STRATEGY

BOOK REVIEW

LOW RISK, HIGH REWARD: STARTING AND
GROWING YOUR BUSINESS WITH MINIMAL RISK

By Bob Reiss with Seffrey L. Cruikshank
New York: The Free Press, 2000

Reviewed by Thomas R. Taylor, II
trtaylorworldnet. atc net

Many small businesses fail within the first few years of their existence. Bob Reiss'bjective
in Low Risk High Reward: Starting and Growing Your Business with Minima! Risk is to
improve the success rate of small businesses by passing on "real world" wisdom gained
through many years of operating successful small businesses. Writing in an approachable,
conversational style, the author discusses some of the key elements involved in starting and
running a small business that can weigh heavily on the ultimate success or failure of the firm.
The perspectives, insights and guidance provided in the book will be helpful to anyone
currently operating a small business, but will prove especially helpful to individuals who are
evaluating small business ownership as a potential career choice.

Although targeted primarily at entrepreneurs, High Risk, Low Reward will also prove useful
for members of the academic and consulting communities. The concepts emphasized by
Reiss, and his frequent anecdotes illustrating the concepts in action, help to connect theory
with reality by providing valuable insights into how successful entrepreneurs modify, adapt
and implement various small business management theories. These insights should prove
helpful to consultants working with struggling clients, if only as a means for providing
evidence that sound adaptation and implementation of key business practices can contribute to
success. Similarly, teachers of small business management or entrepreneurship courses may
find that their students benefit from the perspectives of a successful entrepreneur as they seek
examples of classroom learning applied to actual business practices.

The first four chapters provide important attitudinal considerations for those thinking about, or
currently running, a small business. Chapter 1 provides a description of ten personal attributes
the author believes are important for individuals considering entrepreneurship, followed by a

discussion of four key skill sets that the entrepreneur needs to possess or to develop. Chapter 2
introduces the importance of "numeracy," defined as the numerical equivalent of literacy and
requiring a deep understanding of the ratios and financial statements used to monitor the
health of a business. Chapter 3 begins a discussion of risk and methods to manage risk by
finding ways to reduce it to a level that is comfortable for the business owner. Finally,
Chapter 4 provides a brief discussion of the types of product ideas a small businessperson can
reasonably expect to pursue, where to find these ideas, and how to test ideas to minimize the

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risk of failure. Reflecting the practical nature of the book, the author emphasizes that most
successful small businesses are built on an ordinary, mundane idea and not a flash of
brilliance.

The following five chapters are devoted to the challenges of establishing a small business and
the activities required to ensure the long term success of the enterprise. Chapter 5 discusses
the basics of starting a company, including how to get into business (start a new venture, buy
an existing company, buy a franchise, etc.), legal forms of organization, sources of funding,
stafling, location, and the like. Chapter 6 covers topics relating to building the company,
including advice on planning for the future, managing attorneys and other professionals
associated with the firm, and gaining credibility. Chapters 7 through 9 conclude the heart of
the book by considering key aspects of designing and producing total products, guidance on
how best to sell products, and, most importantly, how to obtain reorders to ensure the long—
term viability of the firm.

The book concludes with a chapter entitled "Reassessment: What's Next?" and four
Appendices. "What's Next?" explores the importance of evaluating what the future may hold
for the entrepreneur and the business, such as maintaining the company on the same course of
growth, shrinking or growing the company, going public, selling, or closing the firm. Two of
the more useful Appendices include an example of applied "numeracy" and a Harvard
Business School Case (386—019) developed around the author's experiences that provides
applied, "real-life" examples of the themes presented in the book.

The dominant theme throughout the book and uniting the various topics is stated plainly in the
subtitle: Starring and Growing your Business with Minimal Risk. As any business owner
knows, risk is an everyday reality, and the consequences of risk gone bad can be catastrophic.
Perhaps for this reason, successful entrepreneurs tend not to be high-rolling risk takers, but
skillful managers of risk in all aspects of their business operations. Throughout the book, the
author provides insightful guidance and advice on how to evaluate, manage and reduce risk in
various forms, and illustrates how to apply these ideas in a business setting by using personal
anecdotes and the experiences of other successful entrepreneurs. While some readers may find
much of the advice on risk-reduction to be familiar territory, even experienced entrepreneurs
are likely to discover one or two valuable ideas that they had not previously considered.
Individuals launching a small business and those contemplating an entrepreneurial endeavor,
in contrast, will likely find the risk-reducing strategies to be extremely beneficial.

While the themes of risk reduction and risk management touch most aspects of starting and
running a business venture, many readers will find the author's insights in three areas to be
particularly useful. The first of these involves the personal attributes and skills that tend to be
found in successful entrepreneurs. Many entrepreneurs are predisposed to failure because they
unknowingly lack the internal resources required for success, and fail to consider the
importance of these internal characteristics. Serious consideration of the attributes and skills
highlighted by the author will help prospective entrepreneurs minimize their risk of failure by
inducing the self-evaluation necessary to determine personal readiness for launching a
business. Importantly, the author emphasizes that the lack of any particular attribute or skill
does not mean that an individual cannot become a successful entrepreneur. Rather, a critical
assessment of personal attributes and skills can help to minimize the risk of failure by
provoking consideration of how weaknesses may be overcome. Perhaps other personal
attributes can help compensate for those that are weak or lacking. Or, perhaps, skills that are
lacking might be acquired or honed through training or education to enhance the likelihood of
success.

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The critical skills listed by the author contain few surprises, and include creativity, the ability
to communicate effectively, the ability to sell (yourself, your company, your products), and
the ability to make decisions. The personal attributes the author uses to describe successful
entrepreneurs include familiar characteristics such as passion, curiosity, energy, work ethic
and mental toughness, but also include balance, egotism, and greed, which may be overlooked
by many current and prospective entrepreneurs. Balance can be important in helping an
entrepreneur keep the venture in its proper perspective, thereby helping to prevent burn —out.
Egotism is an attribute that is often considered to be a liability for the entrepreneur, and can be
just that if taken to an extreme. However, when defined by the author as a belief that not only
can you succeed, but that you deserve to succeed, a measured amount of egotism can help the
entrepreneur overcome what might be a paralyzing fear of failure. Similarly, greed is a
harmful attribute for a business owner when taken to an extreme. When defined as a state of
"wanting more money than you currently have," however, a controlled level of greed can be a
powerful source of motivation.

The second area in which the author's risk reduction techniques will be helpful to small
business owners is cash flow. Many entrepreneurs focus their attention on market share or
sales revenue, but cash flow is the life —blood of a small business. The author avoids a dry,
textbook approach to financial statements and accounting practices by providing a number of
practical suggestions for managing this key aspect of a business. These ideas can be found not
only in the chapter on "numeracy," which presents a more formal discussion of measuring a
company's financial performance, but throughout the book. Many of these ideas relate to the
notion of finding creative ways to convert fixed costs into variable costs to better match or
control cash outflows with cash inflows. The use of manufacturer's representatives rather than
an in —house sales force, using a public relations firm to gain valuable "free advertising," using
factors, and building relationships with suppliers to receive good payment terms (and as
potential sources of capital) are just a few examples of techniques suggested by the author to
maintain a healthy cash flow.

A final area of risk —reducing advice involves what many entrepreneurs may consider to be the
most threatening aspect of running a business: selling. The author draws heavily from his
extensive selling experience to present useful insights and techniques that help de —mystify
sales and improve the business —owner's chance of selling successfully. While too extensive to
adequately capture in a brief review, the author's advice includes suggestions to help
maximize effectiveness by focusing on particular segments or channels of distribution,
building and maintaining relationships with buyers, managing manufacturing representatives
to maximize performance, focusing on obtaining reorders as well as initial orders, and actively
managing inventories to prevent stock —outs or large close —outs. An important distinction
made by the author that should be helpful to many business owners is the notion of "selling
in" vs. "selling through." Selling —in is defined as the process of selling to middlemen or
buyers during the launch stage of a product, which is critical to the initial success of a product.
Selling —through, however, may be more critical to the long —term viability of the company and
involves a focus on creating consumer demand that will pull the product through the
distribution channel and drive reorders. Unfortunately, many small business owners lose sight
of the importance of selling —through in their excitement to "get the product out there."

Overall, Low Risk, High Reward: Starting and Growing Your Business with Minimal Risk is a
well written and informative book containing practical, experience —based advice for anyone
thinking about starting a small business, as well as for current small business owners
wondering "where to from here?" While the book does not attempt to provide a detailed road
map of every activity required to launch a business, it will help the entrepreneur consider,
evaluate and find ways to reduce the risks inherent at each stage of the process. Perhaps the
one weakness of the book is its almost exclusive focus on product —based companies, although

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much of the advice it contains can be applied to ihe growing number of small service
providers. Overall, entrepreneurs who adopt at least some of itob Reiss'deas and suggestions
are likely to find that they can minimize the risks in their venture, and increase their

probability of enjoying long term succes.;.

Thomas R Taylor, 11 currently runs his own small busitrcss, Taylor Consulting, which
provides regular reports on developntents in the patent literature, performs searches of tlie
patent literature, and produces custom technology background and prior art studies based on
business, technical and patent literature. Prior to forming Taylor Consulting, he was a
Research Director for one uf the Johnson & Johnson family of cotnpatries, with resporisihility
for the development of consumer wvttnd cure products, iticluding BrtND-AID Brand
Adliesive Bandages. Hc is also an Adjunct Instructor in the Business Division of Mercer
County Community College (NJj. His formal academic training includes a B.,S. in Chemistry
from lVake Forest University and an M. B.A.from Rider University.

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