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Posted by A. B. Dada on April 21st, 2006
There are 4 “R”s to the equation of a successful entrepreneur, the 4 I listed in the title. They’re fairly simple to define:
Risk - Doing something that might have a chance at failure
Responsibility - Following through with what you’ve committed to do.
Reinvestment - Taking some new assets and using them to produce more
Reward - A gain. usually called profit but could be more than a financial gain
The first half of the equation requires more of both to get the latter half of the equation. The less you expect of the latter half, the easier your business will be to maintain. It is nothing like a see-saw: as you put in more of the first, you’ll get more of the latter. If you skip on any one part of the equation, though, it all falls apart. Ignoring your reinvestment and never getting a reward will quickly lead you to not focus on the first part.
The Reward part I’ve focused on before — I like to call it profit. Profit does not mean financial gain, necessarily. Profit can mean an increase in knowledge or an increase in free time to spend with friends, family or hobbies. Profit can also mean a gain in assets other than money; I call these incentives. They’re all profit, in the end. If you end up with more of something (time, money, knowledge) than you previously had, you’ve profited.
The Reinvestment part is very important, and this is one place where many entrepreneurs fail. When I start a business, I don’t focus on the reward at first, I focus on the reinvestment. How much of my gain do I put back into the business for more gain in the future? If you gain some money, you should put a little extra in every month towards both long-term savings (which can help you through cash flow shortages), marketing or even branching out a little. Forgetting to save a bit of your income for reinvestment will leave you without growth and could even cause you to lose a little of your profit every month. My belief is that businesses either grow or they shrink: there is no status quo where you can stay the same forever.
Risk is the biggest deterrent for most people from starting their own business: they’re afraid to move forward since the risks far outweigh the rewards. The biggest reason you might be afraid to take a risk is because your life has too many negatives that keep you in the same job, the same lifestyle, the same town. My recommendation to knock these negatives out by working quite a bit harder for a year should be taken now — in a few years your energy won’t be what it is today, and you might be even deeper in the negatives that prevent you from taking a risk. My new businesses today are almost no risk — the money I had available isn’t huge by any means, but I don’t depend on it to pay the mortgage or the bills.
The Responsibility part is a killer for me — the follow through. I can step into any risk and make it work, but following up in the long haul can be a real bore and a real concern. Looking around your life today you have to take note of the places you’re irresponsible and fix those before bringing a new one on. If you don’t think you’re irresponsible in any areas, ask your friends and family first. If all is green-lighted, you’re ready for that risk — take the jump tomorrow. If you do have responsibility problems, focus on what you can do to clear those out, the headaches you cure today will be even more important tomorrow when you’re running against the random problems that come up when you are your own boss.
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