Entrepreneurs: Leash Your Optimism

Even in tough times, entrepreneurs are incurable optimists. But too much optimism can blind you to the obstacles ahead.

Norm Brodsky is a veteran entrepreneur.

Consider a recent survey of Inc. 5000 CEOs that appeared in the magazine's October issue. Eighty-five percent of respondents described their companies as "strong" or "very strong"; only 25 percent felt the same way about the economy as a whole. Even the worst economy in 80 years can't get a business owner down.

That said, if you happen to be an entrepreneur—especially a first-time entrepreneur—you would be wise to keep a leash on your optimism. I'm not saying you should stop being optimistic. Optimism is great. You wouldn't have a business without it. But unless it's balanced by realism, optimism can blind you to obstacles and lead you to take unwise risks. In the start-up phase, overoptimism usually takes the form of unrealistic sales projections, which lead to inaccurate cash-flow projections, which in turn lead to incorrect estimates of the start-up capital needed, which then lead to running out of cash. Overly optimistic sales projections can also cause trouble during the expansion phase of a business, but the greater danger there is that you won't take into account everything that could go wrong with your growth plans.

I speak from experience. Back in 1988, my overoptimism landed my messenger business in Chapter 11. The key mistake I made was to use the credit of my healthy business, Perfect Courier, to prop up a very sick business, Sky Courier, which I had recently acquired. It never crossed my mind that I might not be able to make Sky Courier successful. But it failed, bringing Perfect Courier down with it. The latter's demise happened only because I had tied the fate of the two businesses together. It took me three years to work my way out of Chapter 11, which gave me plenty of time to think about what I had done wrong and why, and how to avoid doing it again. Part of the problem, I realized, was overoptimism, which led me to make crucial decisions without thinking through the pros and cons.

So I came up with two rules. First, if you have a viable business, protect it. Don't do anything that would jeopardize it. Above all, walk away from any opportunity that could bring the main business down if things don't go as planned. Second, never make a major decision about your business without first taking a shower. That's right—a shower. Not only do I do my best thinking in the shower, but I never have time to take one during the day. So I'm actually telling myself to put off the decision at least until the next morning. In the beginning, I had a hard time following this rule, but it eventually became second nature. I can't say I haven't made any mistakes since adopting it, but I've at least managed to avoid making big ones. Plus, I'm cleaner than ever.