Twelve steps to success

Step 11: Recognize the risk

"As far as I am concerned, nothing is worth going broke for." Warren Avis, founder of Avis Car Rental.

It is wise to ask yourself before committing your money, your lifestyle, and your future, to a new business: "If things don't work out, can I afford the risk?"

Many sorry individuals in their haste to make a quick fortune have confused entrepreneurship with gambling. Remember the phrase of a decade ago: "Do your own thing." Not always great advice, as jumping into a risky business venture may be: "Doing your own thing with disaster."

If you're debating whether to take the plunge, and you have a sound and fiscally conservative proposal, do it.

Nevertheless, don't risk everything unless you are in your 20s or 30s. If you fail at those ages, don't worry, you will have time to recover and even try it again.

There are tales of successful business owners who failed more than once, but finally rose from the ashes to found a fortune. Firestone and Ford are two such examples of individuals who knew how to balance risk with determination.

The gray area for starting a business occurs when you are in your forties. Middle age may bring the most financially demanding period of your life with mortgage payments, college tuition and retirement savings. How much risk you are willing to handle will be a difficult decision for you.

The choice between employee and employer may be a tough call. If you do opt to have your own business, prudence and family support are the underpinnings you will need to survive.

However, if you are age 50 or so, time is definitely against you if you fail. You may not recover your financial health. To my middle-aged and senior friends, I say, be cautious, careful, and conservative. Old age and poverty are not an enjoyable lifestyle.

Here is a poor example of my style of risk management. I love the game of black jack, but rarely do I bring home a wad of winnings from Atlantic City's casinos.

I guess it's my risk aversion approach to gambling. I rarely let my winnings ride, I never hit above 13, and I never split. I usually win modest amounts, but on an hourly basis I would make more money waiting tables. I understand business risk, but not gambling.

How do you manage risk, are you rash or conservative? Your behavior can reveal clues to your possible business success.

If you're not sure about starting a business, here is a suggestion with modest risk. Rent a stall at your local flea market. It's a low risk and easy way to test the water.

I wrote a column on the topic a few months ago, and if you wish I will send it to you. A flea-market business allows you to gain the experience of running your own business plus finding out if entrepreneurship is for you. It will test your money and management skills.

If you don't like it, or can't hack it, dump the inventory and call it quits, your losses will be minor at worst.

Just as you have no difficulty in understanding the risk when you buckle your seat belt, ask yourself the question financial advisers tout: "Can I lose it all and maintain my lifestyle?"

Yet, there are opportunities that come along that may require you to "bet it all." If so, do a complete analysis, watch out for dreaming, and don't confuse negative thinking with turning down a bad deal.

Moreover, get some opinions from successful business owners, as most can spot a risky deal or idea in a moment.

Next week will be the final column on our "Twelve steps to success." I hope the series has been of value to you. If anyone has a question or comment drop me an e-mail I promise you a prompt reply.