Starting your own business is fun and challenging in ways you never imagined. I get a lot of questions about these challenges. Most budding entrepreneurs are trying to estimate the barriers they’ll run into. This assessment helps them understand the amount of risk they might face, which is a good thing to do. But, I think they have the concept backwards. In my experience, it’s your level of commitment that defines the amount risk you’ll encounter. If you don’t invest much, you don’t have much at risk.
My kids love the TV show “Shark Tank.” For me, it’s entertaining. The Sharks have a lot of money, so the risk they take is small, considering it is only a fraction of the value they possess. But for most of the small business owners on their show, the risk is much greater. Well, most of them. I do remember a recent episode when the Sharks asked the business owner how much she had invested in the company so far and she said not much because she was still working her day job. I think Mark Cuban jumped out of his chair in shock and gave her the “I’m out” response after chastising her for her lack of commitment to the company. Apparently, the Sharks believe you have to be “ALL in” to really achieve the success you desire. Why? It shows everyone your level of commitment to your business and dream. Sure, we can work in a job we don’t like but would someone really build a business that didn’t encompass their passions?
Napoleon Hill once said “Great achievement is usually born of great sacrifice, and is never the result of selfishness.” For most entrepreneurs I work with, great success is their quest; more specifically, financial independence. They seek the freedom such success affords. After all, we only have so much energy to put into building dreams. If we spend a lot of energy building someone else’s dream, we have little energy to build our own. This is why Mark Cuban didn’t appreciate the young entrepreneur’s efforts in building her company. This approach is attempted by so many professionals; that is, working for someone else while starting a company on the side. We already know investors aren’t crazy about that idea, but what else could this approach be missing?
Just as an investor doesn’t think you can put all of your energy in a side business, an employer doesn’t think you can do your best in your job if you have a business on the side. Employers will worry that each day you’ll be focusing on your company and not theirs. It will threaten your job security, which might make your side business your only business. If you have a business on the side, don’t share that with your employer. Managers don’t have entrepreneurial mindsets and won’t understand that you can separate the two activities.
According to Forbes, 90% of startups fail. Even when you start out under the best conditions, you’re likely to fail. Yes, there are outliers that prove you can build a business on the side and then jump into it full time once it takes off. But considering that 10% are successful, I would suspect that a small fraction of these started as sideline businesses. While I’m not a big fan of side businesses, there is one reason you might try it. Forbes identified the main reason startups fail. Essentially, half of startups create a product no one wants. However, starting your business on the side might give you sufficient time to assess the market for your product, especially if you don’t have the money to contract someone to do a market study for you and you have to do it yourself. Taking the time to study the market will greatly improve your odds of success or help you keep from becoming another startup failure statistic.
Another challenge for part-time startups is the ability to truly focus your energies on figuring out how to reach your market and build a business. Without employees, you’re forced to wear all hats of a business. That can be overwhelming, especially when you realize that you are not an expert at many of them. It takes time to learn about legal requirements, accounting, marketing, sales, and planning. Now, consider that your day job may require travel and times of intense efforts requiring long work days, and you can begin to see how your startup could remain in startup mode for many years. Eventually, it becomes easy to push off making decisions about your company because of other responsibilities. Without sufficient consideration of issues, you run the risk of failing to consider everything you should consider which can result in poor decision-making. For example, if your company began to grow to the point that you needed to contemplate going all in but were afraid to make that step because you didn’t have enough funding to pay your salary for a year or so, then you might not decide to get funding to grow the business. So, you remain in your safe job and keep the business at a level of work that you can manage while you’re working your main job. This is the risk versus reward scenario. Little risk with earn you little reward.
As a sideline business owner, your risks aren’t too bad. You already know most knowledgeable business people, especially investors, may not take you seriously, much less invest in your business. Your startup time is likely to be very long (e.g. multiple years). If time to market is important, you’ll likely miss it. Also, the longer it takes to start, the more risk you have in your day job. It gets hard to hide your real passion from everyone at work and telling the wrong person could bring your employment to an abrupt end.
As an “all in” entrepreneur, the challenges are much greater. When I started that business, I forfeited my job. I sold my house. Moved my family and rented a house. As I began, I felt I could earn business and move out of the startup phase in less than a year. This sounds easy, right? Its okay for first few months but when it begins to take longer, around months 7 through 9, your family and friends begin to wonder if you’re going to make it. I began to wonder too. But you can’t lose faith. The slightest crack will set off those around you and spin your world into a huge panic. Relationships can be easily strained, mounding more pressure on top of you. With no customers, will I need to tap into my own personal funds if I pass the first year mark without success? If I do, then all future plans could be at risk; vacations, cars for the kids, college, retirement and all of those luxuries we all enjoy. But….if it does work as planned, the reward is much more than I can get working for anyone else in any given year. No more 1 to 3% annual increases each year or that tasty spiral cut ham for Christmas. I’m working for myself, pushing a business I built. With significant income flowing in, I can start building my own Shark Tank and diversifying my investments. It’s chasing financial independence and as an entrepreneur, I can get there much faster. And when I’m tired, I let my kids run it. Yes, the risk is much greater, but so is the reward.
I’ve tried starting businesses both ways; part-time and full-time. Full-time certainly has considerably more risk than the “playing it safe” part-time approach. I think the decisions you make and the effort you put into your business are considerably different between the methods…and the results typically reflect that. It’s amazing the energy you’ll put into a business when your next meal or rent depends on it. You will become bolder, especially in the face of any adversity. There are many things to learn and procrastination has a price that as a full-time, “all in” entrepreneur, you can’t afford to pay. Success becomes your only option. You strive very hard to gain that first customer so that you can call yourself a legitimate business. Then, you have to learn how to take that first success and create more success from it. It’s a never ending learning process. As a father of three, starting a business is much like raising a child. It takes effort…constant effort. It’s painful. It’s risky. It totally changes your life. Sure, you can raise a child with little effort but we all know what those results look like.
So, what you think? Are you ALL IN?