Risk
I am a firm believer in the old adage “Nothing ventured, nothing gained.” The most successful companies, and frankly the most successful people, are those willing to take risks. It’s important to have a hedge, though. In other words, while it’s okay to be aggressive and enter into speculative transactions, it’s only okay if you also have other transactions or investments that are pretty safe, so you have other secure sources of revenue. I think about it in the same way I think about an investment fund. You’ll have your risky investments that, if they pan out, could bring spectacular returns, but they very well could end up with a zero. And you’re going to have your T-bill sort of investments, which will have a slow and steady rate of return, but will be consistent.
Companies, in strategizing about their business objectives, really ought to do the same thing. Take a flyer on the acquisition of that little startup company across the country, because if it works out it could have a huge return for you. But don’t do 20 of those. Do one or two and continue to make your regular margins on your core lines of business. It’s common sense. Too often, though, – and it’s human nature to do so – people see one thing as such a high return they put all their resources into it. Then that one thing changes, and in a relatively short period of time what had been an investment producing big returns is suddenly producing big losses. So you should hedge your bets when you can.
In terms of the risk involved taking on new clients, much of what I do involves companies and people referred to me by others I trust and respect. I think that’s the best way to get new business: having a referral from a current client, which happens frequently, or from someone I’ve known and worked with or been friends with for a long time.
It’s unusual for me to get a client to whom I’ve had no prior connection. It happens every once in a while, though, and in those situations I’ll do a lot of homework. I’ll have a Dun and Bradstreet report pulled on the company and its principals. I’ll do a search to see whether the company or its principals have been involved in much litigation, which to me is a red flag; I try to stay away from that. Occasionally, I’ll even work with an investigative firm if something about the client seems a little unusual. I’m fortunate that I’m able to work with people I want to work with. I don’t feel compelled to take on a client I feel is questionable or think might create problems, simply because I might receive a fee. It’s not worth it. Life is too short for that.