5 Steps to Entrepreneurship With Zero Risk
I’m sick of people asking “Do you know how crazy you are for making the decision to go out on your own as an entrepreneur and taking on all that risk?”
I’ve barely taken ANY risk as I’ve pursued my entrepreneurial ventures. You can take this (almost) risk-free approach too if you plan carefully and deliberately.
First, let’s dissect the kinds of risk you typically take as an entrepreneur then we’ll get into making entrepreneurship (almost) risk-free.
There are a few discrete types of risk you’ll take as you set forth on your own: financial risk, career risk, brand risk, and lifestyle risk.
Financial risk: you have the potential to blow it all. Or you can simply run out of cash and face foreclosure. This happens when you build a business that can’t sustain the cash demands you’ll face as an entrepreneur. I recently explored this risk in the 4 traps that destroy entrepreneurs.
Career risk: you can derail your career progression because you spend a few years out of corporate America pursuing your dream of building www.BoogerSculptures.com (by the way, that URL is available in case you’re interested…).
Personal brand risk: you become known as the guy who “couldn’t cut it” as an entrepreneur.
Lifestyle risk: your family hates you because they forget what you look like since you’re working 94 hours a day. You also become such a stress bomb that everyone around you develops a nervous twitch.
Now that I’ve scared off the lily-livered posers from pursuing the entrepreneurial dream, I’ll tell all you real want-to-be-my-own-boss types how to de-risk entrepreneurship:
Step 1: Build Your Platform. This morning I gave a budding gonna-be-an-entrepreneur-some-day grad student bizarre advice: go get a job in corporate. He thought the Starbucks guy had spiked my coffee.
My reasoning? You’ll understand your future customers from the inside out. Many entrepreneurs sell their products/services to big companies. If you know how big companies operate, what their challenges are, and how to navigate the organization, your venture will be more successful.
I spent many years in corporate (too many… and I’m never going back). Now thoughtLEADERS provides services to some of the biggest companies in the world. My corporate background is tremendously helpful in that regard.
There’s an added bonus to having a solid platform. If your venture does fail, you have a solid resume and background to fall back on. You can go back to corporate and get another job if you’ve built up solid credentials before you set out on your own. This is how you solve for career risk and personal brand risk.
Translation for me: if thoughtLEADERS goes under, I have a strong enough network and solid enough career background that I can find another job. It might not be an optimal job but it will at least pay the bills.
Step 2: Build Your Cushion. The biggest risk you’ll face as an entrepreneur is you’ll run out of cash before you realize your dream. Running a business isn’t cheap. You have to make investments before they pay off. That takes cash and time (two things you might not have a lot of when you start out – again, check out the traps that destroy entrepreneurs and my perspective on cash).
Start building your financial cushion NOW. When I set out on my own full-time, I had built up some cash reserves to enable me to make it through 18 months of operations. I knew my cash burn and planned for it.
I also knew exactly how much runway I had to make this thing take off (as well as when I’d need to bail on it if it wasn’t working). Granted, I would have had to raid my portfolio if things got tight (which is never a good option) but nonetheless I had some cushion. This is a big part of solving for financial risk.
Step 3: Build Your Business. Sell something people want. Listen to the market (and remember: YOU ARE NOT THE MARKET!). If you can’t clearly identify the problem you’re solving AND explain how your solution creates value, you shouldn’t be starting a business.
You must have a clear product definition, sales plan, marketing approach, and all the other great things that go into a solid business plan. If you ever come pitch me your idea and say “my business is awesome because I have no competitors because no one has figured out how to make money in this market” I’m going to laugh at you. Where there’s competition, there’s demand. You just need to know how to compete BETTER than the other guys. Find that differentiated edge.
A solid business helps solve for financial risk as well as lifestyle risk. If your business is doing well, you don’t have to work so many hours to keep it afloat. You can also actually take a vacation or two.
Step 4: Build Your Transition Plan. When you start your business, you might want to do so while you’re still employed. I’m NOT advocating doing entrepreneurial things on company time. I am advocating doing it in the early mornings, lunch hours, weekends, evenings, etc. Write your plan. Do market research. Gather data and feedback. Pilot your product. Ensure there will be a market for your stuff before you turn in your resignation.
I ran thoughtLEADERS off the side of my desk for almost 4 years before I took the plunge full-time. And even when I did go “full time” I had a part time consulting gig lined up to generate cash flow while I focused a larger portion of my time to building my “real” business.
Now that the thoughtLEADERS business has been built, I’ve been working hard on another new startup called TiXiT off the side of my desk (which is a significant amount of time). I’m sure once that venture gets all the way off the ground I’ll end up pursuing another.
Step 5: Love What You Do. I know many of you secretly hate your jobs. You have bosses telling you what to do all the time. News flash: as an entrepreneur, NO ONE tells you what to do ergo you have to motivate yourself to work. It’s a lot easier to motivate yourself to drive your business when you can’t wait to get at it every day.
If you build a business you don’t love, you’ll fail. Period. I’m lucky – I know what I love to do. I love teaching. I love selling. I love thinking about leadership and talking to all sorts of brilliant people about it. I love pontificating on my blog. I DON’T WORK ANYMORE – it’s not work when you love what you do.
Be thoughtful before you head out on your own. Build. Plan. Think. Love. Your venture’s chances for success go up exponentially if you do. And a successful business is the best form of risk mitigation I can think of.
– Mike Figliuolo at thoughtLEADERS, LLC
Photo: danger_2 by openDemocracy
As someone who still lives in corporate life and has made a few gos at things on the side, I would add a few things:
1. Corporate jobs are a good idea, but should be highly relevent to your intended field of entrepreneurship – i.e. don't go into corporate finance, wear your green visor for years, and learn nothing about selling if you want to revolutionize online copywriting. Be on the front lines, dealing with customers and generating direct, tangible value for your corporation, wherever possible to get used to and never lose the mindset and drive to create real value in all you do. One can become a jaded 'back room joe paycheck' and lose touch with what it takes to strike out.
2. There are other risks, more psychological I suppose, in failure and in lost time. You think your widget is going to revolutionize the market. But it doesn't. Your marketing stinks and the world fails to beat a path to your door. If you did it on the side, the risk was low but the failure is still real and you've lost all that time if you can't turn it around – time when you could have done something else. And now you're burned and maybe burned out on being an entrepreneur. Increase your chances by accelerating all activities that get you to the point where you're talking to humans about buying your product or service as quickly as possible. Perfect is the enemy of 'good enough'.
As a non sequitur, this quote from Machiavelli pulls no punches on the topic of risk:
"All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer."
The man may not be universally embraced, but one must give him credit for this thought.
I was a pretty risk averse entrepreneur when I left a corporate CEO's life at 40 with a family of 3. After successfully growing my third venture, MediPurpose, into a global medical device company, I will never go back to corporate life. This is what I did to mitigate the risks.
I built a strong platform after working 15 years in IT, training, marketing, finance and management in the telecoms, real estate and electronic payment systems industries.
I built a cash cushion when I sold my property in a buoyant market.
I transitioned from corporate life by first investing in and managing a small retail business while I was still working on a full time job. When I took the plunge and left my full time job I became a consultant in the payments industry while I started two ventures. My consulting jobs paid the bills and sustained the family while I tested myself and the markets. One venture never took off while the other became a cash cow for the third venture, MediPurpose.
At the end of the day, MediPurpose was not in the same industries I had built my careers on. Rather it was the processes and skills I developed – marketing, finance, organization and management – that saw me through.
Great article! I am considering going for my own startup and this was great advice for consideration. I recommend people at the same stage as me to read this.
I also refer to it on my own blog which I dedicate to and invite to co-creation on defining ambidextrous entrepreneurship.
– SteffenHedebrandt.Wordpress.com
Great comments and perspectives folks. Glad to see this post is resonating with a lot of people.
I actually covered this topic with some MBAs in an entrepreneurship program today. Very fun and eye opening conversation.
As someone who lived through some of what you describe here,…the start up the "no cushion"
and then I had to work hard at every single step you are listing.
since I joined my own business and the entrepreneurial "world" I've learned so much by getting involved in the social media and reading peoples post like you and networking;
Thank you so much for the post, very helpful!
OMG, I have looked into everything on this list and have everything covered except for the cash reserve. Which is why I am going straight into sales. Here's a problem I'm experiencing: My corporate life won't let me go! I gave my resignation, last day, and they still want me to stay and even be on part time. But alas, some are just not meant for this life! I agree that you should work for a corporation before going on your own. I feel that I've gained valuable insight into the corporate structure and actually feel confident to approach large companies because of this (far better to be familiar than to look like an idiot selling something to Human Resources when you are trying to sell a product to their Maintenance or Janitorial Crew!) So, I definitely recommend that step!!!
If it's going to have zero risk its worth trying for at anytime and its going to work definitely if you acquire great help from project consulting services.
I’ve got everything except the cash cushion, too. I actually view my corporate job as the training ground for my own business; every major project has to further my goals, not just the company’s. The most difficult part is time. I reached a point a couple months ago where I was not investing enough in my marriage and family, so I backed off my own business for a few weeks. Now I’m searching for a different balance point to include it again.