THE BLOG
06/15/2010 05:14 pm ET Updated May 25, 2011

The Obama Administration is Discouraging Entrepreneurship by Preaching That Taking Risk is Evil


President Barack Obama and his risk-aversive legislators are sending the wrong message to America's entrepreneurs. They equate risk taking with wanton greed and evildoing.

Understandably, their wrath is focused on "too big to fail" financial institutions and banking reform. But the "risk taking is bad" message funnels down to small and middle-sized, privately held businesses as well. It can discourage entrepreneurs from launching and expanding their businesses.

Ed Piekarz says, "I have never had a client ask about the risks faced in their small business venture." Piekarz should know about risk since he is a SCORE CyberChapter volunteer and has mentored business owners online since 1997.

SCORE is a nonprofit business resource partner of the U.S. Small Business Administration. It has more than 11,200 volunteer business counselors in 370 chapters nationwide.

Neophyte entrepreneurs are cavalier about the enormous risk of founding a business. They are more focused on sales and marketing than the possibility of running out of cash to pay bills -- the most lethal cause of failure.

Therefore, codifying and controlling risk is essential.

"Before suggesting doing a business plan to most clients, I recommend that they do a two year cash flow chart first," Piekarz says. "It usually ends up showing financial crunch-points or concludes that the venture is risky or has no growth potential."

Equally as important, it cites when the business risks are most likely to occur and their magnitude. Moreover, when cash flow is charted or graphed, it is easier to visualize the future trouble spots than solely relying upon numerical projections. That is particularly important in tourist-related businesses because seasonal risks can obliterate a company during slow months.

John Greer is a veteran automobile dealer in Bradenton, Fla. and looks for new ways to sell cars. He equates risk to taking a chance.

"Several years ago, we took a chance and put our first car ad on eBay," he wrote in a newsletter to the Young Entrepreneurs of Sarasota networking group. "Our first eBay ad was a success for the dealership (and) we never looked back."

More recently, he bought a bunch of cars to sell on eBay. "Are we crazy taking a chance by buying 23 cars during a recession?" he asked. "But by taking a chance, we will know which makes/models not to buy the next time."

Larry Face, a Sarasota, Fla.-based business coach with Next Level Achievement, e-mailed to a business group, "The word 'risk' can often be such a scary word." Therefore, he asked, "It sure sounds like something we should want to avoid, doesn't it?"

"But, if we are to accept personal responsibility for being proactive and creating our lives, we need to accept the fact that risk is an important part of doing so," he wrote, answering his own question. "Breakthroughs to the next level of our life takes place in direct proportion to the size of the risks we take."

And so it is with starting and growing a business.

Entrepreneurs do not sleep well at night. They work 12-hour days, sign personally for credit and on leases, and pledge the family house to the bank as collateral. Because everything they own is on the line, failure can be catastrophic. By contrast, success is euphoric.

To help entrepreneurs achieve euphoria and reduce the risk of failure, SCORE is introducing a newly developed series of five workshops called "QuickSTART." A cadre of business owners, seasoned consultants and SCORE business mentors developed it.

The first workshop, "Start-up Basics" is free. Nominal tuition is required for each of the remaining four workshops. During the workshops, attendees will receive free onsite coaching to guide them through the exercises and homework.

Greg Hoffmann, a Longboat Key, Fla. resident and SCORE volunteer, says the first workshop is designed for attendees to make "a personal assessment of their interest in and aptitude for starting a new business." The next four sessions are "designed to make a 'go, no-go' decision."

The workshops and subsequent business mentoring is a segment of SCORE strategic plan to create 1 million new businesses.

Jerry Chautin is a volunteer SCORE business counselor, business columnist and SBA's 2006 national "Journalist of the Year" award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin