Protecting The Downside

Let me preface this post by saying that protecting the downside was one of the most important things I’ve ever learned in my ventures. It’s a process, a theory, an act of really understanding what the downside of making a decision is. In most cases, the consequences are far less severe than what we think. If your entrepreneurial venture fails and you only wasted 2K, do you really think you cannot make that back in your lifetime? Also, you can use negotiation to start your ventures- get creative! But don’t credit me with this theory. The first time I heard about it, was in reading Richard Branson’s book “Like a Virgin”. In that book he talks about protecting the downside with his own life experiences and we’ll cover some of them here

It’s been long touted for entrepreneurs that the first and best way you can protect the downside in your decisions, is to only risk your time not your money. There are many theories on this – because the value of time you can never get back- the value of money you can. So for the purposes of this site and your ventures, time and money are equal- sweat equity is always best. Most entrepreneurs think this way and I think that this is a good thing. The reason I think this way is because time is something that we all have. Its not different for you than it is for me. We all have 168 hours per week that we can delegate to do things. Now, most of that time is taken up by natural things like sleep eating etc. but business really still comes down to hard work and time- the best way to grow and start a business.

Even Mark Cuban says, “only morons start a business on a bank loan or large bankroll.” It is because most businesses that you can start cost less than 5K, 1K or even less. But the one who is most popular for the downside protection theory, is Sir Richard Branson. The most famous examples (which he talks about in the book) were present with starting Virgin records and student magazine, but the Virgin Airlines story is the most fun.

When he talks about starting Virgin Airlines (he goes into great detail on this in the book) he really leverages his ability to start this airline, and gets a fantastic deal on one aircraft. Because every good entrepreneur knows that if you can’t make it work with one product, one car, one client, or one aircraft, how can you expect to make it work with 200 or 200,000? What he does next was momentous. He finds a nearly retired plane on the market from one of the higher-end Airline companies, available for $80,000. Now the clincher is that he was able to tie them into a deal and negotiate that if he didn’t need the plane at the end of that year he could give it back to them and not lose any money.

After all, it was merely an offer you can’t refuse. He nearly got a free attempt at using an aircraft to try and start airline, and if he failed he had no down side. And again, for the purposes of this article and I think for your future entrepreneurship ventures, you cannot be thinking about time wasted as a downside, because time is never wasted, you just learn things. Had Richard Branson not succeeded with Virgin Airlines, he still would’ve learned a load that year about how to run airline, or not run an airline and what he could do better.You have to start thinking about life in this way. And this is lesson number one from L2 archive- you’re welcome my friends!!

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