A veteran entrepreneur explains how luck plays a role in business, but only to a point.
Norm Brodsky is a veteran entrepreneur.
Luck plays a role in every business, but why are some people luckier than others?
I'm sometimes asked what it takes to succeed in business. My answer is luck, talent, and hard work. The trick is to get them in the right proportions.
Now, some people, I know, will say you don't have much control over that, since luck is out of your hands, but I take a different view. Let me tell you about the time my company won a contract with the help of a rabbit.
The rabbit was a cute little bunny with long, floppy ears; my employees had given him to me at our Christmas party. He was our office pet. We had a closed-in office, and Bunny would hop around it all day long, eating M&M's, which someone had discovered he liked.
As for the rest of us, we were in the delivery business. One of our customers was the state of New York. We had a contract with the state, worth about $1 million, to deliver bundles of exams to high schools. We'd won it in the usual manner--by submitting the lowest bid. Two years later it was coming up for bid again, and we had to decide what we were going to submit this time around.
Specifically, we had to decide how much we were going to bid per pound of material being delivered. It came down to three choices. The lowest bid we considered was 55¢ a pound, which I myself thought was much too low. Maintaining gross margins is always a top priority for me, and I considered the gross profit we'd earn at 55¢ barely enough to justify doing the work. I didn't want to lose the contract, but in my opinion we could go as high as 64¢ and still be the low bidder.
My accountant and my chief administrator disagreed, and they had a point. We'd won the first contract with a bid even lower than 55¢, and the other bidders knew it. They undoubtedly realized they'd have to come in as low as possible to win this time. It was unlikely that any of them would bid 55¢, my people argued, but 60¢ was a strong possibility. No way should we go higher than 59¢ a pound, they said.
Normally, I don't have trouble making up my mind in such situations. I have good instincts, and I trust them. In this case, however, I was torn. I simply wasn't as sure about the 64¢ bid as I like to be when I'm going to override people whose opinions I respect. Meanwhile, the bids were due in a couple of days.
"Why don't we let Bunny decide?" someone finally suggested as a joke.
I thought about it for a second and said, "That's a great idea!"
The others looked at me as though I'd gone nuts. "You don't mean it, do you?" they said.
"Do you have a better idea?" I asked.
They didn't. So we found Bunny and put him in his cage. Then we got three pieces of white paper, wrote a different bid on each, and placed the papers in separate corners of the room, each with an M&M on top. When everything was ready, we set Bunny's cage down in the other corner and opened the door.
He hopped around for a while before finding one of the M&M's. He sniffed it, looked up, and hopped away. The next M&M he sniffed and ate. I turned over the piece of paper. It said 59¢. "OK," I said, "this is the bid we submit."
We did submit it, and we won. The second-lowest bid was 60¢ a pound. Had we bid 64¢, we would have lost the contract. Had we gone with the 55¢ bid, we would have left about $120,000 on the table. Bunny got it just right.
Why did I decide to trust a rabbit over my own instincts? I just listened to my inner voice, and it told me not to insist on doing it my way this time.
Most people would say we were lucky, and I couldn't disagree. But I'd also note that it wasn't dumb luck. By the time we called Bunny in, the odds were two to one that he'd pick a winner, since two of our three bids were low enough to get the contract. Luck had nothing to do with our ability to come up with those bids. It was all hard work and talent. We had effectively reduced the role luck would play in our success.
And that's the point. Business is not a completely rational process. There are always factors beyond your control--some that you're aware of, some that will hit you out of the blue. Luck determines whether you succeed despite those wild cards, and you can never completely eliminate it as a factor, but you can reduce its importance. You can use your street smarts. You can watch your gross margins, preserve your capital, and monitor your cash flow. You can do all the things we talk about in these columns, and you'll improve your chances of succeeding.
Yet there will still be times when you've done all you can and a decision has to be made. At moments like those, go with your gut feelings if they're strong enough, but recognize when they're not. And then don't agonize. Just take my advice: let Bunny decide.
Norm Brodsky is a veteran entrepreneur whose six businesses include a former Inc . 100 company and a three-time Inc . 500 company. Readers are encouraged to send him questions he can address in future columns. This column was coauthored by Bo Burlingham.