Embrace The Risk and Vegas Money

Going into business is risky business! It’s about one of the scariest thing you’ll ever do. But the most successful small business owner actually enjoys this risk! It’s like skiing down that challenging black diamond run, riding a roller coaster, or going sky diving. Driven small business owners love the adrenaline high they get from taking risk! Small business ownership is not for the faint of heart.

Take Martha Stewart for instance. Like her or not, she left her short career on Wall Street as a stockbroker to start her own catering company. That lead to a book, and the rest is history. Larry Page and Sergey Brin maxed out all their credit cards in an effort to launch the now famous Google website. And it was Victor Kiam – best known as the owner of Remington Products (electric shavers) and owner of the New England Patriots from 1988-1991 – who said; "Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets." He is also famous for saying “I liked it so much, I bought the company!” about the Remington electric razor which was purchased for him by his wife.



The biggest risk of small business ownership is simply failure! Entrepreneurs do what they do to make money. To succeed beyond their wildest dreams – beyond those who have tried before them, and beyond those who will try after them. The very thought of the risk of failure spurs an Entrepreneur to come out with their guns blazing, putting it all on the line – to succeed. I have yet to meet an entrepreneur who is satisfied with a business that doesn’t turn a profit.


Unless you are extremely lucky (and I mean extremely), there is going to be a time period when your business is costing more to operate than it is bringing in. The time period it takes to break even varies from business to business, location to location, owner to owner. A successful small business owner needs to look at their working capitol as “Vegas Money”. And they must accept the risk of losing all their “Vegas Money”. “Vegas Money” is that sum of money you take on your trip to Las Vegas, to use for gambling. For instance – you decide to take $2000 out of your “fun money” account to go to Las Vegas this weekend and gamble with. If it is all gone by the time you need to go home, then it was just a cost of the trip. You should have expected to loose it anyway. If at the end of your trip to Las Vegas, you only have $50.76 left of your “Vegas Money”, then consider yourself lucky. Remember, “what happens in Vegas, stays in Vegas” – and that includes your money!!! You could have lost it all. Now you have $50 left to take home with you!

If, the day you are ready to go home from Las Vegas, your “Vegas Money” has doubled –consider yourself blessed! Put it in your pocket and head for the airport – don’t expect to be able to repeat the luck each time you venture to the “sin city.”

That’s how I look at working capitol. You have to expect your business to take some time to break even. During that time, you are going to have to put some “Vegas Money” into it. You should set aside a certain amount of working capitol to use based on a number you come up with in a pro-forma, “worst case scenario.” That means, if you think your business will take 6-12 months to break even, you had better set aside enough working capitol to last the whole 12 months!!!! If you don’t have to use it all, great – if you do use it all within that 12 month time frame, and your business then starts making money, then that was just the cost of getting it going. Do not expect to have working capital left when your business starts to break even and/or turn a profit.

As you are utilizing your working capital, or Vegas Money – as I like to call it, remain positive. There is nothing more disheartening than listening to a new business owner talk about how much money they are loosing or have to put into the business. Even though many entrepreneurs write great business plans with 6 month, 12 month, or 2 year breakeven goals, they still seem surprised when they start using their working capital. My theory is that they are just uncomfortable with the risk. On paper, it is easy to predict that you will spend $50,000 in working capital to get your business to break even. But as you are writing the checks and your business plan turns into reality, suddenly the thought of putting another $50,000 into your business begins to become harder and harder to digest.

Each month, you should get closer to break even. Instead of focusing on how much money you put into your business that month, try focusing on how much closer you are to that breakeven point – that fictitious line between bleeding and blooming. For example, the first month in business, you may have had to put $5000 into your business. The second month, only $4500. That’s $500 closer to breakeven. Go back and look at your business plan. I recommend a business plan’s pro-forma be calculated worst case, moderate, and best case scenario. Depending on the type of business, overhead and other factors, the length of time in each scenario will differ from business to business. In the example above, let’s say the moderate break even length of time was set at 12 months. At a rate of reduction to the capital contribution of $500 per month, this business is only 9 more months from break even. That would mean that they would reach this milestone in 2 month less than their “moderate” business plan prediction. Not bad!

A common mistake made among small business owners is to think that they need to start “cutting back” on various items as they have to infuse working capital into their business. A quick glance at your business plan is a good way to keep yourself in check, bring yourself back to reality, and keep you focused. Sure it’s hard to have to put additional funds into your business. It always seems different on paper when you write your business plan – then when you actually go to put that money in. That’s why I recommend you keep your business pro-forma handy to look at in times like this. Look at month two. Spend the money on advertising, promotion, labor, etc. that you predicted you would. At the bottom of your pro-forma column, how much money did you predict you would lose that month? Be prepared to loose it. I know that it is far easier to write a pro-forma and look at it and say – “yes, but that’s not really how it will be. This is just on paper. I won’t have to put money into this business. It won’t really loose money, will it?”

If you predicted in month 2 you were to spend $1000 on advertising, but after writing that working capital check to your business to get by another month, you decide to cut out some of that advertising and only spend $500 – I can almost guarantee you that your success in month 3 will be greatly affected! It will be a vicious cycle. Each month, you will put in more working capital, and work diligently to find other areas to cut expenses. Your break even will move further and further away. Stick to your plan. Plan on loosing money for the “worst case scenario” period of time in your pro-forma…..and if you don’t, be happy, give yourself a huge pat on the back, go out for dinner – celebrate!!!!

One of my favorite sayings (that I overuse, according to my husband) is “slow and steady wins the race.” As a small business owner, you cannot fear slow growth. Growth is growth. And sometimes it’s slow speed is a blessing in disguise. Not everyone is going to like your business – not everyone is going to be a customer of your business. As long as you are continually moving forward, growing at whatever pace, you are successful.