One of the most startling things about setting up a new business is the new awareness you develop around both costs and risks. It’s as though a bionic implant has been put in to alert you to where you might be paying too much – or where the risks of doing something are too high. An sensor goes off when something isn’t right.
Of course, there’s no implant, it’s the entrepreneur’s survival instinct kicking in. This is perhaps one of the biggest differences between entrepreneurial and established businesses. In the former, the person making the decisions has ‘skin in the game’. Financially. Emotionally. Reputationally.
In an established business, and I include mature social businesses here, the decision maker is normally one step removed from the consequences. She might hear the sensor going off, but instead ignores it. Or, more likely, leave it for someone else to worry about.
I have not attempted to hide the fact that my new business is 100% mine. There are a number of reasons for this. I do not want to be someone else’s plaything. I don’t want to deal with all the bullshit that comes with getting grants. But most of all, I didn’t want to insulate myself from that bionic sensor that you acquire when you have skin in the game. So when I needed money, I borrowed it.
Of course, not all entrepreneurs have skin in the game. Some, including some social entrepreneurs, will seek OPM (Other People’s Money) in the early stages. Often this is because they have nothing or can’t borrow.
However, my guess is that more of the OPM people fail, give up, get ripped off or don’t recognize risk as accurately as those who, from the start, use their own resources. Their bionic sensor is that bit duller than those with something of their own on the line.
This isn’t me having a go at anybody in particular. Success comes in many packages. Stelios, for example, used his Dad’s money at first. And social entrepreneurs are heroes of our society, whoever’s money they use. They are taking risks - period.
No, my point in writing this is to say that you are a better business person if you have skin in the game. A big financial commitment, in particular, switches on the bionic instinct that the salariat don’t use. My worry, if I have one, is that social entrepreneurs, because they are often using OPM, can lack this vital wiring for survival.
Wanna be a successful social entrepreneur? Go to the bank and take out a loan.