Tag: risk

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Do you value your independence as a small business owner enough?

As the years of recession role on, it’s so clear how important growth and having cash reserves are in your small business. How can you have a sustainable business if you don’t have growth and if you don’t have cash when you need it to perhaps invest or fix things up? How can you have sustainability without economic growth? Okay, some environmental economists have looked at what prosperity could look like in a finite world with limited resources and a population expected to exceed 9 billion people within decades. It’s not an easy question to answer, especially when you are working in an old paradigm and you have to make decisions in the here and now.

But you see companies that have a mandate to pursue the growth agenda taking risks in markets far away from their home markets as shareholders put pressure on them to grow. When the cellphone and service provider market saturates in a home markets what can you do to increase revenue? Jack up airtime rates and because data demand is increasing spike that cost up too. But how far can you go? Next thing you start to look outside in so-called underdeveloped markets where the risk is higher, including regulatory risk.

Now, a small business owner does not have the same shareholder pressures unless he or she has investors in his or her business. A case in point: a small business owner in this economy has expanded no less than three times, making those three decisions himself. His business continues to grow, because he has discovered a growth niche and is providing value that the major national chains can’t match.

The other area is cash reserves. For the listed company the problem is that because of financial rules and regulations only so much cash is permitted to be kept in reserve. Without cash reserves the larger mining or industrial companies find it difficult to maintain operations. In a resources commodity down cycle, you might think that it’s a good idea not to invest in your plant and equipment. But if you don’t, it’s going to be far more expensive down the line when demand for resource commodities increase. Yes, you can find different ways to raise finance later on, but it will come with an added cost.

For the small business owner who has built up reserves, a cash kitty, he or she has flexibility to invest, replace outdated or worn equipment and, when necessary, bring in new technology. Another case in point: a small printing business has bought a new flat-bed, A3 scanner to improve reproduction quality for customers. Without a cash reserve, the scanner would cost double if it was bank financed.

Are you as a small business owner taking advantage of the freedom and independence you have to make decisions about growth for your business and are you building up a cash reserve or cash kitty to make improvements in your business?

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Afraid of risk? Then take a look at this…

Photo courtesy of "Death to Stock"
Photo courtesy of “Death to Stock”

The other day I heard about a business person who exited a company to get hold of pension money to invest in a business. The basic premise would be to use the pension money to expand and grow the business. The business person is still young and able to recover if the business goes bust.

It reminded me of someone some time back who was fired from his director position with a large company. The way the company went about firing him was disgusting but let’s not get into that here. The business person decided to go into an industry where he thought he knew what was involved. So he invested his pension money and extended his home bond for the capital requirements of this new business. Within less than two years, the business went bust. Costs were underestimated and demand for product was overestimated. Plus a competitor, much larger, entered the market with big resources, making the small manufacturing business unviable. Continue reading “Afraid of risk? Then take a look at this…”

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A lesson about risk from a successful entrepreneur

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Credit: Unsplash,Christopher Campbell

The other day I was talking to a successful entrepreneur that I’ve known for some time and I asked him what was the biggest lesson he had learnt as a business person. He immediately came out with this answer: don’t take too much risk. About two years ago before he started the business that he is presently running, he imported a container load of product. Everything was working out well until the local currency dropped overnight. He had not taken any forward cover and his loss was astronomical. Continue reading “A lesson about risk from a successful entrepreneur”

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Even the top opera singers are in search of new business models

BinaryRhyme East Village Opera Company Chamber...
BinaryRhyme East Village Opera Company Chamberfest  (Photo credit: Wikipedia)

A top, seasoned tenor, Stéfan Louw announced his plans to come up with a new opera company to help bring back the “mysticism” and “singing excellence” of opera. He has named his company Big Wig Opera – because he is so tired of pretentious names that no one understands – and will operate from the Roodepoort Theatre. He has already produced “The Tragedy of Werther” at Roodepoort and hopes to do bigger productions in 2015. Continue reading “Even the top opera singers are in search of new business models”

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How much risk are you willing to take in this economy?

(Copyright © 2015 by Chesney Bradshaw, all rights reserved)
(Copyright © 2015 by Chesney Bradshaw, all rights reserved)

A business owner running a large factory was closed down because of cheap imports. He then decided to become an importer himself. Things turned out all right in the beginning but he made one wrong move with a container load of goods because of a sudden currency decline and lost millions. He sat down, did some hard thinking and to rescue his dire situation started a takeaway and restaurant business. This business owner knew full well that the restaurant business is risky and made plans to take as much risk out of his new enterprise as possible.

His secret was to start small and keep things small. After opening up in a down economy, a year later he has done exceedingly well. Even halfway through his first year trading he had so many customers that the temptation was they to double up the size of these restaurant space. But he didn’t do this. Having been bitten twice before, he decided to increase his retail space only marginally more. This is meant that he has so many customers that he has an overflow on the pavement outside. Continue reading “How much risk are you willing to take in this economy?”

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How to reduce risk in a start-up?

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A long and lonely desert road in Namibia.

Some people define a “true” entrepreneur as someone who conceives, organises and leads a new, independent commercial venture at significant personal cost and risk – both financial and emotional. One entrepreneur doesn’t believe that an entrepreneur is someone who does only part of that set of jobs. He believes that someone who opens a new coffee shop or buys a car wash franchise while being a risk taker is not a complete entrepreneur. Why? Because he or she has not fully conceived organised the venture. If you dream up a business, he says, put it together, run it and depend on it financially, you are an entrepreneur. Continue reading “How to reduce risk in a start-up?”

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Knowing how to identify entrepreneurial risks doesn’t make you a wimp

English: Young Dutch entrepreneur Danny Mekic
English: Young Dutch entrepreneur Danny Mekic (Photo credit: Wikipedia)

A year can be a long time in the life of an entrepreneur. At the beginning of this year a new fast-food takeaway restaurant outlet started in my local community with much promise. The product quality was good and the staff really tried to give good service. But before the end of nine months this business shut its doors.

You know how it is, once a business person like this decides to open a new business family and friends tell him or her what a good idea it is and give him or her all the encouragement. They say well-meaning things like “you’ll make it”, “I know you can do it” and “you’ve done it before, you can do it again”. This is in the nature of things. People are encouraging and want to be supportive. But comments like this may give you a sense of false security, thinking you can do what others have done but better. Continue reading “Knowing how to identify entrepreneurial risks doesn’t make you a wimp”

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Why come up with a new business idea and face the high risk of failure?

A medical student checking blood pressure usin...
A medical student checking blood pressure using a sphygmomanometer and stethoscope. (Photo credit: Wikipedia)

Two John Hopkins medical students came up with an idea for a business and with the help of an accelerator program have launched a company that provides security for electronic health records. The two medical students have developed a tool that protects the hospital’s electronic health record system. Instead of the traditional approach that focuses on protecting the perimeter, the tool focuses on building an immune system. The company now plans to employee between four and 10 people and is looking for data scientists, engineers and technical experts to help fine-tune its software program so it can be used for hospitals and health systems of different sizes.

This is an example of two medical students who went beyond their medical studies and came up with an idea that can potentially provide great rewards for them. Why would they go above and beyond their medical studies to become medical doctors and take on the risks involved in starting a new business from scratch? Why would they put their reputations on the line with the possibility of failure which comes with the territory in forming start-up enterprises? Continue reading “Why come up with a new business idea and face the high risk of failure?”

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Is a bird in the hand always better than two in the bush?

Hand Shot
Hand Shot (Photo credit: Sangudo)

It’s a question that can make some people feel uncomfortable. The proverb “a bird in the hand is worth two in the bush” means that it is better to have something that is certain than take a risk to get more, where you might lose everything. It is a warning against giving up a sure thing for something speculative.

Under what circumstances might this rule or proverb not apply? Continue reading “Is a bird in the hand always better than two in the bush?”

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The end of the line

A sad ending for traditional line fishermen.
A sad ending for traditional line fishermen.

I have a friend who is a professional fisherman but overnight he has lost the status “professional”. He has been fishing from Kalk Bay harbour, Cape Town, for over 40 years. He recently had a heart attack. A lot of it was due to putting his boat up on the costly slipway and spending a lot of money to refurbish the boat and fix up the engine so that his wooden commercial fishing boat is seaworthy.

Everything changed for him when out of the blue when and on 10 PM on 31 December 2013 the fisheries department confiscated licenses from over 300 traditional line fisherman whose families involvement in fishing go back for generations and dished them out as they saw fit.

It’s a tragic situation where thousands of traditional line fisherman all along the coast are now out of work, jobless. Millions invested in fishing boats and equipment are now sitting idle. Thousands of families have no income because the main breadwinner, the traditional line fishermen, have been robbed of their jobs.

I suppose from the fisheries perspective this seems like the right thing to do. It gives people who haven’t been in the fishing business an opportunity to enter the industry. It’s also probably well timed for vote-hungry politicians with an eye on the elections.

If you look at things from the point of view of the new entrance themselves, many would be pretty excited to make money from catching fish.

Who knows? In any legislation change there are going to be winners and losers.

The thing that really interests me is people who work in an industry or market for a long time don’t seem to think of upskilling themselves. Why is it that people can work for so many years in an industry but they seem to be oblivious of the changing circumstances around them? How come they don’t learn new skills?

I’m not pointing fingers. I’ve been there too. I also had my fair share of mistakes. What I’m talking about is people who don’t see the warning signs, try increase their skills or don’t diversify. Suddenly their livelihood is cut off.

If you think about it, it’s not only legislation that can be a risk to your livelihood but also technological obsolescence, demographic changes and simply trends that have changed in the market. Anything can be a threat or risk to your livelihood or business.

But it’s a lesson for all of us. Maybe if we’ve not been developing new skills, we might need to look into it. New skills whether for a craft, trade, engineering or professional services are all valuable for starting a new business or running one.

Yes, some might say that these line fishermen made so little money from their fishing because of the dwindling fishing stocks that are not being properly managed anymore that hey have never even had a chance to find opportunities to learn new skills. It’s a difficult one. This may well be the case for some of the older fisherfolk who could decide now to pack it in and not try anything else and live off their savings. For the young fisherfolk, they still have an opportunity to turn things around personally and move into new areas.

For those who are going into a new venture or doing something on their own such as starting a business from scratch, it would be worthwhile to try get a sense of how that industry or market will develop over the next 10 years or so. I know it’s very difficult to make predictions of this sort but when professions and markets can suddenly be shut off overnight with no compensation, no extended period for making alternative arrangements, no support for developing alternative skills and no regard whatsoever for human beings, then it pays to be sensitive to possible dangers lurking in the future.

Even so, for those smart entrepreneurs who can spot opportunities between the cracks and in the gaps, new possibilities will still be available. A smarter, sharper breed of entrepreneurs in the fishing industry have already started to develop opportunities for themselves. The money sometimes is not just in the harvesting, pulling up one fish at a time on a line. The food industry is expected to grow by something like 60% by 2030. Staying under the radar in h hard-working, difficult and dirty industries where you can do things faster and smarter and when no one can beat you in your game will offer rewards to entrepreneurs that are risk takers and have courage, work ethics and values.