Reward Goes With The Risk - And Vice Versa
Being an entrepreneur has become the in-thing to do. If you ask someone what he or she does for a living, the response is more likely than ever to be "I'm an entrepreneur."
One of the frequent complaints I hear from other entrepreneurs is that employees do not understand the basic rule that reward goes with the risk. Employees draw a steady paycheck and should be paid whether or not the business is making money. They generally do no share the upside (other than a potential bonus) when the company is doing well or the company is sold etc. The upside is the benefit to the entrepreneur for taking a risk - incurring debt, working 70+ hour weeks and losing sleep about where you will get the money for payroll. Most would agree that the risk taker is entitled to the reward.
Many entrepreneurs, however, are not as comfortable with the flip side of the coin. The person who will potentially receive the reward must also take the risk. Employees and suppliers (whether of goods or services) do not share in the reward and should not bear the risk. I am always baffled by the entrepreneur who drives a company leased luxury car but cannot make payroll. Something is wrong with the entrepreneur who is taking a large draw from the company, but is unable to pay his or her suppliers.
Over the last couple years I have noticed a growing trend. An entrepreneur starts a business by leveraging his or her suppliers to extend credit. If the business goes really well, the entrepreneur will pay the bills. If not, the entrepreneur will approach the suppliers and claim that something improper happened - i.e. the business they bought had inflated books, a business partner did not meet obligations, etc., - and expect the supplier to sharply discount the bill. Likewise the entrepreneur may not pay commissions when due or may offer employees "stock" in a worthless company (unknown to the employees) in exchange for part of their salaries.
In Utah and many other places, the entrepreneur will probably be successful the first couple of times he or she passes the risk on to employees or suppliers. However, it will eventually catch up with the entrepreneur. Word gets around about employers who do not pay their employees. Suppliers talk and the next time you need goods or services, expect to pay for them in advance. Eventually, the entrepreneur will get the reputation of one who takes the reward while dumping the risk on others.
Simply put, the entrepreneur took the risk, not the employees or suppliers. The entrepreneur cannot unilaterally convert his or her employees or suppliers into passive investors whenever it is convenient. If you want to own the reward, you should own the risk.
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