“If it doesn't work on paper, it won't work in real life either!” That's what a mentor of mine has said more times than I care to hear, and I'm sure that many other entrepreneurs don't like that saying either.

That's why calculated risks offer a substantial reduction of failures when it comes to start-ups. You're able to quickly make adjustments when you're headed off course, but if you don't have a map, you won't know when you're going the wrong direction.

It's critical that you understand your marketplace, both with hard core experience and industry research to back up your ideas.

A few years back, my wife and I would go out to a restaurant by a lake in the country. The food was fantastic, and you never had to wait to get in. The prices weren't that expensive either and they should have been quite a bit more.

One day I was reading the paper and discovered the restaurant had closed with the owner attributing it to the economy. While the economy was not good, other restaurants were getting more money for their food that didn't even compare to the quality and service at this restaurant.

This was disappointing and I mentioned it to several friends and not one of them even knew the place was even open! How do you expect to stay in business if you don't tell potential customers you are there?

The restaurant owner didn't do his homework. He assumed that he would open and word would spread. The owner had taken a big risk, not a calculated risk. He had done no research to show that the customers would come.

When you do research, you're validating your ideas and you create the potential for success.