Who are the real risk takers?

Perhaps you have always dreamt of being your own boss. Maybe there is an entrepreneurial spirit buried deep down inside of you and you want to take the plunge into starting your own company. Or maybe you already made the jump and started a business from scratch, or bought someone else’s business or a franchise in a larger business. As one of those people who started a business from an idea scribbled on the back of an envelope, I can relate to the dream.

For those who took the plunge, I can empathize with risk calculations, the struggles, the exhilarating highs of success, and the depths of despair when times are tough. My hat’s off to all of you who have taken the plunge, considered the risks, and are doing the hard work daily to keep people employed and provide a valuable product or service to your customer base. Small business truly is the backbone of America, and it takes a backbone to take that leap of faith.

When I was in the executive development program at a fortune 50 aircraft company, our group was given the opportunity for a chat with the CEO and Chairman of the Board. This particular leader was a very personable and approachable man. He made time for young, up-and-coming whippersnappers like me. He enjoyed sharing his experiences and providing insight on his career growth and how his experience could be applicable to others rising in the ranks. One of my colleagues asked the CEO, “Why should the company pay you what they do?” Although very bold, I thought it was a fair question. The CEO was paid very well, orders of magnitude more than any of us. His answer was surprising to me. He told us that his salary was reflective of the risk that he was taking in his position.

Recently, the Seattle Times reported on a new venture being headed by former Boeing CEO Dennis Muilenburg. Muilenburg was fired by the Boeing board of directors for his mishandling of the 737 MAX crisis. As the CEO of Boeing, he received a handsome salary. When his employment ended with Boeing, the Seattle Times reported he was released with no severance pay. However, it was also reported that he walked away with a pension worth $15M, plus $4M in 2019 salary and benefits, and long-term incentive stock awards valued at the time of publishing at $39M. Added together, that’s a $58M package. Regardless of Muilenburg’s guilt or innocence, how does the risk of the Boeing CEO even compare to the risk every small business person takes? Walking away at 57 years old with $58M versus the possibility of complete financial loss.

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Who are the risk takers? When I consider the idea, CEOs of fortune 500 companies aren’t the people that come to mind. I think of the person who had a dream and the guts to open their own restaurant, IT company, machine shop, or parts distribution center. These are the people who developed a plan, secured the funding, hired employees, signed personal guarantee loans/leases, and truly mortgaged their future to make that dream a reality.

I think of the entrepreneur who decided that they wanted to follow their heart, develop a business that provided opportunities for others to have employment and, in the process took less than their fair share as the business got started. And what about the people who decide to work for these dreamers? When KTM Solutions was founded, I heard repeatedly the statistic that 75% of all small business fail in the first year. Of the small businesses that survive, 75% of those will fail in the first 5 years. Those statistics are not really a strong selling point for someone looking for stable employment. Although these employees don’t feel the same weight as the owner who signed the guarantees, the employee is taking a risk.

I often wonder, what if the CEO of the fortune 500 company truly carried the risk of the small business owner? What if Dennis Muilenburg truly risked losing his entire fortune when the Boeing Board fired him? In a small business, the financial weight truly falls on the CEO (usually the owner). What if the huge Boeing financial loss fell on his shoulders? Interestingly, per the Seattle Times, Muilenburg has started a new aerospace venture in which he hopes to raise $200M from wealthy investors to acquire promising space, defense, and advanced air vehicle startups. Sure, all the fallout of the 737-MAX was a public embarrassment for Muilenburg.

I’m sure that the weight of that embarrassment will be heavy for the rest of his life. Obviously, in a high-profile position, the risk of public embarrassment on the scale of Muilenburg’s is not something most small-business people carry. Even so, with his financial resources, Muilenburg can live the rest of his life in relative comfort. If this venture moves forward and Muilenburg truly wagers his fortune, then perhaps he can be counted among the risk takers.

Note: The Seattle Times source referenced herein was an article published February 2, 2021, written by Dominic Gates, a Seattle Times aerospace reporter

Paul V. Kumler, P.E., is president of KTM Solutions, an engineering company that services the aerospace and large-scale manufacturing industries. In addition to aero structures engineering services, KTM Solutions designs and builds tooling supporting a broad clientele and various industries. (www.ktmmechanical.com) The company is headquartered in Greer, South Carolina, with remote offices in Charleston, South Carolina. Mr. Kumler serves in several volunteer roles including the SC Aerospace Advisory Board. Mr. Kumler, a professional engineer, is licensed in Louisiana, South Carolina, Texas, and Washington. He is married to Ginger A. Kumler. Together, they have two grown children and three grandchildren.

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