Almost everyone who writes about entrepreneurs and the enterprises they start discusses the fact that entrepreneurs are risk takers. Rajiv Dingra, an Indian entrepreneur who is the founder and CEO of WATConsult, a social media agency, wrote an op-ed piece that states that just because someone is willing to take risks it doesn’t mean they don’t have any fears [“Are You Fearless?” Wall Street Journal, 10 August 2010]. He writes:
“You often hear people saying ‘entrepreneurship takes guts.’ The reason it’s true is that every successful entrepreneurial story starts with grappling with many unique failures and fears. One of the first questions you need to answer is: Are you one of the rare breed of fearless entrepreneurs? From the time we are born, we were constantly being told how to do things, what not to do and the importance of being careful. Be it the electric switch or the water-park slide, we were cautioned by protective and well-intentioned parents and guardians all the time. We were told that we should study hard so as not to fail. Failure [in India] is considered so bad that some students’ commit suicide under exam pressure every year. This kind of upbringing does something to each and every one of us. It instills fear in our minds. We have a fear of change and a fear of unknown people because we have been taught not to trust strangers. We carry these fears with us as we grow up. We even add more fears to the list following negative experiences.”
Not everyone, of course, suffers from the kind of fears mentioned by Dingra. Some parents help children confront their fears and embrace the unknown. Nevertheless, I’m willing to bet that most people have fears they must confront sometime during their life. Dingra writes about some of the unique fears faced by entrepreneurs:
“The First Fears
As a person starts his or her entrepreneurial journey, fears surface from the very beginning. When you are deciding to take the plunge, many of your folks and friends may caution you. They will tell you ‘What if’ stories, like ‘What if something goes wrong?’ Some may enlighten you about your family responsibilities and how you don’t have the luxury to be entrepreneurial and so on.
Start Up Fears
If you cross this hurdle and start something, then you will meet colleagues, venture capitalists and other entrepreneurs who will warn you about your business model, your lack of ability and tough market conditions. These too are well-intentioned folks but as they say ‘people see what they choose to see.’ At this moment you are again likely to succumb to the fear of failure and withdraw the steps you took towards being an entrepreneur.
Let’s say you have crossed the above two hurdles. There will still be all kinds of folks, including employees, giving you advice. More often than not, some of it would go like this: ‘It’s easy to run a ten-person company dude, when you touch 20 then you will know.’ Or ‘If your current clients get poached by competition, what will you do then?’ Or ‘Have you made a three-year plan yet? The way you are going this business may not last very long.’ Often the friendly ‘advice’ is even worse.”
Dingra isn’t arguing that entrepreneurs should shut out voices that give rise to fears or simply plunge into a business venture with one’s eyes closed. In fact, successful entrepreneurs plunge in knowing full well the risks they are taking — but, because they have their eyes open, they are calculated risks. The antidote to fear, Dingra asserts, is faith. He explains:
“So now that we have identified that fear is the top reason for entrepreneurs to backtrack and avoid greatness we need to discover the opposite of fear. How do I stand up when fear stares me in the face? According to the Merriam-Webster Thesaurus, some of the antonyms of fear are: aplomb, assurance, boldness, confidence, self-assurance, self-confidence, courage, dauntlessness, fearlessness, and fortitude. But I have one that I believe is the real opposite. It’s faith. Faith in oneself, one’s belief, one’s dreams and one’s ability. If you can’t back your own words, actions and abilities, trust me it’s highly unlikely anyone else will.”
In previous posts about entrepreneurs, I have noted that one thing most successful entrepreneurs share is confidence in their own abilities. Dingra is correct — if you don’t believe in yourself, why should anyone else? Faith, however, goes one step beyond confidence. Confidence generally results from the belief that one can control events. Faith denotes confidence even in the face of the unknown. Dingra concludes:
“As Chuck Palahniuk famously said, ‘Our real discoveries come from chaos, from going to the place that looks wrong, stupid & foolish.’ So in conclusion I repeat the question: Are you one of the rare breed of fearless entrepreneurs? Another way of putting it is: Do you have enough faith in yourself?”
There is a fine line between fearlessness and foolishness and that line is easy to cross. To help entrepreneurs from crossing that line, Luke Johnson offers some business do’s and don’ts [“Do’s and don’ts to get ahead in the game,” Financial Times, 16 June 2010]. Johnson writes:
“When I am interviewed, I am occasionally asked: ‘What is the secret of business success?’ If I knew the perfect answer, I would have made far fewer mistakes over the years; in truth I suspect there are many ingredients. Nevertheless, as an exercise, I have noted below a number of contributing factors that I think matter more than most.”
Johnson begins by noting that business success is often a mixture of hard work and luck. He believes that entrepreneurs can achieve spectacular financial gains or even change the world. But, the greatest reward (i.e., the ultimate satisfaction achieved as a entrepreneur), he believes, is being able to fulfill a dream. The advice he offers next is how best to ensure that hard work will put you in a position to take advantage of any luck that may come your way.
“• Be in the right place. History shows that growing markets, where entrepreneurs are encouraged, offer greater opportunities than places where there is stagnant demand, high tax and lots of regulation. On that basis, anyone with little to lose who is living in the west should emigrate to the east: it’s what I advise anyone under the age of 30 to do. This is a harsh verdict, and inevitably there are thousands of exceptions. But it is undeniable that far more new millionaires and billionaires are being minted in countries such as India and China than in Europe. Growing gross domestic product, expanding populations, low costs and modest tax rates offer a powerful combination that the west simply cannot match.”
Johnson realizes that not everyone can emigrate so he offers six more practical do’s and don’ts.
“• Learn how to borrow. An ability to find and use debt is a factor in most stories of great wealth. Even if banks are not extending much credit right now, the cycle will turn and eventually they will re-open for business. I was slow to realize the fundamental importance of using debt. Many entrepreneurs overdo it at the top, and end up losing many of their leveraged assets when prices fall. But somehow they rarely go bankrupt, and very often reappear with new bankers in tow when the cycle turns.”
Many entrepreneurs turn to angel investors or venture capitalists to get funds rather than going to banks for loans. The reason that Johnson talks about learning how to borrow from banks is because if one goes that route one maintains control over the equity of his or her company — which is the next subject he discusses.
“• Keep hold of the equity. Do not sell out or dilute too early, but retain ownership if you possibly can. Individuals get rich through capital growth in the value of shareholdings, not through salary or dividends. Often, entrepreneurs give away big chunks of shares early in the project to junior partners; you should do this only if you have no choice – it is better to use other forms of currency if you can – especially since it is unlikely to be highly valued at the beginning.”
Banks, however, are not as likely to take a chance on a promising idea as an angel investor or venture capitalist might be. Although I agree that you should hold on to as much equity as you can, don’t let your dream die because you are unwilling to share equity with those who can help you achieve your dreams. Johnson continues:
“• Know when to lunge for glory. For most of us in business there come a few great opportunities in life that require a huge leap in ambition and scale. It might be a new factory, a big acquisition, a breakthrough product launch. On these occasions, boldness is required if the transformation is to be successful. Of course, such steps will carry risk as well as reward. But all investment involves downside possibilities – as well as the chance of sunlit uplands. Winners have an intuitive sense of when the time is right to really go for it.”
The only advice that I can add is that if your head is too deeply buried your dream you may not see a great opportunity when it presents itself. Most successful entrepreneurs that I know see new business opportunities almost everyday. Their challenge is resisting opportunities that have a small risk/reward potential so that they can take advantage of the kind of opportunities discussed by Johnson. He continues:
“• Build a team. Almost no one makes it on their own. Businesses that do reach the big league do so by hiring excellent managers and having strength and depth among their top people. Great leaders know how to pick the best recruits, and how to delegate and motivate. They are modest enough to realize their shortcomings, and hire colleagues who compensate for those weaknesses.”
Johnson continually advises people to work for themselves yet he clearly understands how chaotic and ineffective the world would be if everyone took that advice. I completely agree with Johnson that putting together the best team that you can is one key to business success. I consider myself blessed with the team I have at Enterra Solutions. Johnson continues:
“• Resilience. Constructing a substantial company demands both physical stamina and emotional fortitude. There are likely to be occasions when the prospects appear bleak, and giving up seems the only option. More often than not it is these moments that separate the victors from the rest – because they never despair, and press on when others fade.”
On this point, Dingra and Johnson appear to be in total agreement. Although Dingra calls it “faith” and Johnson calls it “resilience,” the characteristic that motivates entrepreneurs to press ahead into the dimly lit future is what separates winners from losers. Johnson concludes:
“• Domain knowledge. It generally pays to focus on a particular industry, and truly to understand the technical aspects, the market, the competition, the best people, the margins, the trends and so on in your chosen field. And picking a large sector that is undergoing rapid change increases your odds of making a fortune – such dislocations allow newcomers to take advantage.”
I call this looking for white spaces in industry sectors. It’s much easier to gain a foothold in an industry sector in a space that is currently unoccupied. Trying to dislodge an established competitor is often a non-starter. In fact, if your offering complements what is already available, all the better. By complementing existing systems, processes, etc. you gain allies rather create enemies.
Mark Victor Hansen once said, “Don’t wait until everything is just right. It will never be perfect. There will always be challenges, obstacles and less than perfect conditions. So what. Get started now. With each step you take, you will grow stronger and stronger, more and more skilled, more and more self-confident and more and more successful.” I think Dingra and Johnson would agree with me that Hansen’s advice is good. Have a little faith.