The title to this piece is scary, with words like “fraught,” “risk” and “failure.” But rest assured — this is an optimistic article with a happy ending, thus the appearance of the word “success.”
The road to success is fraught with risk…
No new business or project starts from nothing. There is a history of facts behind the entrepreneur and the concept. The entrepreneur — perhaps, more accurately, a thought-developer at this stage in the life of a venture — was exposed to other products, services and businesses prior to the “Eureka!”moment. Entrepreneurs assess all that they have observed in all elements of their lives and all they have been exposed to, both personal and in business — their learning curve — and invest that input into their concept.
A major element of their assessments consists of the risks that impacted the facts comprising their learning curves to date. Those risks can be operational, financial, supply chain, political, regulatory, competition, or liability-directed, and they can be from external sources or even internal parameters. Entrepreneurs take those observed risks, evaluate their continued predictive usefulness based upon their current and anticipated environments, and bake those risks into their planning for moving their business or product forward into the marketplace in an effective, efficient and economical way. They identify secondary sources for the materials and equipment needed to operate their businesses just in case their primary sources fall through; they market their goods and services through multiple platforms; and they develop collection methods to maximize timely payment…among other things. By doing that sort of planning in a thoughtful and fact-based manner, entrepreneurs attempt to position themselves for success not only now but also on an ongoing basis.
And then, entrepreneurs implement their plans. They actually do business. They sell their wares and provide their services, hopefully in ways that lead to market impact and profit.
The road to success is fraught with failure…
But (to draw from the generic infomercial phrase), “Wait, there is indeed more.” Things go “bump in the night.” Risk — even carefully calculated risk — can go awry. Something was missed in the market niche analysis. Numerous competitors arise. The costs of goods increase. There were errors in product design or service delivery, causing excessive returns or service callbacks. Interest rates rise. New or revised regulations deleteriously affect the business, good or service. Litigation ensues.
The road to success ends up with, well, success. (But, entrepreneurs cannot just rest on their laurels…)
Disciplined entrepreneurs do not — repeat, do not — just give up when things go wrong. Back to the topic of the learning curve. Instead of pulling the comforters over their heads and going back to bed, they add the fact-lessons learned from their failures and work with their support team (such as their lawyers, accountants, bankers, insurance agents and real estate brokers) to revisit and redesign their goods, services and businesses to further bake in these new risk inputs. They also prepare to use that enhanced knowledge-base to attend to an always changing environment. And, they do this on an ongoing and even second nature basis, both when things go wrong and when things go right. They create for themselves a continuous improvement model.
Entrepreneurs do, of course, support their maturing learning curves with risk-hedging activities. Among others, they purchase insurance to help protect the down-side. And, they use contracts: (1) to tell the story of the relationship of the parties to the contract and their respective roles in that story; and (2) to allocate risks between the counterparties both through indemnification-type clauses and also through the timing, sequencing, means and methods and performance measure elements. One basic example of an ordinary-course risk allocation is that in a commercial real estate lease, one of the parties is assigned to maintain the air conditioning system — not that the other party is not interested in that maintenance occurring properly, but rather that they do not have to perform that one specific function.
The evolving learning curve — from risk to failure and beyond — must also objectively measure to determine performance on an ongoing basis. Those measures should be quantitative (capable of being counted) or qualitative (capable of being described determinatively). The nature and scope of objective measures are identified and refined as the result of trial and error over time.
Even from this relatively brief discussion, it can be concluded that disciplined entrepreneurs are resilient and flexible. As their working environment changes over time, they adjust their processes, systems and measures with the intent of mitigating risk and failure and, even better, causing success. OK, to “make lemonade from lemons.”
And, they are persistent. Remember the historical examples of Abraham Lincoln, Ulysses S. Grant and Thomas Edison (and most popular musicians). They were not overnight successes. They tried. They failed. They learned. They applied what they learned. They tried again “X” number of times. They failed again “Y” number of times. Lather, rinse, repeat… And eventually… Eureka! They hit upon success.
It seems, then, that the focus for getting beyond risk (to the extent that is possible in the real world) and failure to success is an open-minded attention to evolving one’s learning curve and then flexibly and persistently applying the lessons learned along the road.
NOTICE: The article above is not intended to serve as legal advice, and readers should not rely on it as such. It is offered only as general information. Readers should consult with an attorney regarding their legal matters, as every situation is unique.
PHILIP N. KABLER, ESQ. is an incubator resource for the Santa Fe Center for Innovation and Economic Development (CIED), recently taught a course at the UF Warrington College of Business Administration’s Master of Science in Entrepreneurship program and was a member of the Gainesville Area Innovation Network’s board of trustees. He is also the current president of the North Florida Association of Real Estate Attorneys and is the immediate past chair of the Gainesville-Alachua County Association of Realtors Commercial Council. (And, he has played in “garage bands.”) For more information, call Philip N. Kabler, Esq. of the Gainesville, FL office of Bogin, Munns & Munns, P.A. at 352-332-7688, www.boginmunns.com/gainesvillelawoffice, where he practices in the areas of real estate, business, banking and equine law.