Tag Archives: risk

Risky business

They say that entrepreneurs are risk-takers and it’s fair to say that, like most things in life, it takes an element of personal and/or professional risk to make things happen. This is not to say you can only succeed in business by being reckless, but being willing to get outside your comfort zone is pretty much essential. So, what are the main risks for the entrepreneur starting a new business? Here are six ‘Cs’ to consider:

Can’t do – Much of the talk these days is about a ‘can-do’ attitude – as if positive thinking is enough to make things happen! In reality, self-awareness about what you can’t do is probably more important – so that you can work out how to overcome your shortcomings eg filling skills gaps by training or co-opting someone else.

Competition – With a new business one of the first considerations should be the competition (direct = others doing something similar, indirect = everything that’s going to stop your would-be customers buying your product or service). If there’s no competition, you might ask yourself why not, if there’s loads of competition you need to know why people should choose you. A serious assessment of the competition can reduce the risk of failure – try to learn from other people’s mistakes. That said, I’m a firm believer that you can gain more from cooperation/collaboration than competition.

Cash (flow) – The single biggest reason that businesses fail is running out of cash. There may be lots of money tied up in the business but none available in a liquid form – cash – to cover immediate costs such as salaries and daily expenses. Not for nothing do people like me repeat the quote Turnover is vanity, profit is sanity, but cash is reality.” Keeping a close eye on the money coming in and going out of your business bank account – your cashflow – will reduce the nasty surprises.

Capacity – So your start-up is doing well and you want/ need to grow; the biggest limiting factors at this stage are time and space. You only have so many hours in the day and, if your business involves face-to-face customer services, you’ll need to be looking for people to bring in to help out (in effect, to increase the hours in the day). You may also need more space to accommodate the extra people knocking at your door. If you’re selling products, you’ll likely need extra space for production, storing stock and materials, and maybe for increased packing and distribution.

Contingency – They say that the best business people are not so bright that they keep asking ‘what if?’ all the time. But, it would be bright to do at least some contingency planning around you and your business along the lines of … What if I’m off sick for 4 weeks?  What if my mobile phone or laptop was stolen? What if a massive order comes in next week?

Coordination – Business seems so easy when you see it in terms of ‘selling the right products/services to the right people at the right price’ (whatever we mean by ‘right’). But the problems arise because real life rarely provides an easy route from A to B. Coordination – having a realistic map of your route to a clearly defined destination, and systems for coping if/when things go wrong (breakdown recovery etc), will help make the ride less bumpy.

Ultimately, the best entrepreneurs manage risk rather than letting it stifle progress – they take risks when they can afford to fail. David Robinson, former Chief Officer of Community Links in East London, makes the case for risk-taking. “If we don’t fail it means we’re not taking risks. If we’re not taking risks it means we’re not trying to do things differently, and if we’re not trying to do things differently, why are we here?”

Purepallets – more than a family affair

Latest in the More Expert by Experience series

Purepallets 2 photosIn February 2015, Dawn Taylor – founder of Purepallets – was enjoying a service break from her visual merchandising role with a major high street store. After falling into a possible career change, Dawn wanted to see if she could make a business out of upcycling wooden pallets into unique products for homes and gardens.

A year later I was intrigued to find out whether, after the gestation period, she had cut the umbilical cord or returned to her more secure and financially rewarding role in mainstream retailing.

“I handed in my notice at the end of October” says Dawn. “I’m now self-employed and it’s quite scary. But I knew that if I survived the first 9 months it would be OK. So far, so good.”

Like many other entrepreneurs, Dawn enjoys the flexibility of being self-employed and working from home. She can combine home life with work in her workshop, help her son before and after school and, if she doesn’t think she’s put in enough hours, paint her pallet products in the evening.

“It’s a lot of hours if I include time on social media, but some days I might only work in the evening. And it doesn’t feel like work; I get up in the morning and I never have that feeling I used to get – ‘oh no, another day at work’. I’ve always got a new product to make so yes, I’m loving it.”

But can she keep work and home-life separated when she has a kitchen that doubles as a paint-shop, and what about weekends?

Family means I try to keep weekends free, but in the run up to Christmas I was very busy, so… But I do make a conscious effort not to work weekends. I’m in control – I can always say ‘no’, although a lot of the time I don’t!” Clearly Dawn is addicted to pallets in the nicest possible way.

Young Purepallet customersAttending events at weekends can be very time-consuming and is not always rewarding; Dawn is learning which ones are worth the effort. She points out that face-to-face contact with would-be customers personalises the business, which is the selling point of her bespoke creations – they’re individually made for individual people. And then there’s the reaction when people see her pallet products. “It gives people ideas, sparks their imagination, and I usually get commissions off the back of an event”. Over the past 12 months, commissions have continued to grow, through word-of-mouth and Facebook, to a point where they’re now up to 80% of sales income.

You’d think that the success of Purepallets would be enough to convince Dawn that she has a winning formula. But, like a mother nervously waiting for her child’s school report, she says she’s always anxious when she hands over a commissioned item. “Everything still feels so new that when I make a new item for someone and come to deliver it, I’m nervous they won’t like it. But then they say ‘it’s just what I wanted’ and that puts my mind at rest.” 

Purepallets is not so much a family business as a business that’s part of the family. Dawn’s pallet-dismantling husband and young son are, she says, ‘supportive’ and even the family’s small car doesn’t complain about doubling up as a van.

So how is the new member of the family settling in?  Like a rapidly growing teenager, it thinks in might be time to leave home! From sales at local events in and around York a year ago with mixed success, Purepallets products can now be found in retails outlets in Selby, Darlington, Halifax and, until recently, Wetherby.

Alongside possible re-location to an off-site workshop, storage space and retail outlet, what does 2016 have in store for Purepallets?

The list of events at which Dawn plans to display her products in the next 12 months sounds both impressive and exhausting. April means Living North exhibitions at Newcastle and York Racecourses. A return to the Festival of Thift in Darlington in September follows a successful visit in 2015 with Remade in Britain, and the York Christmas Markets will mean more pressure on precious weekends.

I finish our conversation delighted that Dawn loves pallets as much as she did when I first interviewed her in 2015 – on Valentine’s Day.

Further information:

Purepallets  http://on.fb.me/1ZLc701

Remade in Britain http://www.remadeinbritain.com/purepallets

A passion for pallets http://bit.ly/1QsPsVq  (February 2015)

Festival of Thrift 2016 http://www.festivalofthrift.co.uk

 

An A – Z of social entrepreneurship: P – S

P & Q  – Price and quality 

There’s a danger that, in the fight for public service and other contracts, social enterprise is promoted as a cheaper vehicle for providing goods and services. Some social entrepreneurs who should know better find themselves making such claims. In only a few cases have I ever found this to be true.

Social entrepreneurs will never ultimately win a battle on price, however much we may want to be the chosen provider, and it’s a dangerous route to go down. In reality, social enterprise is an expensive business model – employing people deemed ‘unemployable’, providing what others won’t, and locating in places others don’t go. I’ve always believed ‘better not cheaper’ is a much more sustainable mantra than ‘more for less’.   

R – Risk  

– “If we wait for the moment when everything, absolutely everything is ready, we shall never begin.” Ivan Turgenev

Textbooks tell us we need to have a fully grown business plan in place before launching an enterprise to minimise risk. But increasing in a fact-moving business environment, there’s a case for getting products/ services out there before they are fully formed.

The argument for a ‘lean start-up’ is that there’s no substitute for market-testing with real products and services and that early-stage feedback is more likely to be taken on board because it’s not written in stone in your fully developed business plan. 

S – Systems 

When asked how he ‘turned around’ an international charity that had grown too fast for its own good, the new Chief Officer’s one word answer was ‘systems’.

Social entrepreneurs are renowned for being flighty and fact-moving. Frustrated staff at a great social enterprise once told me “the business runs best when xxxx [its inspiring founder] is not around”.  

Just as there is usually a team behind every great social entrepreneur, so there needs to be systems people who can identify what works that can be shaped into a regular way of working that gives the enterprise firm foundations and brings stability from day to day.

 

Letting go … and getting on

Sometimes we just have to take a leap of faith

Sometimes we just have to take a leap of faith

This week I learnt that a fellow ‘graduate’ from the School for Social Entrepreneurs East has just handed in her notice with her current employer. It’s the ‘big moment’ for many entrepreneurs – cutting loose from the security of regular paid employment to enter the liberating but uncertain world of self-employment and, in some cases, also becoming an employer. Scary and exciting times ahead!

Having worked in time-limited projects for the past 15 years or so, I’m used to the financial insecurity or being ‘between jobs’ every year or so, and I’m eternally grateful to my (permanently employed) other half for her understanding and support for my chosen career. After all these years, I think she’s accepted I’ll never get a ‘proper job’.

So, having let go of secure employment years ago, this week I had a ‘letting go’ experience of another kind at The Repair Shed, where I feel we’re now officially ‘in business’. We currently have two commissions to make things with two deadlines to meet.  The first commission is for a pallet product – a portable, table-top rack for an aspiring social enterprise in Colchester to display their wares at events – the next one being on 28 November! The second commission is for a first item of play equipment we’ve been asked to make for a local playgroup. We’re using reclaimed wood to make a slotted Christmas-like tree for hanging coats, gifts, whatever on. For obvious reasons, this needs to be ready as early in December as possible.

With two products to be made and only three of us in The Repair Shed, the ‘letting go’ for me was getting on with the display rack while my colleagues worked on the design and manufacture of the tree. Overhearing their deliberations, it was all I could do to stop myself interfering and contributing my own views. I think I managed reasonably well, but you’d need to ask them.

The ‘getting on’ element in the title of this blog is what we do next; how we adjust to the changed situation and our ability to look forward, rather than back.  Like most parents, I’ll never forget waving off our young daughter to school – going with a friend but, for the first time, without us. What mixed emotions – pride at her self-confidence, apprehension about her safety, but a strange regret about her growing independence. I’ve just about got over it a dozen years later.

Learning about Earning: lessons 9 and 10 from a social enterprise start-up  

Working on the business vs working in the business

If you’re starting a social enterprise, how are you going to fund yourself over the first few years? Being employed in a part-time job running alongside your start-up is not without problems – conflicts of interest and time management (at work and home) being two of them. Are you disciplined enough to let others get on with the operational ‘fun parts’ (in my case – making, mending and learning) while you do the less creative form-filling, finance and legal aspects?  http://bit.ly/1An23gR

 Success vs failure

“Assume it will take twice as long as you think it will, cost twice as much, and generate half the income”

Passion, self-belief and eternal optimism are the hallmarks of someone setting up a social enterprise (otherwise why would anyone do it?) But it’s good to stir a little realism into the mix. Be open to advice from advisers and seek out the wisdom of the ‘experts by experience’ who’ve been, done it, and got the cardigan.

Be realistic about time and costs (however painful). The three CRI-supported social enterprises in Hertfordshire have been given a couple of years to break even. Olive Quinton of Lofty Heights in Ipswich (www.lofty-heights.org) wisely observed ‘Your timetable is not other people’s timetable – you’ll need to be patient and do a lot of chasing and waiting’.

As well as having someone with entrepreneurial tendencies leading, is the rest of the enterprise (assuming it’s not just one person operating in isolation) also entrepreneurial? Do you have at least some of these characteristics? http://bit.ly/1w4E7kD

And if all else fails… and your start-up doesn’t take off – probably for very good, unavoidable, reasons – console yourself with the insights of David Robinson founder of (and now senior advisor to) Community Links in east London. He is a man with a declared passion for failure. He says

“If we don’t fail, it means we’re not taking risks. If we’re not taking risks, it means we’re not trying to do things differently. And if we’re not trying to do things differently, why are we here?”

And maybe learn a lesson or two by reading this blog post http://bit.ly/1rVPVTp?

If you’re interested in exploring ways to turn ideas into action, join Chris Lee for a day-long workshop on December 4 in Chelmsford Details at www.voluntarysectortraining.org.uk/courses/event/70/Ideas-Into-Action

Running on fumes – a case for lean business start-up?


Month six of my year-long journey on the Lloyds Bank School for Social Entrepreneurs start-up programme. The creative environment at our monthly group learning sessions in Ipswich at the Eastern Enterprise Hub is always stimulating. Our last gathering got me thinking…

running-on-fumesStarting a new enterprise is always a balance between getting going and doing your homework first. Clearly having a sound plan and a solid funding base before developing a business makes sense, but could the ‘lean start-up’ approach be a quicker route to financial viability?

When I was at primary school, my mother seemed to be driving around on very little petrol much of the time. If I pointed out the petrol gauge was in the red, she would simply speed up – “to get home before it runs out” she’d explain.

Yes, pressure – to get home, to meet a deadline, to get a business up and running – can lead to irrational behaviour. But maybe real entrepreneurship means just that – cutting corners and taking risks (with due regard for health and safety) and doing things differently – however irrational and ill-advised it may seem at the time.

Bedford-based social entrepreneur Lynn Serafinn uses the phrase ‘running on fumes’ in an excellent blog post on social enterprise start-ups in which she passionately argues against letting your heart rule your head when it comes to money. But maybe, just maybe, there are benefits to be had from taking my mum’s approach to overcoming a shortage of fuel for the journey? Four thoughts on this subject:

Motivation: We know that in a dangerous situation, our adrenalin kicks in to enable physical feats – jumping clean over a sofa to avoid a violent confrontation was one such achievement for an unfit friend of mine. More general discomfort can also encourage us to go further, faster. I know a couple who built a house in just less than a year while living in a garden shed that was little bigger than the double bed inside it. Their friends decided to do the same thing – but while living in a nice, comfortable warm house. They were struggling to get their house finished many years later.

Real market testing: In his much-praised 2011 book The Lean Start-up, Eric Ries suggests that it’s a good idea to put a product out into the marketplace before it’s fully developed. Getting a product developed for sale at ‘just beyond pro-type stage’ will get more genuine feedback from purchasers than will more theoretical market research. Also, Reis argues, by launching the unfinished article in which you’ve invested relatively less cash and care, you’re more likely to respond to criticisms positively and adapt your product – which is what innovation is all about.

Less padding, more purpose: Without the luxury of unlimited resources, the new enterprise is forced to hone in on essential spending (assuming you have some objective ways of defining ‘essential’) with a keen focus on purpose; what are we trying to achieve? I’m currently watching a national programme of activity evolve through two broad development routes – top-down (the deluxe model) and bottom-up (the lean machine approach). A few years from now I’ll be intrigued to see which route has been the more sustainable and, ultimately, more successful.

Attracting finance: Even when seeking start-up funding, it may be a good strategy to get your business out there before you have all your proverbial ducks in a row. A social lender recently told me “proof works” when pitching for finance. A shining business plan with figures to impress is just that – a plan and a promise – whereas hard evidence, of demand for new real products and services, counts for a lot.

What do you think – is ‘running on fumes’ the way to go fast, or go bust?

References:

Lynn Serafinn’s blog post http://the7gracesofmarketing.com/2013/10/show-me-the-money-thoughts-on-social-enterprise-start-ups

The Lean Start Up by Eris Ries www.hive.co.uk/book/the-lean-startup-how-constant-innovation-creates-radically-successful-businesses/13291794

Funding your social enterprise with or without money www.theguardian.com/social-enterprise-network/2014/feb/10/how-to-guide-funding-your-social-enterprise

Enterprise essential – Embrace risk and failure

The best entrepreneurs manage risk rather than letting it stifle progress – they take risks when they can afford to fail. David Robinson, former Chief Officer of Community Links in East London, makes the case for risk-taking. “If we don’t fail it means we’re not taking risks. If we’re not taking risks it means we’re not trying to do things differently, and if we’re not trying to do things differently, why are we here?”