Stress Test for Entrepreneurs

If Stress Tests are able to tell us if a bank can survive tough times, then maybe entrepreneurs should take a stress test before starting a new venture. And if current trends continue, the government may require such a test before we are allowed to start a new venture!

So, what would a Stress Test for Entrepreneurs look like? Here are a few sample questions:

1. Do you have a clear idea of what you want to do and are you committed to sticking to it until it succeeds or fails? If the answer is yes, you fail the stress test. To be a successful entrepreneur, you have to have a clear idea of what you want to do and then make adjustments as you begin to implement. That does not mean reacting to every event but it does mean learning and adapting. The one thing you can be sure of, no new venture looks exactly like the business plan that was originally drafted.
2. Do you have financial resources to survive while you learn and adapt the plan until it is profitable? The correct answer is of course "yes". There is no shortage of good ideas. The problem is that most do not work as planned initially. A good entrepreneur, given enough time, is capable of solving the puzzle. Unfortunately, what often happens is that we run out of money and resources before we get there?
3. Are you prepared for rejection, criticism and failure? Again, the answer better be yes. Entrepreneurship involves selling--selling the idea to investors, to future employees and of course customers. And maybe most importantly, to friends and family. While you think the idea is brilliant, you will get many more "No's" than "Yes's". Entrepreneurship is heroic until it looks like it may fail, and then people start to question your judgement--why are you putting yourself or your family at risk? And, of course the odds are not necessarily in your favor.
4. Is your idea potentially a billion dollar venture? If you answer yes, again you fail. First of all, if you think your idea is likely to create a billion dollar venture, you probably need counseling for grandiose thinking. Sure, we are told to thank big and we should. But we also have to be in the real world. Do you know the odds of a new venture turning into a multimillion dollar business much less a billion dollar business? You have a much better chance of being successful with a small idea, maybe even several small ideas. Only the most experienced entrepreneurs with proven track records are able to secure the resources to run with big ideas.
5. Is the pain of Not doing it greater than the pain of Doing it? The correct answer is yes. This, of course, is fundamental to basically all decisions we make, but especially true for entrepreneurs. There will be pain in the process. The question is, will there be more pain and regret in not doing it? For many of us, the rewards that come from adventure and following our dreams outweigh the risks.

OK, how did you do? Entrepreneurship is not for everyone. We all should carefully assess ourselves and our current life situation before taking the plunge.

Fail Wisely, But by All Means, Do Not be Afraid to Fail

While this may be difficult to hear, in my experience failure is fundamental to being an entrepreneur. The truth is, the odds are not real good when you start a new business. While we have all heard the stories of people who have an idea, start in the garage and end up on Wall Street, we hear about those stories because they are so rare and they are news.

The untold stories are those who have an idea, start in the garage, and end in the garage. Failure is a part of being an entrepreneur. If we are afraid to fail, however, the ideas never get to the garage.

If failure is fundamental to entrepreneurship, the the key is learning how to fail. If you spend a lot of money and a lot of time on an idea and it does not work, then you have lost a lot of money and a lot of time. You may have learned a lot, but at a great cost. While this sounds so simple, for most entrepreneurs it takes a while to figure out.

What I have finally learned is that if you invest a little money and little time and the idea is not successful, you still have learned but have not lost a lot. I like to call this Rapid Cycle Failure. Develop an idea and get it going as quickly and for a little money as possible. Most will probably fail, but if you do several you have a chance that at least one will be successful.

This is really a hard lesson for entrepreneurs. I believe the reason is that most of us have a dream of hitting a home run. And home runs must require a lot of planning and obviously a lot of money. Most of the time we never get the idea to the garage, and if we do, our odds are not very good.

Learn to fail quickly and inexpensively. Always learn from the failure and occasionally you will hit that home run.