Not knowing what you’re in for can lead to failure and no one wants that.
The first question potential entrepreneurs may ask themselves is, “Can I do this?” It’s a wise question to ask because not only is the process of starting a business challenging, it takes a lot of savvy and intensive work. Not knowing what you’re in for can lead to failure and no one wants that.
Then How Does Starting Your Own Business Compare?
From personal experience, I would say it’s easier than starting a traditional career.
It’s easier than going to uni or college, doing a degree, competing for jobs, learning on the job and moving through the corporate grind.
It doesn’t take as long and it’s less controlled by outside forces telling you at what point you’re allowed to advance.
It also comes with a whole lot less office politics.
Why Does It Feel Hard?
It feels hard because there is no official one established roadmap to follow and no one telling you when you are ready to move to the next level.
No one gives you permission and you have to choose which path to take.
That is the hard part.
The unknown and dealing with how you deal with the unknown.
Meaning, your mindset.
Starting a business is easy with knowledge
While starting a business in a struggling economy presents a whole set of challenges, it’s not impossible. If you have a vision, passion, and drive, starting a business might just be a wise decision. But you also need resources and to understand what you’re up against before you start. That shouldn’t be a deterrent, but rather, knowing and preparing yourself is much better than going in blind and failing. Failure can be costly but is also part of the process.
Here are a few things to consider before starting a business.
Starting a Business is all about overcoming Inertia
There are a lot of forces working against you starting a business. Sir Issac Newton’s first two laws of physics state that:
1. An object at rest tends to stay at rest.
2. An object in motion tends to stay in motion.
Your new business is “at rest” and needs a huge external force – i.e. your effort – to get it into motion. In practice, this includes things like changing your daily life patterns so that you have time to work on your business. Even if you operate in a vacuum, this is hard to do as none of us really like change too much! But also, your friends and family may not like this as it’s different and disturbs the existing rhythms that you’ve all been working and living around.
Getting momentum in a new business is the next step. Once you have made some progress, there are other forces that start pulling your business forward. It doesn’t necessarily get easier, but it also doesn’t feel like everything’s working against you either.
Steps overcoming inertia, starting a new business
1. Fear of failure
Lack of confidence is an entrepreneurship killer. It’s true that the failure rate for new businesses is relatively high, with half of new companies failing within five years. To buck those odds, you’ll need a healthy dose of confidence in yourself and your idea.
The only solution to a fear of failure is to change your mindset. You have to see failure as an opportunity for learning and growth and stop seeing it as the end of the road, an indictment of your abilities or a stain on your character. Reading accounts by successful entrepreneurs will inspire you to see the possibilities rather than focusing only on the risks.
Becoming a successful entrepreneur typically demands experience; you need to understand your industry and business management in general if you want to earn a living from your venture. When you have limited experience, you may be reluctant to move forward, and understandably so.
You can make up for this, however, by actively seeking the experience you lack. Take an online course to gain a grasp of business management basics. Strive for a leadership position with your current employer so you’ll acquire strategic planning and people management skills. Work with a mentor or shadow an entrepreneur you admire.
3. Financial limitations
Launching a business takes money, and most people don’t have ample cash to throw at a startup. There are several options here. First off, you could begin saving now for the funds to establish your business. If you shop for a better mortgage and reduce your house payments by refinancing, you can sock the savings away in your startup fund. You can trim costs in other areas to put away a few hundred dollars each month or save even more by picking up a side gig.
Barring that, you can secure funding in a variety of ways, such as borrowing from friends and family, crowdfunding, seeking loans and grants or even working with angel investors and venture capitalists. There’s always a way forward.
Dealing with uncertainty
When starting a business, uncertainty is inevitable. Dealing with this is a matter of managing how this uncertainty impacts you and your health. Starting a business can be an anxiety-inducing experience, but doing your research and having a plan can help mitigate those feelings of anxiety.
Dealing with uncertainty also means learning from your mistakes and what to do differently and there will definitely be some mistakes. That’s just part of the learning curve! Remember, you can’t forecast for everything and plans are never set in stone. Be flexible and always have a backup plan.
How entrepreneurs bear uncertainty
But how do they do it? In his recent doctoral dissertation, Dr. Steve Trost studies how entrepreneurs bear uncertainty. They don’t simply rely on luck. Very often, entrepreneurs direct their efforts seemingly against the odds simply because they disregard information that others do not question — information that is oftentimes limiting.
Many entrepreneurs escape the curse of knowledge, because they don’t accept the notion that the past limits the promise of the future.
This is not necessarily an ability they are born with, however. There are ways to improve one’s ability to bear uncertainty.
Tony Robbins has a catch phrase that he says all the time: “The quality of your life is in direct proportion to the amount of uncertainty you can comfortably live with.”
Uncertainty is going to crop up anyway, wouldn’t it be nice to find a way to comfortably live with more of it?
Here are six ways you can make that happen:
1. Embrace uncertainty
Certainty is a cage.
Sure, we all like that warm feeling that comes from knowing where we are and what’s coming next, but that’s not the way life is meant to be lived 24/7.
We are meant to grow and become more as people, and growth is always, always, always preceded by something novel and uncomfortable. You cannot evolve without new and challenging experiences.
You know that expression, “If you do what you’ve always done, you’ll get what you’ve always gotten”? It’s true.
Uncertainty is your friend, because without it, you’ll stagnate, and you’ll begin to die a little at a time.
2. Learn what matters
As the founder of a startup, you likely already have expertise in your area of business. But what you need is entrepreneurship expertise. Your job is to imagine the future and go about creating the version of it that is best for you and your business. The only way of doing this is to learn two things: to understand people and understand the economy. Technical knowledge is easily acquired — and can be hired. You have a team for a reason, so use it.
We are desperate to know about the future, but the problem is that it is unknowable. This is the foremost burden on entrepreneurs, since they are in the business of creating their version of the future and hoping for the best. They bear uncertainty. And they do it for the whole economy.
The future is imaginable and, at least to some degree, can be controlled and even created. But to create something new, it is necessary to also think outside the box — new and different. Don’t allow yourself to be unnecessarily restricted by the past and what you think you know. More information is not necessarily better, especially if you endeavor to do what has never been done before.
In a very real sense, entrepreneurs create our future.
3. Acknowledge fear, and hear what it is trying to tell you
Look your fear square in the eye.
Don’t try to pretend you’re not afraid, because as psychiatrist rockstar Carl Jung told us, “What we resist persists.”
Fear is not bad. It’s here to warn you. It’s saying, “This might happen, so plan accordingly.” But — and this is key — make sure you don’t believe fear knows more than it does about the future.
It’s making a guess, not assuring you that something bad willhappen. Prepare, and do your best to mitigate any potential peril. Then try hard to let fear go.
Once you’ve heard the message and have prepared as much as you’re able, don’t let it keep screaming in your ear, repeating its prophecies of doom.
4. Do something
Action is the antidote to fear.
If you’re uncertain and afraid, the worst thing you can do is to simply wait to see what happens.
Do something. Do anything.
If you’re worried about money, send some emails to prospects who may hire you. If you’re worried about your marketing message, re-read your sales copy and do what you can to refine it.
Remember how I said that uncertainty and fear are the keys to growth? Well, this step is where it happens. Don’t just experience fear. Use your fear.
Chuck D. from Public Enemy said, “When I get mad, I put it down on a pad — give you something that you never had.” He doesn’t just get angry; he gets angry and uses that anger to write lyrics. Fear works the same way.
It can cripple you, or it can inspire you to do something awesome, even if that awesome thing just feels like a way to escape fear at the time you do it.
Starting a business is about managing financial risk
Just about every entrepreneurial venture starts off under-capitalized. Before you can seek outside investment, you need to have developed a prototype of your product and proof of concept, if you’re selling a service and / or product. This takes time and money. This is the bootstrap phase of your business. This is where we ask “friends and family” for an investment or a loan to help us get our venture off the ground. Or we convince our life-partner to let us mortgage the house one more time to fund our latest crazy idea. This is the start of financial risk and financial pressure.If we are fortunate enough to build our prototype and demonstrate proof of concept, we have to start building our team. This costs money. We still don’t have revenue. Top talent is expensive. Cheap talent is more expensive in the long run. We may still be too early for outside investment. Either we are not big enough or their money is too expensive in terms of the equity they require at this stage. Do we take a loan, max out our credit cards, mortgage the house (if you have one), close out the 401K, raid the kid’s tuition
Forms of Financial Risk
Over time, as our business grows, we face different forms of financial risk
Our customers are a form of financial risk. Customers are looking to buy on credit, and we are looking to generate revenue so we extend credit pretty readily. All of a sudden we are facing a bloated accounts receivable and a skimpy bank account. What happens if our customer goes under and we don’t get paid?
We also face supplier risk. In times of financial distress, suppliers concerned about their own accounts receivable exposure may tighten credit and accelerate payment terms. You may not have that same luxury with your clients. Collecting in 60 days and paying in 30 days can drain your bank account pretty fast.
There is also banking risk. Banks generally like to lend in growing economic environments when businesses are making lots of money and really don’t need a loan. The worst time to ask a bank for a loan is when you really need money. In severe economic times, banks have been known to limit credit lines to amounts already borrowed and cut off your supply of oxygen (cash) when you can least afford it.Leverage is another huge risk for any business. Leverage is simply the use of debt to grow the business. The problem with too much debt is, if sales take longer than expected to materialize, or if business in general slows down, your lender still expects to be paid every month. And if your business fails, you will generally still be personally liable to repay that debt. There is a place for debt in growing your business, however, that decision needs to be made very prudently and the proceeds from the loan managed very carefully.Some businesses get very lucky and they take off immediately growing faster than their founders ever could have imagined. While this sounds really exciting, there is an element of financial risk when growth is too rapid, which is you may out-grow your capital. What could be more awful than running out of money while running a business that is growing at exponential rates? None of these scenarios are pleasant. However, in the life cycle of building your business you will encounter most, if not all, of these risks.
Exploring the Personal Financial Risk
Shifting gears a bit, while contending with all of these potential financial risks to your business, there is also the personal risk. If your business is experiencing a cash crunch and your struggling to pay your employees and vendors then guess who will go without getting paid? Yet, there is still mortgage / rent, car payments, grocery bills and children’s tuition to get paid.None of this is meant to scare you, or dissuade you from pursuing your entrepreneurial dream. In fact, it is meant to encourage you to follow that dream. Knowing the risks that lie ahead of you and having a solid plan to manage your scarce capital and related risks makes all the difference between success and failure. The more disciplined you are in your approach to financial management, the better run your business will be and the more attractive you will become to investors or lenders as your business matures.
So, What is an Entrepreneur to Do?
So, what is an entrepreneur to do? Establishing some very simple protocols early in the life of your business is key.
- Know your numbers: What will it cost to build, sell, distribute, provide your product and / or service. Know your unit costs and your gross margin.
- Know how much capital you need to get to that first sale: Do a detailed plan. Once you have come up with the amount you believe you will need to get funded, double it.
- When you are starting out, allocate a certain amount funds to 90-day sprints: Have a clear set of goals and dollars available to fund those goals. Are you spending more or less? Why? What can you control? What can you Adjust? The earlier we figure out there is a flaw in our plan the earlier we can adjust before it is too late and we run out of cash. There is a very simple tool I have used with all of my businesses and my clients that I will be glad to share with you. A side benefit of this practice is that it creates a disciplined culture of accountability.
While none of this will guarantee your success, it helps tilt the scales in your favor.
Starting a business demands a lifestyle change.
Entrepreneurship isn’t for everyone, but for those who adapt to the lifestyle changes required to run their own business, the rewards can pay off. Those lifestyle changes might be daunting, but going in knowing what to expect will help set you up for success.
Your workdays will change
Time spent working as an entrepreneur is vastly different than in traditional employment. This is both a good and a challenging thing. As your own boss, you aren’t necessarily beholden to any supervisor on a daily basis, and you can be far more flexible with your time.
Conversely, and particularly when starting a business, there are little to no bookends to your day. Hours will be long and days off in short supply. This is where business plans come in handy. Having those attainable goals can ensure you are on the right track and will be able to hire people to help grow your business so you can have a moment’s rest!
For those who struggle with self-discipline, starting a business can be challenging. Learning to hold yourself accountable for tasks and achieving goals is paramount in running a business. While you are your own boss, you are responsible for your business’s success and therefore, are responsible for all the cogs in the wheel that make up your business.