Thursday, January 17, 2013

Rule#6: Manage Risk


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“One  of  the  great  myths  about  entrepreneurs  is  that  they  are  risk  seekers.  All  sane  people  want   to  avoid  risk.” – Professor  William  Sahlman, HBS



Do Not Take Risk. Manage It.

     Successful entrepreneurs don’t take risk. They work very hard to manage and take as little risk as possible. To them, they deal with financial risk with DROOM (Don’t Run Out Of Money) principle. They don’t spend money when they don’t need to. They raise money before they need it. They focus on growing their revenue and improve their bottom line. True entrepreneurs do not take random risk.


Different People, Different Risk

     People view things differently. One thing could be risk for one person, but be opportunity for another. When you want to hire someone. You usually have to pay for at least minimum wage. That’s risky for you. But you might be able to convert your project into  collage project and get a free labour. The students would do this because they’ll get real word experience. And, you may promise to hire them after graduation if they did well. 


Things You Need To Do

If you are serious about doing business, here are things you need to learn:
  1. Learn about money and finance: You need to understand at the minimum cashflow and balace sheet. Even if you hire someone to do accounting for you, you need to know what they are doing.
  2. Incorporating: Learn about how an corporation is formed. For example, what are legal document you and your co-founder need to sign? Then, do it early. Make it clear from the beginning. If it’s not meant to work out, let it end at the very beginning.
  3. Have a plan B. Just in case, things does not turn out as you expected. For example, at the early stages, keep your day job and work part-time as an entrepreneur. Do it until you are absolutely sure about your venture. Then you can quity your day job.
  4. Maintain liquidity. Keep the cash. Monitor expenses. Rent. Do not buy if you don’t have too. 
“It’s much better to have some other offer and not need it than to need one and not have it.”

Source:The Intelligent Entrepreneur: How Three Harvard Business School Graduates Learned the 10 Rules of Successful Entrepreneurship by Bill Murphy Jr.,
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Book or Audiobooks?

Personally, I prefer audiobooks. It's fun, and I can listen when I'm doing something else. It also makes other activities (e.g., jogging) a lot more fun. For more detail about audiobooks, please read [this post].

There is one more reason that may encourage you to go for the audiobook version. You can get it now for FREE. Audible offers you a free trial for 14 days. Even if you get the book and cancel the subscription right away (so that you don't have to pay), you can keep the book. And, don't worry if you lost the audiobook file. Just log into audible.com. You can keep downloading the over and over again.
About the summary: It takes time to finish up a book. And, when you do, sometimes, you want to review what you learn from the book. If you do not make  notes as you read, you might have to go through the book once again. This can be time-consuming when you are dealing with a book. But you can still flip through the book and locate what you are looking for.

However, when the material is an audiobook, it is extremely hard to locate a specific part of content. Most likely you will have to listen to the entire audiobook once again.

This book summary will help solve the pain of having to go through the book all over again.

I am leaving out the details of the books. Most books have interesting examples and case studies, not included here. Reading the original book would be much more entertaining and enlightening. If you like the summary, you may want to get the original from the source below.

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