Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

5 Steps to Manage Startup Risk

“I think that only daring speculation can lead us further and not accumulation of facts.” Albert Einstein

In the first post of this series, I added a video which stated life = risk. If we shield ourselves from all sorts of risks by staying in our small comfort zone we will not be living life fully. It is our perrogative to find a balance to ensure that we live life to its fullest. The points below relate how to find that balance when starting a business.

1. Market Risk: Our world is in a constant state of flux and with mind boggling technological advancements taking place, we have to be constantly aware of the changes taking place around us. This requires us to monitor our competitors, be in touch with our customers and suppliers, and watch for trends which could potentially make your business extinct. To read more about how to manage market risk please click here.

2. Operational Failure: All companies operate on a set of processes. These processes drive all avenues of business, ranging from Internal operations, business development, sales, marketing and execution to name a few critical functions. When these processes are not optimized or closely scrutinized a business will not be able to scale effectively and reach its target goals. To read more about how you can avoid operational failure please click here.

3. Financial Risk: Without financial controls a business loses its foundation and is on shaky grounds even when the company is making steady profits. Ensuring that you have sound and reliable financial controls in place will allow you to minimize your exposure to financial risks and allow your business to grow more effectively. To read about how you can add financial controls to your startup please click here.

4. The People Risk Factor: You hear it all the time, “Our people are our most important asset”. Its like a mantra that has been wedged into our sub conscious and is constantly repeated from board meetings to your daily staff meetings. However, I am always surprised that though this is such an important asset, very few steps and measures are taken to mitigate the risk associated with this asset. To read more about how you can add effective control measures to mitigate these risks please click here.

5. Lessons in Risk: Having been in this line of work for some time now there have been several risk factors which I have witnessed or experienced first hand. These cover the time you should start, what the risks of starting without a plan are and the kind of risks you have to deal with on a daily basis. To read more about these lessons please click here.

In life and business, if you stop taking calculated risks, or if you let doubt  paralyze you, moving forward becomes close to impossible. It is only when you make mistakes that you learn from them and eventually move forward. Along the way we have to manage the types of risk faced and ensure that we take precautionary measures to avoid risking it all if we do not know where we are headed. Once you know what you want and how you want to get it, take action , because thinking ‘what if’ is just about the worst thing you could do to yourself!

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Personal Experiences With Risk

“Be brave. Take risks. Nothing can substitute experience.” Paulo Coelho

The risks mentioned in prior posts provide a framework on mitigating risk in various divisions of business. Some of the risks and counter measures mentioned in this post are general and some those I have personally encountered during my journey as an entrepreneur. 

1. Start as early as possible: The younger you are , the lower the  risk level when embarking on new startup ventures. This is a point in life when you do not have many personal responsibilities and can hence take on greater leveraged risks, for greater payoffs. There will never be a right time. If you wait around for it, you drastically reduce the level of risk you can take . 

2. Don’t start without a plan: Starting a business is a lot of fun and very exciting, however, if you do not have a solid business plan which has been well researched and developed, get working on that first. I am not a fan of shotgun startup ventures who are clueless about where they want to go and how they plan on getting there. 

3. Learn to trust your gut: There will be times when the plans looks too good to be true on paper, but your gut feeling is to be wary. On the other hand ,there are times when the pieces do not fit into place initially, yet, your gut says this is worth exploring. Learning to trust your gut allows you to hone into your inner guidance system and intuitive capabilities.

4. Don’t forget your core values: We are constantly faced with challenges where compromising on core values could lead to substantial benefits. However, going down that path poses great personal and moral risk . I have personally known someone who went down this path and ended up losing everything that mattered in his life. It was an incident which left a deep impression. Compromising on core values is one of the greatest risks you can take and one where the consequences are long lasting & long term.

Some of the concepts mentioned in this posts have many counter arguments. Such as the first one, which is to start early. Some argue that it is better to get some work experience before venturing out into the startup world. Others believe in just starting a business and hoping to eventually make some money. I would really like to hear what your thoughts about this are. Look forward to hearing from you.

 

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The People Risk Factor

Our mission statement about treating people with respect and dignity is not just words but a creed we live by every day. You can’t expect your employees to exceed the expectations of your customers if you don’t exceed the employees’ expectations of management.” Howard Scultz

You hear it all the time, “Our people are our most important asset”. Its like a mantra that has been wedged into our sub conscious and is constantly repeated from board meetings to your daily staff meetings. However, I am always surprised that though this such an important asset, very few steps and measures are taken to mitigate the risk associated with this asset. As a startup this is one of the most dangerous sort of risk we are exposed to, due primarily to our size. When a critical team member or employee leaves, the entire business can be brought to its knees. Listed below are a couple of risk control measures you can use to protect this asset .

1. Strict selection policies: At early stages, startups are usually 2-3 individuals who know each other and are comfortable spending days on end locked up in an office, working on the next big idea. Adding new partners or employees represents a large undertaking, and requires serious looking into . If you make the mistake of adding the wrong individual, productivity in the office takes a nose dive and the cost of replacing the employee is high. So use this list along with your own requirements to ensure that you select carefully.

2. Ironclad contracts for new employees: A lot of private data is shared regarding costing, pricing and internal processes with new employees. Many startup companies fail to get employees to sign non compete and confidentiality clauses. The risk of losing an employee to a competitor with your trade secrets represents a phenomenally large risk against which you should take counter measures .

3. Quarterly one of one reviews: I usually have quarterly reviews with most of the individuals whom I work closely with . This is an open and candid session where I learn about their level of satisfaction, frustrations and other problem which may be hindering them from performing up to mark. These sessions provide critical feedback and allow you to take precautionary measures to ensure you do whatever is necessary to retain your most talented performers.

4. Provide training and development: Most startups run on strict financial budgets, however if they have used strict budgeting controls as stated in my previous post, a budget for training and development should be in place to provide your team with training ,which will help improve their productivity and skills. This helps in creating stronger bonds between management and employees. It also increases the overall morale and productivity levels of the organization.

5 Fair rewards & recognition: If your team is generating high levels of growth for your organization they need to be compensated fairly. In some startup companies, which are not heavily venture backed this can be a challenge as funds are usually very tight. However, management needs to ensure that performance and rewards are tightly linked. If they are not, you stand a high level of risk to lose your rainmakers. To read more about rewards and recognition please click here.

We have to do whatever is necessary to ensure that we cater to our team wherever possible. It is a difficult juggling act to manage expectations and requirement, at the same time maintaining an environment where productivity and morale is high. If not correctly maintained there can be nasty repercussions which can bring your organization to a standstill and expose it to extremely high levels of risk. However if it is correctly managed, this asset becomes your organization’s competitive advantage, and paves the way for greater achievements.

 

 

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