GREAT IDEAS FOR ENTREPRENEURS FROM THE THOUGHT LEADERS AT CASEY NEILON
IF YOU WANT TO THRIVE IN THE NEW ECONOMY – GET RESILIENT
HOW ACCIDENTAL ENTREPRENEURS CAN PROSPER THROUGH DISRUPTION
The US economy is changing. I’m sure that’s not news to you, but what many entrepreneurs seem to struggle with is how to respond to the changes. Disruption is a term we hear a lot these days. Uber disrupted the taxi industry. Netflix disrupted movie rentals. MP3s and streaming disrupted the music industry. Airbnb disrupted the hotel industry. What’s next? Could your business be the next in line to be disrupted?
I have come to believe that the answer to disruption is resiliency. Resilience has traditionally meant “bouncing back” from some type of blow or adversity. That’s not quite what I mean by resilience. Taxi companies and VHS rental shops haven’t really bounced back. It’s not likely they’ll ever recover.
I believe that to thrive in the new economy you have to give yourself space to anticipate and act with boldness. I think of this as anticipatory resilience. This is about avoiding the blow, not recovering from it. After working with dozens of entrepreneurs and helping them navigate their ups and downs, here are my lessons learned about how to thrive through disruption.
Why Do You Need Anticipatory Resilience?
Resiliency in our economy is a real problem. Many people – even successful people – are one check away from financial disaster. What would it mean to your business if your top clients suddenly couldn’t pay your bill? What would you do?
A situation like this can lead to bankruptcy and loss of a home and security. It happens far more than you might realize. Why? Because disruption often happens at an industry level, not just at an individual business level. I think of this like ecosystems, where a change in one part of the ecosystem can impact everything else.
For example, distribution of product in the music industry morphed predictably from vinyl to 8-track to cassette to CD. Each new type of media improved on the media that came before it. Consumers embraced the progress and record label executives slept well at night. But then…
To create CDs, the songs had to be converted to a digital format. Conversion from analog to digital, at first, happened at the end of the process – after the music had been recorded. Record executives did not see coming what happened next.
Once music became digital, this opened the door to MP3 sharing and then to streaming. This one relatively small change – from analog to digital – disrupted the entire industry. Record label profits plummeted. Tower Records went bankrupt. From the late 1990s to the early 2,000s, the music industry got turned on its head. Every single business was impacted. An entire ecosystem, the supply chain, suffered.
Looking back, it seems obvious that people would want to share MP3s and stream music. But hindsight is 20-20. It was certainly not obvious to stakeholders in the music business. So this makes me wonder – what might be happening in your industry today that you do not see?
Here is my message to you. Even if your business is very successful today, that doesn’t mean you’re safe. I don’t believe you can rest on your laurels. None of us can anticipate exactly what is going to happen next. But we can, and should, expect disruption and we can, and should, practice anticipatory resilience.
Even if your business is successful today, that doesn’t mean disruption is not right around the corner.
The Accidental Entrepreneur In The Gig Economy
I see two primary shifts in our economy today: the accidental entrepreneur and the gig economy. Both of these have come about because of disruption. In many instances, they are linked. Here is what I mean.
You may have seen Uber running TV ads with the tagline – get your side-hustle on. This speaks to the mindset of the gig economy. In this model, workers do not expect permanency. They move from one gig to the next with the greatest of ease. They always have something cooking on the side.
If they don’t like the way things are going in a certain environment, they move on. Workers in the gig economy never really settle in to a particular job or company. They anticipate their next gig and plan to move. Migration is built right into the model.
While certain industries, like film and TV, have always been gig-based, we have not seen this many workers in motion before. This is new. What’s more, the traditional gig-based industries usually provided enough income in good times to ride out the valleys of unemployment. That may not be true in the wide-spread gig economy. But that has not prevented millions of people from being swept up by this model.
This is why you should care about the gig economy as an entrepreneur. It is highly likely that people you are counting on today to help you run your business are considering or have already engaged in side-gigs. In fact, side-gigs often give rise to permanent gigs that could take them away from you altogether.
This gives rise to the second phenomenon – the accidental entrepreneur. I am one such example. I did not go to school to become an entrepreneur. But here I am, many years later, living the life of a business owner. Many of my clients are the same way. They had an idea, often on the side, that they pursued for some years. The idea eventually became their day-job.
An Accidental Entrepreneur Story
I work with a client today who fits this description perfectly. This man worked for a manufacturing firm for many years. He saw an opportunity to create a product in-house that would save the company money and brought it to the attention of his former employer.
The time was not right for them to pursue the opportunity, so he got their permission to work on the project on his own. For several years he pursued the opportunity, creating new products and identifying new purchasers. The business operated out of his back bedroom.
While building this business on the side, he continued working for other companies until one day, his permanent job was no longer permanent. Rather than finding another employer, he jumped in to entrepreneurship with both feet. The side-gig became his sole focus and his full-time business. In short order, he went from being an employee to being an entrepreneur.
As the company grew, he started looking for a complimentary business to expand into. An opportunity presented itself when a local businessman was retiring. Our entrepreneur took another big leap and purchased the business. This new company built machines that help construction firms to install glass windows faster and easier. The company was vertically integrated with his existing company as one used parts from the other.
The machines that his company makes are rather expensive, so he built some to sell to construction companies who could afford to buy them. He also built some to rent to construction companies that could not afford to buy them outright. This was phase 1 of his resiliency – two revenue streams.
He also knew that any machine with moving parts would break down, so he started a parts supply business and used products from his original business as consumables. That was resiliency phase 2 – a third revenue stream. But then he thought to himself, why just deliver the machines? Why not repair them as well? That lead to resiliency phase 3 – yet another revenue stream.
But even with his success, he still saw a weakness. The majority of his revenue streams were dependent on the construction industry. If anything happened to this industry, he would be in trouble. This led to resiliency phase 4.
This entrepreneur had CNC machines that make the parts for his expensive machines. But the CNC machines are not operating at full capacity. He began to look for contracts to leverage his excess CNC capacity with businesses outside the construction industry.
He recently told me about several contracts that he had negotiated. These contracts not only represent alternative revenue streams, they also represent protection of the CNC operations that build his more expensive and profitable machines for the construction industry. This smart entrepreneur has built 4 revenue streams to protect his operations. This is anticipatory resilience in action.
How To Practice Anticipatory Resilience
Many of the people we serve at Casey Neilon are accidental entrepreneurs. They are smart, hard-working people who saw an opportunity and had the guts and self-confidence to go for it. Most of our clients are not from great big companies. They are from entrepreneurially-minded companies who can adapt to changing market conditions. They can pivot.
I believe this provides a strategic advantage over large companies who cannot, or will not, easily pivot. But to make this strategic advantage work on your behalf, you’ll probably have to go back to the beginning and re-awaken the instincts that gave rise to your success in the first place.
Here is my advice about how to practice anticipatory resilience.
- Keep your eyes open. The tell-tale signs of disruptive change have nearly always been evident years before the actual disruption took place.
- Diversify your revenue streams into more than one industry. Look for opportunities to create diversity by product or service lines outside of your primary industry today.
- Look for great partnerships. Some of the best opportunities come our way when we build relationships with like-minded people who have similar goals.
- Remember that your network is your net-worth. Attend conferences and workshops and network with people inside and outside your industry. You never know where your next great idea might come from and it could just be the difference between being disrupted or being the disruptor.
- Delegate those things you are not good at. Most entrepreneurs try to do too much and this not only holds them back, it soaks up time they could be putting into more productive activities. You should prioritize those things only you can do well and those situations that have a strategic impact on your business. Delegate everything else.
- Read great books. Taking time to read is crucial for entrepreneurs because we get the chance to go deep into someone else’s experiences and learn from them. If you want a list of great books I recommend, just reach out to me.
- Don’t be afraid to make bold moves. You got to where you are today by taking risks. Fear is the enemy of entrepreneurs. You need good counselors to help you make great decisions. But at the end of the day, you will have to be the one to make the bold move.
- Partner with the right advisors. It is not wise for entrepreneurs to act on instinct alone. You need good data and best-case and worst-case scenarios. I fulfill this role for many of my clients today, as do my colleagues.
Anticipatory resilience is about avoiding the blow of disruption and making bold moves before they are thrust upon you. Just because your business is successful today, that doesn’t mean you’re safe tomorrow. Accidental entrepreneurs can use the same instincts that gave rise to their business to guide their next pivot. While none of us can predict the future, you put yourself in the best position to thrive when you anticipate and act. If you would like someone to be a sounding board for your next pivot, let’s have a conversation.
Nicola Neilon – CPA, SHAREHOLDER
I am a CPA and shareholder at Casey Neilon. In this role, I work with many small businesses and their owners. I love that this gives me the opportunity to go beyond just being a tax preparer or auditor. The long-term relationship that develops encompasses the roles of business advisor and trusted confidant. I have been serving clients in this capacity since 1997. My experiences have taught me that I am not Wonder Woman, nor do I have a crystal ball, but many people have no background in accounting and finance, and they need someone that they can trust to help them navigate a path to reach their goals.