Entrepreneurship certainly has its challenges!
People start businesses for all kinds of reasons. Other people don’t start businesses for all kinds of reasons. Sometimes they are the very same reasons. I have compiled a list of frequently used phrases and comments that I often hear when people are discussing this decision and that I think reflect serious misunderstandings. At best, these misunderstandings can lead to a waste of time. At worst, they can lead to very bad decisions and very big losses. Here are my top eight:
1. Any new business has a 50-50 shot at succeeding. Yes, according to the Small Business Administration, the failure rate of new businesses is around 50 percent after five years. That statistic ought to be scary enough, but the odds of your business succeeding may not even be that good. Some ill-conceived ventures have no chance of succeeding, and others may have a 75 percent success rate. It is not the flip of a coin. It is about execution and the need in the market place. With new ideas, it is obviously harder to predict. What do you think the failure rate is for opening a McDonald’s restaurant?
2. It’s all about finding the new thing. Most new businesses are in fact not big new ideas. We all read about the Groupons, but the vast majority of start-ups take an existing idea and try to do it better. Plenty of people have made fortunes this way.
3. Starting a business now offers more stability than holding a corporate job. While it’s no longer conventional wisdom that corporate jobs offer stability, any suggestion that going into business for yourself is a way to find stability is laughable. Maybe nothing is stable.
4. I want control of my own destiny! Can a phrase be an oxymoron? If it is your destiny, you don’t have control. That said, if you own your own business, you can say that you are responsible for yourself — for better and for worse. At its core, that is what being in business for yourself is really about.
5. I want to set my own hours! This might be the cruelest of them all. I’m sure that there are some business owners out there who have succeeded at working whatever hours they like. I am also sure that far more are working more hours than ever before — and many for less money, if any.
6. I’m going to start my business as soon as I raise the capital. We read about all of these new ventures, mostly high tech, that get start-up financing from venture capitalists. But the reality is, most new entrepreneurs get money from their own bank account, their parents, their 401(k) plans and anyone else they know. Sure, there are angel investors out there — but not nearly enough to go around. Banks don’t generally finance start-ups, and if they do, the loans are well collateralized. That means that if you fail, you lose the money in the form of your house or whatever you used for collateral.
7. Do what you do well and delegate the rest. It’s a nice theory. It has some truth to it. But the reality is that you need to know enough about everything — even if it’s just to be able to hire the right person and oversee that person. Many people, for example, want to have little to do with the accounting. And it’s possible that these people will get lucky and find someone who will completely take over their accounts, stay forever and do a wonderful job. Or not. If they don’t learn something about accounting, they may also find themselves bankrupt. Not a risk you should take. Know enough.
8. I’m tired of making money for other people. I really find this phrase offensive. Did you not get paid? Did you not make money? Are you really so critical to the profitability of the company that employs you? Get over yourself. There is no great nobility in being tired of making money for someone else. To me, you just sound like a disgruntled employee. If you start your own company and have employees, you may eventually be lucky enough to have people who will get tired of making money for you. I’m already tired of you. How about telling people that you’d like to go into business for yourself? Period. No further explanation needed.
Entrepreneurship is a funny thing. It becomes a dream come true for some and an unexpected nightmare for others. Your job, if you decide to accept it, is to get rid of your naïveté as quickly as possible. Don’t believe the hype, good or bad. Good luck. Everyone needs some luck.
Jay Goltz owns five small businesses in Chicago.