ask SCORE: FThis Is The Best And The Worst Of Times
This Is The Best And The Worst Of Times
The Question Is: What Can We Do With It?
The Answer: A High Reward & Low Risk Entrepreneurial Venture
By Richard N. Walton
Co-Chairman, SCORE, Hagerstown
I have been reading recently about the daunting effect of negativity on the entrepreneur's mind. In my mentoring work with SCORE I have encountered many situations in which a start up entrepreneurial venture is being hampered by negativity from potential customers, financial institutions, suppliers and even friends and family members. Negativity is directly related to risk as perceived by others and thus a powerful tool in overcoming it is thinking and acting positively about risk, and turning the focus away from worry about risk to enthusiasm about opportunity and potential reward.
Financial theory tells us that there is a direct relationship between risk and reward, in that the higher the risk, the higher the potential reward must be in order to compensate for the higher level of risk. And while there is no way to prevent risk entirely, there are ways to minimize risk while maximizing potential reward. Our approach to dealing with this situation will be to focus upon the positive aspects of reward to whomever you are communicating with, while minimizing the risk associated with your entrepreneurial venture. I have listed these as opportunities, which of course means that they are examples of efforts to minimize risks while creating opportunity. I have listed these as HIGH-REWARD-LOW-RISK, or HR-LR strategies. They are as follows:
HR-LR 1: Type and Scale of Venture
A venture with low initial capital requirements started on a small scale minimizes financial risk, and if the enterprise uses a special talent of yours such as in consulting, the risk is low and the potential reward is high, depending of course on the market need for your services. The low risk associated with providing services as opposed to products minimizes risk by avoiding the need for manufacturing and maintaining inventories. And yet, again providing your services are top grade, maximizes potential reward.
HR-LR 2: An Identified and Receptive Prospect/Customer Base
Entrepreneurial ideas must be tested before 'going live' in the marketplace by a series of tactics including sampling your offer (unpaid services and/or products on a trial basis), seminars on your unique expertise, publications and market research. Every aspect of this Identity Building effort is relatively low cost while its potential rewards are high.
HR-LR 3: Capable and Interested Suppliers, Employees and Capacity to Meet Demand
New ventures must have a developed and ready capacity to meet present and future demand and an organization to generate and process customer orders in advance of startup. While this 'organization to be' might not yet be fully engaged with the startup, there must be a complete plan to call it into being when required. The risk is low having this system on standby ready and the reward of a successful startup is high.
HR-LR 4: Making the Most of Time and Place and Opportunity
The entrepreneur must be totally convinced and able to convince others that this time and place (here and now) represents the intersection of opportunity and capability and is therefore ideally suited to the venture. The above three aspects of establishing the foundations of a profitable enterprise and a low risk startup should be clear to any and all concerned. And the entrepreneur must be able to convey this thought in unmistakable terms.
It was written once that this time is both the best and the worst of times. The worst if we don't know what to do with it, and the best if we do. Not withstanding gridlock in Washington, an uncertain and slow economic recovery, and a general feeling of malaise, there are opportunities for entrepreneurial startups to flourish and do good things for their owners, customers, and the world at large. And it just might enable us to maximize returns at the triple bottom line: 1) people, who as resource providers, employees, and customers, share in the good outcomes produced by the venture, 2) profit, which should enable the organization to grow and improve at the same time doing good while doing well, and 3) planet, which should be cared for and enhanced by the firm's activities, while the organization's efforts are aimed at sustainability energized by the spirit of careful custodian ship of the earth's resources.
This is the best of times, and you, the entrepreneur know what to do with it. SCORE can help you develop your plans and action steps. Free mentoring is available by calling your local SCORE office in Hagerstown at 301-766-2043.
Mr. Walton teaches Financial Management, Operations Management, Corporation Finance, and Entrepreneurial Finance at Frostburg State University and is the co-chairman for SCORE, Western Maryland, and is president of ERMACORP, a Hagerstown based Management Consulting Firm. Richard can be reached at 301-462-9850 or via email at Richard@ermacorp.com. Find him on Facebook(r) at "Small Business Life Cycle" for inquiries and an exchange of ideas on small business management, issues, resources, and experiences.