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Entrepreneur, April, 2002 by Geoff Williams

Look both ways before you cross the street.

That's the first rule, and the others we also know all too well. Don't take candy from strangers. Don't swim for an hour after eating. Careful what you touch in the woods. Wear a bicycle helmet. If you're lost, find a policeman. Fasten your seatbelt. Don't play with matches.

Don't take risks.

All good rules, of course, but most parents know to tell their little start-ups that rules are sometimes meant to be broken, or at least bent. Yes, that smiling child with the missing tooth at the playground is a stranger, but he's harmless. Making a snow angel could result in the sniffles, but let's do it anyway. Sure, after your bike's training wheels are removed, you might fall; but then again, you might not.

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Not taking a risk is taking a risk.

Starting a business is a risk in itself, but in a way, getting a new company off the ground is the easy part. If you started with little, you had little to lose. But once you have employees--whether it's five or 500--what you do or don't do may affect the lives of them and their loved ones. You have customers. Suppliers. A reputation. A bottom line that, if not cared for, could lead you back to the bottom. Take a risk now, and everybody may suffer the consequences.

Or reap the rewards.

We talked to three entrepreneurs who embrace risk even more than your average business owner does--taking leaps when the economy is sour, betting on unproven businesses and trusting their guts for all their major decisions. Take a look--if you can stomach it.

Go for Broke

There are countless entrepreneurs taking enormous risks every day. But let's begin with Ramin Kamfar, 38, who last year grew his Eaton, New Jersey-based company, New World Coffee-Manhattan Bagel Inc., from a robust $40 million-dollar business into a $400 million one, which makes it the nation's largest bagel bakery chain, according to The Industry Standard magazine.

Kamfar has accomplished this by taking what mans entrepreneurs would consider a major risk, particularly these days: New World spent S160 million to buy a bankrupt company, Einstein/Noah Bagel Corp., which was is debt to the tune of $30 million. In fact, over the years, Kamfar's company has made a habit of buying bankrupt bagel chains, including Manhattan Bagel Co., Chesapeake Bagel Bakery, New York Bagel Enterprises Inc. and its subsidiary Lots a Bagels. Kamfar often says he wants to become "the Starbucks of the bagel industry."

But ask Kamfar about the risks of buying up bankrupt bagel chains, and he doesn't see it as dangerous. "Risk is part of any business, and it's inherent in any job, whether you're an entrepreneur or a midlevel manager," says Kamfar. "The trick is to learn to manage that risk and to make sure that all risks are calculated risks." He points out that Einstein Bagels spent $600 million creating its bagel empire. New World purchased the 465-unit chain for a relative bargain: $190 million, when you add in Einstein's debts.

Still, these are bankrupt companies he's buying. No worries, says Kamfar. New World is structured so if a new addition to the business doesn't turn around, it won't bring ruin to the overall enterprise. "One book I re-read all the time is The Art of War [by Sun Tzu, Oxford University Press]," says Kamfar, "and one of its central messages is: 'Don't get defeated.' While that may sound simplistic, or even silly, it's actually very profound. As you make your bets, don't do anything that will allow your company to go under. Make certain you always have a Plan B."

Plan B

Judy Estrin is all in favor of a Plan B, and she probably wouldn't mind a Plan C. Estrin, 47, is a serial entrepreneur. She and her husband, Bill Carrico, 52, have been starting businesses since 1981, when they formed Bridge Communications, which made computer hardware and merged with 3Com in 1987. Then they moved on to start Network Computing Devices in 1988, going public in 1992; and in 1995, they created Precept Software, which was purchased by Cisco Systems three years later. Estrin, an engineer as well as an entrepreneur, serves on the boards of Federal Express, Disney and Sun Microsystems.

Estrin is now CEO of the couple's latest company Mountain View, California-based Packet Design, founded in 2000. The new firm launches start-ups--taking risk to a seemingly foolish degree, especially today. But tile first company Packet Design launched, Vernier Networks, which develops software that helps network managers protect wireless local area networks from intrusion, raised more than sin million from investors last year. Everything seems to be off to a roaring start.

But like Kamfar's, Estrin's type of risk-taking is analogous to a stuntwoman driving a car into a brick wall: It's less dangerous than it looks because of all the precautions taken. Packet Design relies on plenty of internal research before sinking finances and energies into a start-up.

"I believe in calculated risks and known risks," says Estrin, who surely is thinking of a few dotcommers who have come and gone. "There are a lot of entrepreneurs who say 'Let's jump into it and let's not worry about it.' I think we have been much more about understanding what the risks are, and then making the right trade-offs and deciding which risks to take, as opposed to just thinking that taking a risk is always the right thing to do."

Business Services Industry

2002 Ad

Entrepreneur, April, 2002 by Geoff Williams

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