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Entrepreneurs, risk, and Kenny Rogers

Every entrepreneur faces risk, but without proper risk management, you may not be betting at the right time or on the right hand, but any entrepreneur can increase their odds by implementing proper risk management techniques.

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Risk management

Startups involve risk – there is no way around it. Across the United States, only one in ten new ventures will succeed. Those are not good odds, but those are not the odds an entrepreneur needs to face. It isn’t just about risk… it is about managing risk. Leaders must know when to go for it and when not to. If risk is managed well, the “one in ten” game can be dramatically improved.

Info/Data:

Entrepreneurs must secure relevant and good intelligence. They need to interpret it well and apply it to their specific situation and/or company, and then they need to act on it.

Too much risk happens when there is not enough data and leaders make a wild guess on big business decisions. Make sure decisions involve calculated risk and not the great unknown.

Too little risk happens when leaders live in the data and they get stuck in “analysis paralysis.” Here, no decisions get made, and what may have seemed like a safety net can actually be very dangerous.

The Poker Analogy:

Poker isn’t about the cards. It is about playing the cards in your hand and the opponents at your table. Entrepreneurship has some of the same. In poker it is a risk every time you bet, but you can’t win without betting.

The better your hand – and the better your interpretation of your hand verses the competition – the more you bet. Entrepreneurs need to do everything they can to get the information and assets to analyze their situation, and the stronger their position the more risk they should take.

Segmenting Risk:

While many people look at starting a company as one giant risk, it doesn’t have to be that way. Break down the strategic and tactical mission into as many segments as possible. Get data and intelligence on each, evaluate each and make decisions on each.

Of course an entrepreneur always has to keep the big picture in mind, and ensure all the little decisions lead effectively and efficiently towards the overall vision, but this segmentation strategy will mitigate risk. Entrepreneurs can be wrong a few times on individual segments but still get the overall vision correct.

It is almost always easier to evaluate data and make a correct decision in a smaller environment and shorter time frame. Add enough of these “segment battles” up and the war will be won!

Kenny Rogers:

As a wise man once said: “You gotta know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run.”

Entrepreneurs are often romanticized as intellectual gamblers. Whether you adhere to that or not, make sure you never bet wildly – or risk wildly – just as the best poker players never do. Calculate and act on a scale appropriate to your situation. When your stars align, THAT is the time to take your big risk and knock your competition out.

Hoyt David Morgan is an entrepreneur, angel investor and business strategy leader. He is an investor and/or adviser to a handful of exciting and high growth companies, and has been a part of several high-value exits. He is passionate about customer experience, smart business and helping innovative companies grow... and sailing.

Business Entrepreneur

7 books every entrepreneur should read

(BUSINESS ENTREPRENEUR) You’ve heard it said, “do as I say and not as I do.” Read these books from authors who have figured out what works and what doesn’t when starting a business.

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The power of books

If you’re thinking about leading a startup, but not sure where to go, the internet is often the first place we look. Surely, you can find dozens of blogs, articles, stories, and opinionated editorials that can help give you something to think about.

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However, there are tons and tons of great books that can help you think about what you need to get started, how you need to change your mindset, or challenges you may confront as you begin your startup journey. Take a look at the following 7 you may want to add to your bookshelf.

1. The Startup Checklist: 25 Steps to a Scalable, High-Growth Business
This text not only boasts a 5 start rating on Amazon, but offers what few books do – practical, tangible, down to earth advice. Where lots of books try to tell you a story, talk strategy, and share wins, author David Rose instead focuses on advice that assumes no prior experience – and breaks it down from the fundamentals.

2. Nail It then Scale It: The Entrepreneur’s Guide to Creating and Managing Breakthrough Innovation
Nathan Furr and Paul Ahlstrom focus on creating a lean startup by offering a step-by-step process that focuses on nailing the product, saving time, and saving money. The first step is about testing assumptions about your business, and then adjusting to growing it (hence: Nail It and Scale It). Strong aspects of this book include a great theoretical foundation, and an easy to follow framework.

3. The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls that Can Sink a Startup
Wasserman’s strength here is that he focuses not only on the financial challenges, but identifies the human cost of bad relationships – ultimately how bad decisions at the inception of a start-up set the stage for its downfall. This book is a great tool to proactively avoid future legal challenges down the row, and also discusses the importance of getting it right from the start.

4. The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
Horowitz writes about his experiences, taken from his blog, in a way that even inexperienced managers can touch and learn. The advice here really focuses on leading a start-up, and what lessons his experience has given him. Presented in a humorous, honest, and poignantly profane way.

5. The Startup Owner’s Manual: The Step-by-Step Guide for Building a Great Company
Blank and Dorf here standout due the sheer mass of this text. A comprehensive volume at 573 pages, my favorite piece for new investors is a focus on valued metrics – leveraging data to fuel growth.

6. The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life
A personal favorite of mine, this book is recommended for entrepreneurs not because it’s focus on business, but as a reminder that those of you wanting to start up are people. You have limited resources to manage as a person, and will need to adjust your perspective on what you care about. This book is about changing your mindset to pick your battles and be more focused.

7. Disciplined Entrepreneurship: 24 Steps to a Successful Startup
Bill Aulet starts with an approach that entrepreneurs can be taught, and breaks down the process into 24 steps, highlighting the role of focus, the challenges you may encounter, and the use of innovation. This text wins due to its practicality for new start-ups, and a specific method for creating new ventures. It also features a workbook as an additional, optional resource. Check it out on Amazon

GET READING!

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Business Entrepreneur

Business pro tip: when pricing your product, think like a photographer

(ENTREPRENEUR NEWS) On of the growing pains associated with starting your own business is knowing how much to charge for goods and services. Use these helpful tips one photographer uses for pricing a photo and get the ball rolling!

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More than a thousand words

A picture may say a thousand words, but a photo doesn’t just tell a story. A simple photo can be an excellent example on how to price your next business product.

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Photography blogger Sarah Petty wrote her method of pricing a simple 8×10 inch photograph for as advice for her fellow photography business owners. But her advice can actually be applied beyond the world of studios and darkrooms. Here’s how to think like a photographer whenever developing the cost of your next good or service.

Step One: Know thyself (and know thy client)

Your first step in knowing your next price for your next best selling item or service is knowing what type of business you run. This is solved by answering the simple question: are you a high volume seller with lower prices or lower volume seller with higher prices?

This question can be answered by looking at your sales for the past month. Are your trends indicating your customers prefer a more personalized, boutique approach to the things they purchase from you (with higher prices), or do you move a lot of product (with lower prices)?

When you understand what type of business sales trend you’re following, move onto step two.

Step Two: Understand your sunk costs.

A sunk, or fixed cost, is the price to manufacture or deliver a good that will not change (unless reacting to the market’s inflation). What is the basic core cost of manufacturing the product you intend to put in your store? That amount, your cost of goods sold (CGOS), is the baseline from which your ultimate price will come from. Now to step three.

Step Three: Look at your other overhead for producing your product.

So you know your CGOS, so all you do now is just add what money you want to make off that? Wrong. You’re forgetting that you’re not just making that product. You are maintaining a store or electronic storefront, you’ve got office space, human resource costs, and other things that may slip by whenever you’re trying to develop your price for your next big thing. This doesn’t mean you’re charging a customer a month’s rent for consultation fee, of course, but knowing that you’re going to need a comfortable cushion whenever figuring this product’s cost out. According to the federal Small Business Administration you should allocate a portion of the profit “to each service performed or product produced” and this cost should be calculated annually. Finished, now to step four.

Step Four: Profit!

Finally, after factoring your CGOS and your overhead, now you can decide what you want to make by selling. Petty personally uses the approximation of making 4 or 5 times her CGOS plus her overhead per item. Whatever the ultimate cost is, it has to be able to lend you the ability to live comfortably in order for you to be able to manufacture more in the future.

The next time you have to develop a price for a new product, don’t forget to step into the world of photography for awhile. You’ll be saying cheese all the way to the bank.

#KnowYourPrice

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Business Entrepreneur

Startup helps freelancers find trusted partners for overflow work

(BUSINESS NEWS) Covailnt is a service for freelancers that takes the mystery out of collaborating, helping us all to focus on what’s in front of us.

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covailnt freelancers overflow

Trying to balance work and networking can be a huge pain even as a traditional worker; for freelancers, maintaining both categories is often downright impossible. If you’re struggling to make meaningful partnerships in the freelancing world, Covailnt may have a solution for you.

Covailnt takes the mystery out of freelancing, which—unlike romance—could do with a bit less guesswork. The service is best described as a combination of a workflow app and a social network, but its core function is to serve as a database of freelancers. Each person who signs up for Covailnt fills out a profile which includes skills, availability, location, and a portfolio; as a Covailnt user, you can use this information to determine whether you want to work with the person.

The ability to review a freelancer’s highlight reel without having to initiate a conversation is sure to be a time-saver, and you get to avoid the awkward follow-up conversation to boot.

Time efficiency is clearly a strong influence on Covailnt’s platform: each freelancer’s surface-level profile prioritizes the preview window to display their level of business, using metrics from “Not Working” all the way through “Slammed”. Having this information front-and-center makes it easy to differentiate between who in your network might be available for overflow work and who you shouldn’t contact for the time being.

Covailnt also makes it easy to find compatible people with whom to collaborate. In what always seems to be the case when a group project emerges, your go-to collaborator might be too busy to handle a joint effort, and not everyone has the time to troll through the classifieds in search of a temporary partner. Searching for a like-minded, similarly skilled freelancer via Covailnt can significantly cut down on the time you spend looking and help you prioritize the work itself.

Beyond its site-level features, the coolest part of this service is that it allows you to build a network of talented people with whom you share interests, goals, and workstyles. Once you’ve established such a network, you may find your work queue filling up with things you actually care about, enabling you to push some of your less enjoyable work to someone in your network who will give it the care it deserves.

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