| Leading Companies Online Magazine
The Wing Walker's Circle
By Ray Smilor, Beyster Institute Executive Director
 
Entrepreneurs are usually referred to as risk-takers. But I don't think this is quite accurate if we are referring to a gambler who is willing to bet everything on one role of the dice and pray that it comes up seven or eleven.
Rather, to hedge their bets, entrepreneurs try to follow the code of wing walkers, those daring souls who venture out to the tips of airplane wings: "Never let go of one thing until you have a hold on something else." They try to manipulate an aspect of the risk that gives them some control in an ambiguous situation.
But how do they do that?
Minimizing risk
I've never met a successful entrepreneur who wakes up in the morning, rubs his or her hands together, and gleefully exclaims, "How much risk can I take today?" There are times when entrepreneurs must "bet the company." But they never do so willingly, and they take this action only when no other alternative is apparent.
Every effective entrepreneur seeks to minimize risk. To minimize your risk, here are things to consider:
- Plan better. Take the time and effort to write that business plan, to assess your competition, and to understand the real financials of your company.
- Use other people's money. Get your relatives, friends and others, like angels, to put up some of the money, to leverage your own. Seek government funding for projects. Or, try to win grants from foundations. In other words, get others to share the financial risk of your venture.
- Demonstrate market acceptance. Get positive customer feedback on your product or service, conduct surveys and focus groups, secure a few purchase orders, sell something.
- Develop a working prototype of your technology. Show that the innovation works by actually testing it. This will build credibility for your product.
- Get paid before delivery. Have cash flowing as soon as possible. If people are willing to write you a check up-front, ask for it and then take it.
- Use advisors. Seek out expert counsel and then use it. Expand your network to take advantage of the knowledge and experience of others.
Take calculated risks
The successful entrepreneur works to ensure that the odds are stacked in his or her favor. Importantly, the way to do this is to acquire superior knowledge about the domain in which the risk is taking place. The more one knows about the risk, the more calculated it becomes.
Scott Cook at Intuit developed a working prototype of Quicken so he could show there was no technological uncertainty. Michael Dell at Dell, Inc. got customers to pay for computer products before he made them so that he had a steady revenue stream. David Stassen at Spine-Tech created market acceptance for his spinal implant device before it was approved by the FDA to ensure customer demand. Mark Beige secured orders from large retailers for his costume company before manufacturing the costumes.
Rather than freeze with indecision in the face of unexpected developments, entrepreneurs are willing to take calculated risks because they know something about the environment in which they are operating and have come to terms with the possible ramifications of the risk. Entrepreneurs, thus, feel able to deal with the probability of failure-that is, the riskiness-of the situation.
The monk and St. Peter
This is different from the monk who had labored many years at his monastery. One day a torrential rain began to fall, and the river began to rise. A rescue boat came by and told the monk to get in and be taken to safety.
But the monk replied, "No, the Lord has provided in the past, and He will provide now."
The rain continued until the river had risen to the steps of the monastery. A second rescue boat came by. When the monk was told that the weather was worsening, he again refused to act, saying, "No, the Lord has provided in the past, and He will provide again."
Finally, the river rose so high that the monk had to flee to the highest steeple of the monastery. This time a helicopter came by and lowered a rope ladder. The monk was told that this was his only escape, but he rejected the offer a third time, saying, "No, the Lord, has provided in the past, and He will provide now."
The rain continued, and the monk drowned. When the monk approached the gates of heaven and met St. Peter, he was very angry.
"Why didn't the Lord provide?" he yelled at St. Peter, to which St. Peter replied, "What do you want? We sent two boats and a helicopter!"
Heart of entrepreneurship
The perception of risk associated with starting and building a company is at the very heart of what entrepreneurship is about because it reflects the entrepreneur's ability to manage elements of, and thus feel comfortable about, the unknown.
Entrepreneurs who successfully manage risk are like those wing walkers who are willing to venture out to the tips of flying planes and then get back safely because they know where the handholds and footholds are along the way, plan accordingly, and then execute effectively.
©2006. The Beyster Institute and its authors and their entities. All rights reserved.
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