What does luck mean in business? For many business owners, luck is some external, amorphous force that is outside our control. Is luck something that we should take into consideration in our business? Should we even use the word “luck” at all? In this episode, Stephen Krausse demystifies the concept of luck in business and emphasizes the need for conscious planning, preparedness, and risk mitigation. Instead of being at the mercy of “luck,” we can start looking at these external factors and prepare for their potential impact on our businesses. Successful businesses are not lucky; they are simply well-prepared. Take note of the contemporary examples Stephen gives and learn why.
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Wow… That Was Lucky! | Up And To The Right | Episode 039
I want to talk a little bit about the concept of luck in business. We have an interesting relationship with luck. When something goes well, we use it almost as a self-effacing way of distancing ourselves. We say something like we have a lucky break. When things go badly, we use it to distance ourselves from that event like its bad luck. When we’re pushing outside norms or breaking through those, we say we’re pushing our luck. According to Webster, the definition of luck is, “A force that brings good fortune or adversity.” How do we deal with the force of luck in business? Why do I only use covered bottles in the studio? It isn’t lucky that I didn’t spill water all over. Is it because I did spill water all over everything or is it because at some point, I realized that it is possible in the environment that I work in that I might spill coffee, water or something all over the electronic equipment that I have, whether it’s my laptop or my camera equipment? I want to talk about how we incorporate that luck into business and hopefully stop using the term luck at all.
This is episode 39, Wow…That Was Lucky! We are going to talk about concepts related to planning, preparedness and ownership. Instead of releasing something to the power of what, we want to own it and bring it back. It’s not so that it’s necessarily under our control. There’s a false sense of security there. There’s a lot in the environment and economics of business that is outside of our personal control. We need to also own how we respond to that. “What a lucky break. Beginner’s luck. You’re in luck. The luck of the draw, as luck would have it. You’re pushing your luck. Better luck next time. It’s just my luck. Tough luck. No such luck.” We have a lot of phrases that we use surrounding this idea of luck.
If you look in popular culture, luck is not a factor. A part of a quote from the director of the Abyss is like, “Luck is not a factor, hope is not a strategy and fear is not an option.” James Cameron is famous for having said that. A little more than that, in The Hobbit, you have a comment by Thorin that we make our own luck. To me, luck seems to be less like a force and more of a tool that we use to distance ourselves from cause and consequence. I’m not a psychologist. I can’t speak to why we would do such a thing, why it’s important, or why it’s become so common in our lexicon and our thought process.
Business owners don’t need luck. We need clarity. We need to understand what environment we’re working in and how we’re going to continue to operate in that environment. Luck is this amorphous force that we can’t control or predict. We need to find ways to get that word out of our vocabulary since we can’t make our own luck. If we take Merriam Webster’s definition that it’s a force, we can’t make it unless we’re Jedi. We can’t make our luck, but we can do something even better and that’s what I want to talk about.
[bctt tweet=”Business owners don’t need luck. They need clarity.” username=””]
Redefining Luck
My definition of luck or the way I like to look at luck is it’s a collision of external events and circumstances that impact our business. What is important about that is it’s not negative or positive, and it isn’t this amorphous force. It is outside of our control but it’s not almost deified thing, this luck that people talk about. When we work in business and we need to find some way of dealing with these unforeseen events, which is what the term luck refers to as it relates to us. I wrote in my notes, “To make luck our ally,” but we’re not going to do that. We’re going to remove luck from the equation. Rather than attempt the impossible to see every possible future and plan for it, because how do you guess that in 2020 there’s going to be a pandemic and then say, “As a business owner, what am I going to do about that?” That’s ridiculous. You don’t plan for that.
Unless you have a gift that the rest of us don’t have, that’s not an option. We need to look at how external forces impact our business and plan for the impact. We don’t plan for the event, we plan for impact. How do we deal with changes in revenue, whether they’re wildly positive or wildly negative? How do we account for changes in cost? If you’re in the electronics industry over the past few years, you’ve seen a couple of things happen in the raw materials part of the electronics industry and that is the prices have increased in raw materials. It feels like for us higher than inflation.
What’s more of an impact than that is the fact that we have lead times that have been pushed out, so getting the raw material in place is a huge impact. How do you adapt to the changes in the environment of your business whether those are changes in costs, revenue or lead times? What if your equipment breaks, how is that going to affect your business? Is that bad luck if your equipment breaks? Let’s look at that. If you have a piece of equipment that’s critical to your business and you take a look at, “It’s critical to my business. What would happen if this doesn’t work? How would I get my work done?” Let’s say that you have a piece of equipment like a stamp or a press.
You make widgets and let’s say it’s electronic. You tell it to run and it will make 400 widgets an hour. If that doesn’t work, what is your next plan? We have a hand press that we used to use when our volumes were lower. Maybe you can use that. How long is it going to take to fix? What’s it going to cost to fix the machine? The other piece of that is looking at, what can we do to reduce the likelihood that that specific event will happen? There are some things we can do. We can make sure that our machinery is well-maintained. The circumstance is very difficult for a small business owner to prevent a pandemic. We’ll let you off the hook on that one.
If you have a piece of equipment and you analyze, how can that impact my business? If it breaks, it isn’t bad luck because you’ve done what you can to prevent that so it’s a business impact, but you’ve also got a plan to deal with it. If it breaks and you don’t have a plan or if it breaks because you didn’t take care of it, that’s not bad luck, that’s poor maintenance. The idea is, let’s reduce those variables as business owners so that we’re not making our own luck. By properly maintaining our equipment, we’re reducing future risk. That’s all it is. Some other things that can happen like you can have personnel changes. If you have key personnel, what happens when those people leave? You can acquire somebody from another related technology company that can come in.
That can be good luck because they came in and brought skills that will take you to a different place or add features to your product line. Zoom announced that they’ve acquired a company to help them with security, which is in many people are going to be saying, “That’s a reaction because they got so much bad press.” That may be true but in the future, they are responding to a situation in a way that it reduces the risk for the future and it also creates possibilities for them going forward that I want to talk about. There are these factors that you know go into your business, revenue, cost, personnel, equipment, raw materials, and resources like the internet. That’s one that we’ve all become very dependent on. I’m live streaming. What happens if the internet goes down?
Everything that I’m doing is being recorded locally, both video and audio. If the live stream goes down, the live viewers lose the content for the time it takes me to finish. I wouldn’t even know if the live stream went down because of the way that I do this. The impact on the actual content creation is very small because of the way I do it. That is a planned process to reduce risk. The crystal ball idea of predicting the future and creating our own luck, there is no crystal ball. We cannot predict the future. Predicting the future involves the JFK assassination. Did Nostradamus predict that specific event or specific conditions? Entrepreneurs and small business owners don’t have access to that kind of thing but what we can do is examine possible impacts, and then look at what impact would that condition have on my business?
Mastering Luck
If I say, “Revenue is going right now because of the economic situation.” The assumption is revenue is going down but there are companies who are making more money or having a bigger impact than they were before the pandemic started. Zoom is one that I’ve talked about a couple of episodes and it’s a good example. There’s also been streaming services have had an increase in signups and revenue. The Nintendo Switch has had a very good quarter. Nobody with class is going to say that it was good luck that we had a pandemic, even for those businesses which are gaining from the situation. Every economic environment has the opportunity for growth. Maybe not for every market but for the economy in general. There’s an opportunity in every economic situation.
We’re seeing that in this as well. We have to look at the impacts on our business. We’ll talk a little bit more about that in the practical action section. I want to talk specifically about two examples. Streaming, we have Zoom and the restaurant industry. How do we assess luck given the situation around these two businesses? Zoom, people are starting to use their company name as the default for online meetings, “We’ll get together on a Zoom.” We’re at the point where we’re starting to see the point at which Zoom is the variable. It’s the default for an online meeting just like Coke is the default for bubbly sugar water or Google is an internet search.
[bctt tweet=”Business owners can’t predict the future. What they can do is examine possible impacts and brace themselves for those.” username=””]
That’s a fantastic position if they can make it stick. For the marketing team at Zoom, they have a great opportunity here. Was that luck that made that happen? No, I don’t think it was. They had a very full-featured free option prior to the pandemic. What does that mean? That means that anybody who needed a solid video conferencing option, as soon as this started, could go to Zoom, have a platform that worked with a lot of features for a certain number of people for a certain amount of time for free. They were offering that for years before this started. This was part of their marketing plan from the beginning was to have a good option for people to try their service. I almost was saying they were able to capitalize on this situation, but I don’t even know if it’s even that intentional, at least not from that perspective.
They had something that was going to work for a lot of people when this event happened. That’s not because they were lucky. It’s because of how they chose to offer their product. I’m not saying everybody needs a free product, but the value of that was that they made their product accessible. That allowed them to demonstrate the value in a very real way for people. When we come out of this to whatever we’re doing in the future, I’ve made enough videos about video at this point that it’s clear. I feel very strongly that video communication is going to become more and more the norm for more than just reasons of social distancing but beyond that. As we get good at it, we have the opportunity to reduce travel, which reduces costs and environmental impact.
If we can get the real value out of it, video still contains emotional context and that’s what gets lost on the phone and in email communication. We can still have a lot of that when we have videos. We can still conduct a lot of real work through video. They have put themselves through their program from the very beginning. They’ve put themselves in a position to take advantage of people who don’t need something they have to pay for right away but as soon as somebody is ready to pay for it, they become the default. We’re seeing that many people have adopted this platform and that isn’t an accident.
What it shows us is that making your product accessible and finding a way to show value in a real way can have a big impact. That marketing strategy will prove to have been very successful for that team. Restaurants are on the other side, 180 degrees from video streaming and Nintendo Switches. It’s a difficult industry to begin with. You couple that with the fact that they’re heavily reliant on foot traffic and customer service in-person. They are not well-positioned to accommodate the environment that we’re in now. The social environment within the range of their cashflow. It all comes back for businesses, can you pivot or can you change fast enough so that you don’t outrun your cash? That’s a hard thing to do sometimes.
For restaurateurs or any personal services like nail salons, hair salons, massage therapists, even my eye care professional wasn’t seeing patients. They’re in the medical industry but they’re for contact lenses and glasses and stuff. We’re not seeing anybody. All of these personal services, there’s a wake-up opportunity here to start looking at their business in a way that they can say, “If something happens, how can we still deliver value under these conditions and eliminate the need to be lucky?” Getting more specific and practical here. The practical action that you would take out of this is first of all, let’s stop using the word luck and replace it with external factors.
Let’s keep it simple. It’s important because it reduces the power of this external force that this simply wants to toy with our business and brings it back into something that we can’t control but we can certainly work around it. Get used to the idea of external factors and not luck, and then take the profit and loss statement. You remember that. You have one of those if you’re a business owner, I hope. Get one and start going through it line-by-line. We don’t care about the numbers specifically. We want to do a qualitative assessment of our profit and loss statement or income statement if you’re familiar with that term. Line-by-line, you go down that statement and say, “What would happen to my business if this goes up?”
What could cause it to go up? What would that mean to me? How would I need to respond if it goes up? If revenue goes up, that’s good, but what if it goes up fast? That can potentially cause as much risk to business as reduce revenue. Look at each revenue lines and then expense lines. What if my raw materials cost goes up 40%? What does that mean to my business? At some point, can I continue to increase prices to account for that? Maybe I can or maybe I can’t. Looking back at revenue, what could cause revenue to go up or down and how would I deal with that? What do you rely on for revenue? If you’re a restaurant, you might rely on walk-in traffic.
What if that doesn’t happen? You might say, “It’s never going to happen.” We found out it does happen. We know that the world is more dynamic than we might like to believe. If there’s a place or an event that occurs that your primary customer interaction is eliminated for some period of time, how are you going to deal with that? How do you respond to those things? Look at them. Which of the impacts for specific line items are common or related to other line items? If you have several line items where the customer walking in the door is going to impact that part of your profit and loss statement or income statement, you’ve created a scenario. Now, you can start looking at those scenarios and saying, “What happens if customers can’t come into the store?”
What if three times as many customers come into the store? “I can’t have that because the fire inspector says I can only have 200 people in my building at a time. I can’t manufacture that many widgets per hour,” or “I can’t give that many haircuts per day.” How those elements impact the lines in your profits and loss statement are good first cut to eliminating luck from your vocabulary and saying, “How do we deal with changes in these line items?” That’s the basic thing I wanted to talk about. Let’s go through and say, “Luck is not a thing that we can handle as business owners. We shouldn’t rely on it and blame it.” What we need to do is get that out of our vocabulary and say, “What impacts our business and how do we reduce the risk of that impact?”
If this was helpful to you or interesting to you, please like it, share it, and leave a comment. If you have a different experience or if you have an experience that you’d like to share, leave a comment on the YouTube channel for this episode. That’s the best place to leave a comment. If you could use some help identifying and reviewing the profit and loss statement for your business and identifying possible risks and responses to those risks for your business, give us a call or email us at [email protected]. I’d love to talk to you about that. Additionally, if you have any short questions, I’m happy to answer. I may answer it in a future episode or via email. If it’s too specific or involves intellectual property or something like that, then I would answer it personally. If you have topics suggestions that you’d like to see me cover, please go ahead and send those to me at [email protected]. The last thing is, let’s get luck out of our equation or out of our vocabulary. I look forward to speaking with you next episode. Thanks.
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