Another edition of the carnival of entrepreneurship is up, this time hosted by Pamela Slim on Escape from Cubicle Nation. I’m very happy to report that my post on raising venture capital made the carnival!

This is a great edition with six other entrepreneurship posts that are really worth reading. One of particular interest to me is John Brother’s post on what it’s like to work at a startup. I’ve worked at two tech start-up companies and of my instances of employment I definitely prefer start-up. The post nails the experience really well and provides fantastic insight into how you can expect your job to be like.

In North America we are brought up to be very risk-averse. We certainly weren’t born that way - just look at the incredibly idiotic and dangerous stunts every kid pulls off growing-up. However the well-beaten path that we embark on eventually makes risk into a bad thing and praises stability. How many adults warned you when you tried to stray off this path by wanting something different than the reliable job opportunities presented by a respected degree? Entrepreneurs and artists have a lot in common here as they both suffer amazing backlash when starting out from those entrenched in their nice safe lifestyle. Ironically those same people later sit on the couch watching the lives of millionaires and celebrities, wishing they could be like them.

The reality is that to really attain something large, to make something big happen, to achieve ambitious dreams, we have to take risks. No one is going to reward you for being timid and allowing life to direct you, and you certainly won’t get anything for giving up on your dreams in exchange for a stable future.

Aside from the obvious financial risk commonly associated with business and investing, there are other forms of risk. There is the risk of losing your job for speaking-up when the company is making a mistake. There is the risk of making a life-altering decision that will lead you to a future you can’t predict. There is the risk of making a recipe that won’t turn out well. Being able to take these risks can ultimately lead to incredible new things in your life.

Most people don’t seem to have problems taking small risks. Would you honestly not try a new food or watch a new movie because you might not like it? When the stakes change to something more meaningful though, all that courage just disappears. It’s understandable as risk implies that you might lose, which might mean having less than you started with. In the extreme case you won’t have anything at all or you might even die (a risk you take anytime you get on the highway). It’s very easy to be unnecessarily afraid of this extreme and end up passing up many fantastic opportunities, but are you going to give up your car because you might get into an accident?

The Calculated Risk and Losing It All

There’s a difference between taking a calculated risk where a positive payoff is ultimately expected, and betting your entire life’s possessions on a single spin of the roulette wheel. Taking more risks, and exposing yourself to greater risks shouldn’t mean trying to fight overwhelming odds. The enormous potential upside makes up for the high risks that an entrepreneur takes, but plenty of rewarding risks have a much better chance of success. Now is the time to start taking these risks and reaping the tremendous rewards they can provide in business and in life.

I’ve found that what this really means is a gradual shift in mindset nurtured by more and more exposure to risk. Crawling out of your shell and trying things you’re unsure of does mean you will lose at times, but the determined person will brush the dust off and try again. When I need to take a risk I find that it’s far easier if I examine the worst that will realistically happen and then I examine my options in that scenario. Often times losing isn’t the horrible life ending drama that we envision it as. Life is funny in that the more we have the harder it becomes to part with anything, paralyzing us. I combat this by engraving deep into my values the idea that even if I should lose everything as long as I have my health and my knowledge I can always rebuild. There are just so many opportunities out there that what I own and what I have accomplished pales in comparison to what I can have by taking advantage of them.

Accepting risk takes time and it’s an ability that can always be learned and practiced through-out life. I’m at the point where I’m no longer frozen by many risks, but still have problems with some. For example I’ve gone from being afraid to spend $100 on marketing to being confident in investing much more in reasonable anticipation of success. But what happens if you don’t take risks? I’ve covered the dangers of letting life blow you where it will in another post - Plan to Achieve Your Dreams.

I just read an article on Slate in which Michael Idov details his experience with starting a coffee shop and the subsequent ruining of his life that this accomplished. This is a great read and lesson in the importance of coming up with a feasible business where the numbers actually work out. Especially when the business is burning an $18 000 a month hole in your wallet.

There’s no sense dwelling on his mistakes as he summarizes them well enough himself, but his reasons for starting this business are particulary noteworthy:

The dream of running a small cafe has nothing to do with the excitement of entrepreneurship or the joys of being one’s own boss—none of us would ever consider opening a Laundromat or a stationery store, and even the most delusional can see that an independent bookshop is a bad idea these days. The small cafe connects to the fantasy of throwing a perpetual dinner party, and it cuts deeper—all the way to Barbie tea sets—than any other capitalist urge. To a couple in the throes of the cafe dream, money is almost an afterthought. Which is good, because they’re going to lose a lot of it.

There lies the core issue. Starting a business can have many motives, but ultimately a for-profit organization should be able to do just that, profit. This means that some areas just shouldn’t be jumped into, a lesson I have learned myself a couple of times. Or more accurately, you can’t start a business on the idealism of what a wonderful place it would be. Michael points out that in order to get the sales necessary to sustain the shop, they would have had to had a steady stream of in-and-out traffic. However the store was built to host a small number of people for periods of half an hour as they sat, relaxed, and drank their coffee.

Ever dreamt of starting a business? Ever came up with all those wonderful things your business would provide to customers and employees alike? You can darn well bet that my dreams have always included the most perfect product, 24/7 service, and a cafetaria full of free food. However those things cost money and it’s very easy to miscalculate just how much they alter margins or the real cost involved (labour is often missed!). Even something as simple as free coffee for a small team is hundreds of dollars per month. I’m still surprised Google can provide all the benefits that it does, but I guess that’s a perk of revolutionizing the internet and having high investor confidence (see the stock price on Google Finance).

In the end the math just didn’t work out for Michael’s idea, but the lesson that results is something that many of us can learn from. We have to remember that all that addition, subtraction, multiplication, and division we learned does actually have an application outside of developing calculators in this world. It’s quite possibly the most important ability in a business plan - making the numbers work.