Originally Published in Small Biz Bee by Paul Mandell | January 17, 2012
Why start your own business? After all, it may be one of the most masochistic decisions any individual can make.
To begin, startups come with financial risk, and impact of failure on one’s finances can be severe. Moreover, starting a new business is a sure-fire way to distance oneself from friends and family. Startups can be all-consuming, leaving little time for much else—including personal relationships. Finally, starting a business can take a heavy physical and emotional toll. Late nights and meals at one’s desk are not a healthy lifestyle, and the highs and lows of the startup game can drive a person mad.
Here is why I love being an entrepreneur. In short, starting a business is one of the most exciting, challenging, and rewarding ways to spend my working years. Yes, it can be hard and cruel, but six years into it, I haven’t experienced a single day of boredom.
Startups are not for everyone. Here is some advice if you are considering whether to get into the game:
(1) Get some experience first
Some recent academic literature has concluded that the ideal age for entrepreneurship is 40. This is no doubt because can help to have working experience before you start a business. For one, it provides an opportunity to save up some potential capital to invest. Moreover, you will inevitably pick up some useful skills and knowledge along the way—some of which could prove handy, even if your new business is in a field outside of your expertise. In addition, as you work, your network of contacts will grow. This can prove useful in a variety of ways, including client development, recruiting, the pursuit of capital, to name a few.
(2) Analyze your opportunity costs
If you have nothing to lose, it is easier to take the leap into entrepreneurship. If you are the sole breadwinner for a family of 5 with a limited nest egg, it probably makes sense to save up some cash first, and think very carefully about the impact that a bombed startup would have on your life. One other word of caution here in a different vein: Be aware of the risk of your opportunity cost rising too high. Although an increasing employee paycheck is generally a good thing, the higher your salary rises, the more difficult it can become to quit your job and scratch that entrepreneurial itch.
(3) Build a detailed financial model for the business and test your assumptions thoroughly
Once you begin reducing the business to a spreadsheet, the realities of the numbers will begin to emerge. Taking into account all of your expenses and revenues, as well as when they should occur, will give you a sense of whether the business can make money. It will also give you a sense of how much capital you will need and by when. While there are always financial surprises in the startup experience, waiting to build your projections until after you commit to a business is a dangerous proposition.
(4) Speak to potential clients
Treat your new venture as a sophisticated investor would treat a new potential investment and determine whether your idea can be monetized. Do some due diligence and explore whether there is interest in your product or service. Ask client prospects whether they like your value proposition. If you are entering a competitive industry, ask what it would take for clients to switch providers. Knowing what potential clients want and need is critically important to know if there is room in the marketplace for your business.
(5) Ask yourself whether you have the right DNA
Jumping head first into a startup is not for everyone. If you are the type who needs others to motivate you, or who has trouble staying focused when times get tough, starting a business is probably not be the right move. But if you have self discipline, a fair amount of confidence, passion, and a good deal of intestinal fortitude, you may well be the perfect fit for entrepreneurship.
Keep in mind that starting a business is not for everyone. But for those who have what it takes, becoming an entrepreneur may be the most fulfilling professional path.
About the Author: Paul Mandell is a Founder and the Chief Executive Officer of Consero. In this role, Mr. Mandell provides strategic leadership for the company with a rigid focus on excellence at every level of the business. Prior to founding Consero, Mr. Mandell founded and was the President of a national legal support company that was acquired in 2007. The successor entity was recognized as one of the world’s top legal process outsourcing companies during his continued tenure as President the following year. Prior to entering the business world, Mr. Mandell practiced law at Arnold & Porter LLP and Sullivan & Cromwell LLP in Washington, DC, and New York, New York, respectively, where he focused primarily on antitrust and pharmaceutical litigation. Prior to his law firm experience, Mr. Mandell clerked for the Honorable K. Michael Moore of the U.S. District Court for the Southern District of Florida.