Ep. #33: Rethinking the Risks of Entrepreneurship

We generally think of employment as safe and entrepreneurship as risky. Those of us who think this suffer the risks of employment, and miss out on the opportunity to create real wealth by owning a business. Listen to this episode to find out a risk-free definition for entrepreneurship.

TRANSCRIPT:

Welcome to Rich & Thin™ Radio, the only podcast that helps you get more bank with less bulk. Today’s episode is for entrepreneurs or would-be entrepreneurs who are holding back in their businesses, or maybe not getting started at all, because of risk. I’m Kelly Hollingsworth and of this is you, I’m glad you’re here because many of us have views of entrepreneurship and the associated “risks” that are not helpful, that are actually counterproductive to earning more money, so today I want to tell you why entrepreneurship done properly isn’t risky at all. It actually involves the opposite of risk.

And now you may be thinking, Wait, WHAT? Everyone knows that entrepreneurship is risky, and if you’re thinking this, you’re probably also thinking, Listen, lady, now you’ve gone too far.

But just hear me out, because if you, like me, are a conservative, risk-averse person, and you’re also drawn to the idea of growing a business and creating wealth, today’s episode could be very helpful for you.

So to start off, I’d like to say that it’s easy to see why we view entrepreneurship as risky. Here are some typical definitions that I found on the internet this morning.

  • Entrepreneurship is the activity of setting up a business and taking on financial risks in the hope of profit. That’s one definition.
  • I also found this: An entrepreneur is someone who one who organizes, manages, and assumes the risks of a business or enterprise; and
  • An entrepreneur is a person who starts a business and is willing to risk loss in order to make money.

Risk is front and center in these definitions, so taken at face value, what they mean is that to be in business is to be embroiled in risk, and that’s very reasonably an uncomfortable place for most of us. So I’d like to offer a definition of entrepreneurship that’s 180 degrees in the other direction. Entrepreneurship in my mind, and from what I see, involves laying off risk, getting out from under risk, in the pursuit of profit.

How can this be true? We’re going to look at how, but first I want to tell you that I’m not the only person who thinks this. Consider a decades-old definition of entrepreneurship by Harvard Business School Professor Howard Stevenson. He said that “Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.”

Why is this a great definition? Because it matches what really happens with successful entrepreneurs. Harvard Business School has noticed that they tend to start out poor, not rich. So it’s not about accepting financial risk in exchange for possible profit. It’s about pursuing opportunities “without regard to resources currently controlled.” In other words, it’s about being resourceful, not risky.

Inc. Magazine calls this definition “the best answer ever” to the question of what entrepreneurship really is. Why do they say this? Because when people define entrepreneurs as those who run headlong into risk for the sake of money, they completely miss  the boat. Inc.com reported that Professor Stevenson explained that he wrote his definition of entrepreneurship because the typical risk-laden definition “doesn’t fit the entrepreneurs I knew. I never met an entrepreneur who got up in the morning saying, ‘Where’s the most risk in today’s economy, and how can I get some? Most entrepreneurs I know are looking to lay risk off—on investors, partners, lenders, and anyone else.”

So the first thing I have for you on entrepreneurship is that if you’re thinking it necessarily involves risk, you’re looking at it the wrong way. Or maybe not the wrong way, but at least in a risky way and in all likelihood an unprofitable way. Why? One reason we just mentioned—you can, and many entrepreneurs do—transfer the risk that the business won’t work to others who also seek to profit from the venture. Another reason is that entrepreneurs who think business is all risk unnecessarily take on unnecessary risk, thinking it’s just part of the deal, and as always happens, they create what they’re looking for.  It’s not that risk is inherent to entrepreneurship. It’s that if you think it’s involved, you’re going to build some into your entrepreneurial venture.

But I think there’s a bigger reason that entrepreneurship isn’t risky—that it’s actually the opposite of risky—and my reason is this: it’s never risky to deliver to people what they really want at a price they really want. They’re going to take that deal every single time, and if you’re offering it to them, you have a successful business on your hands, no question about it.

So, then the question is, well, If that’s true, why do so many businesses fail? If it’s not risky, why do they fail? It’s always one of four reasons:

One, the business is offering something that people don’t want. Either what you’re selling doesn’t work, or it’s not something people need or desire, or they don’t want it at the offered price. So step one in delivering to people what they really want is proof of concept—when you have this, you know it works, you know people want it, and you know you can deliver it at the price they’re willing to pay.

The second reason businesses fail is they can’t communicate what they’re offering in a compelling way. Every day I have discussions with entrepreneurs who spend 15 or 30 minutes, sometimes even longer, trying to explain what they do, what their offer is, and the message is anything but clear. You can have the greatest product in the world, but if people can’t understand what’s so great about it, it’s all for naught. No one’s going to buy.

The third reason businesses fail is that they fail to deliver the message. If you have a great product at a great price, and you know exactly how to explain why it’s so great, but you don’t get the message in front of people, you won’t have customers. They simply won’t know about you. And now you may be asking, what business would do this, and the answer is too many businesses to count. Many clients who come to me could be a lot more profitable than they are. People want what they do—they want it a lot–but the people simply don’t know about these businesses because the business has no sales process. Why does this happen? Because, somewhat perversely, many entrepreneurs hate sales, and they hate the idea of hiring salespeople. So when I get clients like this, we have to work through the weight that causes this hatred. Often it’s emotional weight such as fear or reluctance, or it’s the weight of an identity that says that they can’t be too successful, and the business owner must get out from under that weight to open up the bottleneck on profits that is created from the failure to sell.

The fourth reason businesses fail is simply failure to deliver. You have the great product at the great price, you know what to say about it in a way that conveys the value, you get out there in the world and you say it to people, but then you don’t actually do the work or deliver the goods. I once paid a 50% deposit to a contractor to build a fence for me, and he took the money, but he never built the fence. That’s a business that’s destined to fail, no question about it.

So this is it. It’s one of four reasons: You either don’t have a compelling offer, you don’t have a clear message, you don’t deliver the message, or you don’t deliver the goods or services. Here’s something to notice: all of this—each of these four steps–is 100% within your control.

In my mind, where the real risk lies is in not having control over any one of these four areas. People like to talk about entrepreneurship as risky and employment as safe, but if you’re employed, you’re at risk because if the business you work for falls down in any one of these four areas, it’s over for you, too. Poof! Your job can go away in a heartbeat, and your income goes away with it.

Financial exposure to the downside, with no control regarding decisions or direction, and no participation in the upside, is the definition of risk, my friends. Risk means “a situation involving exposure to danger” and when you’re an employee, you definitely are exposed to the danger that other people will make bad decisions regarding the business you work for, and that those decisions will affect your livelihood, too.

Are you exposed to danger as an entrepreneur? Not if you don’t want to be. You get to control if your offer is compelling, well-described, well-sold and well-delivered. So if you’re viewing your business, or your business idea, as risky, that’s a very good sign that you’re missing one or more of these four critical ingredients to a successful business. Maybe you didn’t take the time to test what you’re selling to make sure it works, and so you don’t have any confidence in it. Or maybe people don’t actually want what you’re selling. You want them to want it for your own reasons. Or maybe you know you’re offering something great to people who really want it, but for the life of you, you can’t figure out how to describe it. Or you don’t want to go out and tell people about it, or delegate that function to someone else.

Whatever the issue is, solving it is in your hands. If you do each of these four things in your business, you have what successful salespeople call a no-brainer. People are going to buy, and you are going to have a successful business on your hands. But you don’t have to solve this alone, so if you’re struggling, let me know if I can help. kelly@richandthin.com. And with that I’m going to close for today. I want to say thank you so much for joining me, and I look forward to talking with you next week.

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