A friend recently told me about a young man who earned his MBA, worked for a year, lost his job, and got disillusioned about the corporate world. Instead of searching for a job he decided to start a new business.
Starting a new business is part of many Forward Stories. The thrill of entrepreneurship attracts many people, including me. However, the voice of experience has something to say to people like this young man. This voice of experience is my own. I have learned many things from the four businesses I have started.
This young man did not ask for my advice, but if he had here is what I would have told him:
1. Don’t Quit Your Day Job. Listen, the grocery store does not accept as payment your plans, hopes, and dreams. Neither does your landlord. They accept cold, hard cash or, in some cases, plastic. In that case, the credit card company accepts cold, hard cash. It is very possible in free societies to continue earning a living to pay the bills while starting your business on the side.
While I have not yet read it, I know enough about his thesis to recommend the new book by Jon Acuff entitled Quitter. The premise is that you do not have to accept the myth that the only way to achieve your dream and start your business is to go “all in” and roll the dice. There is a much wiser way to be a “quitter.”
If you have already quit your day job, find another one. Work at being great in everything you do. Start your business on the side and build it to greatness.
2. It Takes Money, but Don’t Borrow It. Starting any business takes some money. You may need to buy a computer, business cards, equipment, or any number of other “necessities.” The temptation is there to borrow the money either from a bank or on your credit cards. Don’t do it! Nothing is more discouraging than starting a new business, earning revenue from your products or services, and then turning around and sending it all to your creditors.
So how do you do it without credit? Well, you could start with a pile of cash that you have saved up. That is the way the old-timers did it. You know, set aside money for a purpose and then use the money to achieve that purpose? That is called delayed gratification, and it is a very odd concept these days.
You could also choose to cash flow those items you need to start your business. How about using your old computer or finding one on eBay or at the local thrift shop? How about using that old computer and some free software to print your own business cards? How about renting your equipment for a specific job to generate profits from which you can buy your own used equipment?
This myth of necessary debt has sunk many a new business. If your business does fail, it is really discouraging to be obligated to continue paying credit card bills on a bunch of business stuff that you no longer have. When that happens each month’s credit card bill is a bitter reminder of your failure.
3. It Is Harder Than it Looks. To those who have never owned a business it appears easy. It is not. My goal is not to discourage you if you want to start a business. I am just saying that there is a reason to be conservative in your projections for revenue and be liberal in your projections for expenses. It is going to take longer than you think it is to achieve sustainable profitability.
Not only is it difficult to win new customers, it is also takes time and energy to take care of all of the required responsibilities in government reporting, bookkeeping and accounting, and taxes. If you hire employees, now you have the additional burden of making payroll, paying employment taxes, and handling employee problems. It is no walk in the park!
I have found that many people who leave the corporate world in frustration discover that owning their own business just shifts the burdens to them as the employer. Now they are wearing the boss hat. If they then decide that owning a business is not what they thought it was, they often return to the corporate world with a greater appreciation for being an employee and for how hard it is to be the employer. Often a paycheck never looked so good.
In future posts I will share some of the specifics of the businesses I have started and what I learned from them. A big part of wisdom is not only learning the hard way yourself, it is also learning from the experiences, mistakes, and successes of others.
Develop a Forward Story that includes your business, but do it with wisdom, patience, and realism. That is part of becoming an adult.