The Risk-Return Trade-Off for Small Business Owners

Let’s begin by acknowledging the tremendous amount of risk that is associated with starting a new business or purchasing an existing business.  Virtually anyone that you come in contact with on a daily basis has an idea for a  new business.  Very few people, however, have the resolve to actually pursue their idea(s), particularly if they are already gainfully employed.  A willingness to accept the reality that you wake up every morning unemployed is the first in a long list of risk factors that make entrepreneurs special.   

So, the question becomes why would anyone take on such a risk?  In my estimation, there is a two-fold answer to this question. 

First and foremost is the allure of pursuing the “American Dream”.  Let me provide a prospective.  Ticketmaster was an IAC property back in the 2000’s, and they were a Management and Leadership Development client of mine at that time.  I was invited to attend several worldwide conferences during my tenure at Ticketmaster and I remember distinctly a presentation by an international demographer that hypothesized about why people come to America.  This demographer suggested that Frenchmen go to Germany to find a job; that Germans go England to find a job and that Englishmen go to Spain to find a job.  And then he said, “but people don’t come to America to find a job, they come to America to chase the American Dream”. 

Thomas J. Stanley and William D. Dankoto spoke to the second part of the answer in the The Millionaire Next Door.   In the book, Stanley and Danko wrote: “… self-employed people are four times more likely to be millionaires than those who work for others.” Of the non-retired millionaires surveyed, they found that two-thirds of them were small business owners.  In fact, they found that most American millionaires (about 80 percent) are first-generation wealthy.  In other words, it is reasonable to assume that you may generate out-sized profits in exchange for the risk associated with an entrepreneurial venture.

At EBITDA Growth Systems, our brand promise is that we will double the profits of our clients or we will return their fees.  We have never had to write a check and return fees because we have a robust repeatable system that virtually guarantees our success.  This enables us up to commit all our efforts, energy and resources to helping our clients realize a favorable risk-return calculus.