An Entrepreneur’s Secret: Take No Risks

By Jeffrey A. Tannenbaum

Many people shun becoming entrepreneurs because they dread the essence of the game: taking risks. Robert S. Reiss says he owes his success as a business owner to avoiding risk.

Bob Reiss, 63 years old, has started 16 small-business ventures in his career, shunning risks all the way. His counterintuitive strategy regularly astonishes business-school students assigned to study it.

Paradoxically, Mr. Reiss specializes in a high-risk field, selling vogue items whose time quickly comes and goes. “You try lots and lots of things, because you don’t know what going to work,” he says

Mr. Reiss usually sells or phases out his companies when their fad products stop selling. Today he owns mainly Valdawn Inc., a four-year-old watch marketer here. Valdawn’s sales of Asian-made novelty watches more than doubled to $7.2 million last year from $3.3 million in 1992, Mr. Reiss says.

At all his ventures, Mr. Reiss says he keeps overhead to a bare minimum, avoids owning factories or warehouses and brings in partners to share the investment. “My energies are spent on laying off risk – dividing it up with other people,” Mr. Reiss says

It’s an approach many long-surviving business owners take, says Howard H. Stevenson, a professor at Harvard Business School. “Many people think of entrepreneurs as plungers and gamblers,” Prof. Stevenson says. “But most successful entrepreneurs, if they take any risk at all, are very calculating about it.” Among entrepreneurial successes, cautious souls are far more common than people like Donald Trump, he adds. One of the case studies assigned to entrepreneurship students at Harvard’s business school involves Mr. Reiss’s low-risk trivia game venture from the early 1980’s

When Mr. Reiss noted the success (in Canada, initially) of Trivia Pursuit 11 years ago, he shot off a letter to TV Guide magazine, proposing the creation of a rival TV Guide Television Trivia Game. Mr. Reiss says he turned to TV Guide because it established name would reduce the risk involved in a game venture. Also, the magazine could provide advertising space seen by millions. When the publisher agreed, Mr. Reiss called a wealthy friend in Chicago; the two men formed Trivia Inc. to create and market the game.

Mr. Reiss had no funds of his own at risk. The venture used his Chicago partner’s line of credit to arrange for manufacturing. Instead of paying a fee in advance to the specialist hired to design the game, Mr. Reiss offered a royalty on future sales. That was much more costly in the long run, but it reduced the venture’s risk, Mr. reiss says.

The venture fared very well indeed: about $7 million in sales on a $50,000 investment, according to Mr. Reiss. Of course, he had to split the profits with his partner – but he says it was worth it to reduce his risks.

Minimizing risks also lets Mr. Reiss focus on unglamorous fundamentals-such as sales. Though he is a Harvard M.B.A. himself, Mr. Reiss rates selling techniques – largely neglected in business schools – as more important than anything else.

Instead of making feverish sales pitches, more salespeople should sit patiently while customers talk about their needs, Mr. Reiss says. “The most effective thing is learning how to listen,” he says.

For instance, Mr. Reiss chose a cat design for his first novelty watch after one buyer told him that such designs were in strong demand. (The watch, the first of about 180 styles, sold well.) Besides listening, Mr. Reiss says he also explicitly asks for orders-a routine step that many salespeople neglect to take.

Although caution isn’t always enough to ensure success, it does allow Mr. Reiss to avoid losing much money even when his ideas flop-as he says they often have. In 1988, for instance, Mr. Reiss’s R & R Recreation Products, Inc. introduced a line of novelty picture frames that made portraits resemble magazine, such as “Man of the Year” issues of Time. The entrepreneur persuaded Time and other magazines to go along-and he won about $3 million in orders from retailers.

But the frames failed with consumers, and there were almost no reorders. In less than two years, the product died.

Still, Mr. Reiss says he lost only time and effort, not money: indeed, he says the business turned a slight profit while it lasted. he says he had spent more than half his time for a year setting up the business. But he paid nothing in advance to Time and the other, promising only royalties. He built no factory to make picture frames. Instead, he brought in a frame company in Chelsea, Mass., as his partner. R&R, which is still extant, moved on to other projects. “All I could lose on a deal like the picture frames is time,” Mr. Reiss says.

Mr. Reiss started his career as a sales executive for a pencil company in the 1950s. He went into business for himself in 1959, starting a tiny New York company that earned sales commissions from manufacturers for getting their products into stores. “I wanted to be my own boss,” he says.

Except for a period in the 1970s after a larger company bought out his first venture, Mr. Reiss has been his own boss ever since. “Making things happen-not talking about it-gives me a big kick,” he says. “I have no idea what people at big companies do in meetings all day. They talk things to death.”

Today, Mr. Reiss is building one of his biggest ventures ever. Promising faster delivery than the biggest watch makers, Valdawn aims to hit $20 million in sales for 1994, and $50 million within a few years, he says. The company has five employees including the boss, and plans to hire one or two more this year. Valdawn, Mr. Reiss says, “is my first chance to build a long-term, large-volume company, something that isn’t just a fad.”

But Mr. Reiss, as usual, says he doesn’t stand to lose much if his projections are wrong. He still owns no warehouse or manufacturing facility. Valdawn increases watch orders from its suppliers only when it has firm orders in hand from its own customers, he says.

Mr. Reiss says that for now, he will concentrate on building Valdawn, but further ventures are always possible. “There are always huge opportunities,” he says, “if you just sit back and keep looking.”