So You Want To Go Into Business For Yourself. Really?
So many people tell me they want to start their own business. I get letters every week from people wanting my advice around this topic. A recent poll says that 55% of millennials want to go into business for themselves. I admire people who have that entrepreneurial spirit and want to take control of their future.
But when I respond to this question when asked, people think I am a downer because I am rarely encouraging. Maybe it is because I know the stats on how few of them will succeed. I know because I can read, use a search engine and am a realist. By the way, depending on whose research you want to go with, somewhere between 33-50% fail in first two years and somewhere between 60-90% are history at five years. And don’t say, “Yeah, but I won’t be one of them!” Really? They probably all said that. So let me ask you, “Why won’t you?” Don’t answer yet; read the rest of this first.
To begin with, very few people will actually start their own business. It is a dream but will never become a reality for most. Why? Laziness. Most folks are great at dreaming about what they want but when it comes to putting their butt into gear and actually doing the work, they sit down and turn the television back on and realize that job they have where the check shows up every other Friday isn’t so bad after all. So the years go by and nothing in their life changes.
But that is for the people who don’t start their own businesses, and I want to talk about those who actually DO start their own business. Why do so many businesses fail? You can do a Google search and in a few seconds read dozens of articles on why businesses fail. Do that . . . but do it after you read what I have to say.
Why do most businesses fail? Lack of preparation.
Answer these questions:
- Do you have real-world, hands-on experience in running a business, or are you just convinced you can do it?
- Have you read a book on how to start a business?
- Have you taken a course on marketing or advertising?
- Do you know how to hire, fire, train and manage people?
- Are you under-capitalized? Do you even know what that means?
- Do you know what a balance sheet is, or what your real expenses will be?
- Do you know what your break-even is, and what you are going to do when you are short and what you are going to do with the profits?
- Do you know the survival rate of businesses that do what you do?
- Do you know the importance of customer service and how to deliver it?
- Do you know how to sell?
- Do you know what sets you apart from your competitors?
- Do you even know if there is a need or market for your product or service? Are you sure? Before you answer that one, what analysis have you done? Just because your BFF and your sister-in-law said they would buy from you, it doesn’t mean there is a need.
Or are you opening your business based on your passion for what you do or your desire to be your own boss? If that is your delusion, you will soon be disappointed. And you will be broke and discouraged and right back where you started only in much worse shape. Wiser, but broker.
Open a business because you provide a needed service and because you solve a problem, and then only do it when you are prepared. Don’t let passion (defined as an “uncontrollable emotion”) be your guide. Logic, money, research, skills, preparedness and market need should instead be your determining factors.
And be clear about this: regardless of what some coaches and MLM companies might tell you, some people are not meant to be in business for themselves. Not everyone is cut out to be an entrepreneur. In fact, ask the MLM folks to show you the stats on how many who start, actually stay. And ask to see real numbers on how much money they really make. MLM is like everything else; it looks great from the outside but the reality is, very few make any real money. Sooner, rather than later, you will run out of friends to sell to. Then what will you do? Spam people’s threads on Facebook? That is your marketing plan?
This is reality: Some people are much better off having a job, working for someone who knows how to run a profitable business. That is nothing to be ashamed of, but something to be very proud of. I am sick of the concept that working for someone else is “settling for a job when you could be living your dream of living life on your own terms.” For almost everyone whose dream it is to go into business for themselves, that dream can quickly become a nightmare. And no one who does make it will tell you they live life on their own terms. To be successful in business you will live your life on the terms of your banker, your suppliers, your employees, your customers, the government and the economy. Get real before you start telling people to become an entrepreneur. Usually that is the worst advice you can give someone. Most people want and need a job. There is much more freedom in working for someone else than in owning your own business. So if you are that person (and most are) who is happy to go to work and do your job, then be thankful that you have one, and give it your best every day. Few things are more honorable.
Finally, before you think about going into business I want you to answer in detail and on paper each of the questions I asked above. I want you to examine yourself. I want you to be brutally honest with yourself about your skills. I want you to know the value you bring to the marketplace and to actually know the marketplace. And I want you to remember the words of Dirty Harry: ” A good man knows his limitations.”
Now, after reading this, answer the question I asked earlier: “Why won’t you go out of business like the majority of people who do? What makes you different? How prepared are you?”
I started my own business 10 years ago after working for someone else for 20 years. I worked directly with the owner and learned how to start a business, run it, hire and fire people, and analyze financial statements. I took business classes and then I started my company. And, I still almost lost it all after the first year. It was a wake up call. It’s never been easy but it has been worth it. You have to be the technician, the accountant, the HR person, the sales & marketing person, and much more when you start out. I got smart really fast and hired others to do what I am not good at as soon as I could.
Larry
I just got to reply to this blog and might I say first I agree with your number’s and that’s why I chose Net-WORKING to add to my retirement fund.
If one find’s a service or product ( PhytoZon) that one loves and just can’t live with out it then the number’s change..
I so love your view of the life and just want to take this moment to thank you just for being you ..
So true!! Most people don’t even bother researching and writing a comprehensive marketing and business plan before starting a business. If it was mandatory to submit a 50+ page business plan to set up an LLC – how many people would no longer bother down an entrepreneurial path?? The majority of people who start a business say they don’t like selling. Most have no clue about marketing. Guess what? Owning your own business requires constant marketing and selling. And above everything else discipline.
Mr.Winget, You speak the truth on so many points, I myself have often thought I could run my own business but when questioning myself on many points I come up short and then try in time to bolster those points, but time and commitment are fleeting but maybe one day, but my vocation is in demand and always will be, I myself have seen many come and go (business ) and the only ones I have seen survive are those with good customer service and owners who know what they are doing and when to do it, when to lead and when to let others lead. But enough babble from me, thank you for your perspective on things and the ability to be able to talk to you in this fashion where others want more cash you at least try to give to those that will listen,good on you.
Larry, I read a lot of your stuff and watch your videos. And I am grateful that you that tell it like it is. This blog entry is especially good because it is brutally honest. My whole adult life I have been sold the idea through literature and the media that I can do ANYTHING and that working for myself is the answer to all life’s financial problems. This simply is NOT the case. And I admire you for saying that there is honor in collecting a pay check every 2 weeks. People forget that. We are told that we are somehow unworthy or fools or dupes if we work for someone else. That simply is not true. Thanks for saying it loud and clear to our materialistic and delusional society.
Right on, Larry!
I’m retirement age and have spent nearly my entire life in business for myself, sometimes very successful but often, as you put it, living my “life on the terms of your banker, your suppliers, your employees, your customers, the government and the economy.”
I’m advising my grandchildren to get a good job, avoid most debt, and set aside 30% of their income for investing (yes, 30%!) in a low-overhead S&P 500 tracking fund, reinvesting the dividends and distributions. That way they can let other people do the heavy lifting and worrying about making payroll and tax payments.
As they get older, they will have the wealth with relatively little risk. I call it building wealth instead of building debt!
Larry, I disagree with your reason for why most business start ups fail. The only reason any business fails, start up or on going, is “Lack of Sales.” You can make plenty of mistakes do to “Lack of Preparation,” but if you can sell your products or service, creating cash flow and profits you can pay for all of your lack of preparation mistakes. Hopefully you’ll learn from your mistakes and stop making the same ones.
Keep Doing It, Jim
Jim, thanks for posting and always feel free to disagree. But I didn’t say lack of preparation was the only reason. And all the sales in the world won’t bail you out if you can’t manage, hire, fire or keep good employees.
That was my point, the one and only reason businesses fail is because they don’t sell enough stuff. If you’re the best manager, hire the best employees, write the best business plan you’ll still fail if there aren’t enough sales. You can be one of the worst managers, have so what employees, with an OK business plan and you’ll still succeed if the sales are there. Most business owners are successful in spite of themselves. I am not trying to be a downer. I have learned, like you, that most people don’t want to deal reality. Your list is great, but sales is the most important thing for surviving in business.
Good points, Larry. I’ll add that the world is changing rapidly. I think for the under 25 generation, there may not be so many “jobs” in the near future as the trend is toward hiring specific talent on a contract basis. These folks need to do something very well and plan to support several clients at once. To do this they will need to market, promote themselves and sell. I also think this applies to those over 50 once they lose their job. Running a business may mean being in business for yourself. People need to prepare in advance by learning all they can.
Great article Larry…
Good on you for making people aware that working for a paycheck is still honorable. As entrepreneurs and business owners we need great people in our businesses that value their opportunity and are grateful that people like us have the tenacity & skill to run a successful business that creates these opportunities.
I too am over everyone wanting or thinking they can be their own boss…they turn up for work with an attitude and think to themselves that they could do it better! Obviously these people don’t last very long but it is enough to anger me about the wrong information they have been feed.
I have 3 teenage daughters 2 of which want to have their own business like me. They are only in there early 20’s and I can’t stress enough to them that they need real world experience and a strong and focused mindset to be successful. I say all the time to go work for a few people in the industry you want to run a business in and pay close attention to what they are doing and how they do it…I also advised them to do a sales training course as this will help in a job and in business. It is the best education in the world if you want to start your own business.
Very few people have the right mindset, the right skills, the commitment, money management and discipline you need to be successful. And by the way you need all of those attributes just to get your business to the point where it can just pay your living expenses let alone making a profit!
We watch Shark Tank all the time and we are amazed at how many people have absolutely no idea! some of them can’t even ad up for gods sakes…!
So, I couldn’t agree more with you Larry and I wish more people like you would stand up and tell the masses how it actually is… To be proud of their work and think of it as a contribution because at the end of the day if your boss is making money you get to keep your job and you make money too…that is a win win in my book…
Love your work mate…
James from Australia 🙂
I think one of the biggest reasons people fail at a business they start is their perception of what is wanted/needed is different than really what is wanted/needed so they might have something people want or need but they fail to see all the other ways people can get it than simply from their product. People don’t go above and beyond to be top of mind and most new entrepreneurs are so overwhelmed trying to establish a platform, learn about checks and balances, create a great team etc. that they don’t establish quality relationships with their customers.
A business is a lot like a marriage…it takes much more than saying “I do” and is much more difficult than it looks but if you are willing to consistently work at making it better and in deepening your relationship, the payoff is exceptional.
Not every one is cut out to start a business even if they want to, but then not everyone is cut out to be married, have children or even a dog, even if they want to. In time, the ones who are meant to have something they can be proud of and those who are not have a mess on their hands.
Are you working for the government to help create slaves?
Absolutely! That is my goal. A society of government-dependent slaves. You obviously don’t have a clue who I am or what I stand for. And can’t read either. I want people to have a clue what they are getting into before they lose all of their money and the money of their friends and family going into business on their own. I want to improve their chance of success so they won’t be one of the sad statistics. Seems that logical information based in common sense is always a threat to passionate and stupid people.
Stumbled across your blog and couldn’t help but write a quick reply.
At 36 years old I am 15 years into a corporate position that was once a dream job for most people. Now, in a matter of months we are losing our pension plan, weeks of vacation being stripped away, 401k contributions are cut in half, etc., etc.
Luckily, I saw the writing on the wall 3 years ago. I was blessed with a work schedule that allowed me the time to get my own business off the ground and running. I went into business not knowing a thing. I started part time, worked 4 days a week at my corporate job and 3 days at my business, I kept overhead low and put all profits back into the company and managed to purchase a new service truck this past year.
The 9-5 job that I was told by my parents to get at a young age just isn’t going to last. I have done everything, above and beyond to be as productive as an employee can be. Countless hours of overtime, running on call shifts till 2am, you name it, I did it. It wasn’t good enough. Granted, it’s a paycheck, but there is MORE to life than that.
I will be entering my 4th fall season this year with my business and I’ve learned to know when my slow times of the year are and when I need to put back some of that “extra” money.
I’ve got a lot to learn and one thing that has stuck in my head through it all is the saying that goes “If you don’t build your dream someone will hire you to help build theirs.”