Ever since I was a child my mother told me “JohnHollison, you would make a great banker.” This statement ultimately defined my career path during my graduate studies. I took a job at a bank, ultimately as a lender, to “bankroll” my continued education efforts. From a young age my mother took notice that I was extremely financially conservative. I saved every single nickel and dime I could when I was younger. The week after I graduated high school I had the financial means to put roughly 75% down on the late model truck of my choosing with considerable room to spare. Not a bad start for an 18 year old kid! My financially conservative nature quickly faded during my college years (you know how that can be) but has in essence remained ever-present.
In my introductory blog post I mentioned that a recurring theme of entrepreneurship has been present throughout my whole life. My entrepreneurial spirit has often clashed with my tendency to be very financially conservative on the fundamental level. In analyzing my prior entrepreneurial experiences this main cause of failure has become painfully evident during this last week. Looking back on my various businesses I pulled out when I should have doubled down. I didn’t want to sink another dollar when it could have been returned tenfold. I wouldn’t take the risk so I missed out on the rewards.
In order for me to fully grasp the source of my entrepreneurial difficulties it took on the job financial training. Any fools synopsis of the banking industry will tell you that the key to success is risk analysis, risk – vs – reward. A good banker can look at the 5 C’s of Credit and make a rational decision on a loan considering the calculated risk exposure. The 5 C’s of credit lending are character, capacity, capital, collateral, and conditions. In my entrepreneurial efforts I identified that my problems often stemmed from a fundamental misunderstanding of my personal capacity and conditions.
I looked back and realized that on several occasions I had excess capacity (cash) and favorable conditions but I failed to capitalize on the opportunity. This frequently led to ultimate business failure. Instead of reinvesting my profits into my ventures to strengthen them for unfavorable times I instead often chose to watch my checking account grow. On several occasions one unfortunate incident put my chosen enterprise out of business completely. Then soon after a complete failure I was on to the next venture, never fully addressing the underlying issue.
I have doubted my choice to pursue a career in finance on some level ever since I made the decision. I am just a farm kid who found his way off of the ranch and into an office. I really miss those days when I was outside, hustling to make every dollar. Everyday was new and exciting instead of the boring and predictable experiences typical of an office setting. My reassuring grace is that I have learned a great deal about the financial side of business in analyzing so many different types. Some businesses are good, others excellent, tons are bad, some are doomed, and others are barely salvageable. During my experience here at the bank I have been learning how to make a business work, and work well.
One of the most important lessons I have learned so far working in the financial realm is that risk is necessary for financial growth. There is no prosperous path that is risk free. The key to success is proper risk analysis. A newly established business should only be taking the risks that have upward potential with a manageable downside, should the effort result in failure. Long after I leave the banking industry I hope this lesson will stick with me. I will try to double down, reinvest, add capital, and do whatever it takes to keep going. The consequence of not doing so is surely failure, whereas success is attainable by way of calculated risks. – JohnHollison