Ready to Start Your Own Business?
Before you turn in your resignation and order new business cards,
take some time to think long and hard about your motives.
By Roger A. Reid
Staying motivated and focused on our work is a constant challenge, especially after settling into the day-to-day routine. After a few years, it’s not unusual to feel bored and frustrated over the sameness of the work. We question the decisions of management—or lack of them. We wonder if we’re ever going to move up. And then there’s the issue of money—having our income limited by budgetary and functional compensation programs can make us question our economic future. It’s enough to discourage even the most dedicated employee.
But we shake it off and go back to work. “I’m building a great retirement, and I’ve got financial security here.” At least that’s what we tell ourselves.
Another year passes. It doesn’t get worse, but it doesn’t get better. Same rocks. Same hammer.
Determined to elevate our status as a viable candidate for an upper management position, we flaunt our accomplishments during our annual evaluation—and receive a six percent raise. Just like the year before. Just like everyone else.
And then one afternoon we’re sitting on the freeway, driving home from work, and it happens—the trumpets sound, the clouds part, and the answer appears in a shining blaze of insight:
I should be working for myself!
Sounds good, right? But before you turn in your resignation and order new business cards, you need to think long and hard about your motives. Yes, entrepreneurship can—about fifty percent of the time—produce rewards for those willing to take the risk, but constant euphoria is not one of them.
Elon Musk summed up the brutal truth about entrepreneurship in two sentences:
“The reality is great highs, terrible lows, and unrelenting stress. I don’t think people want to hear about the last two.”
I’ve previously written about new entrepreneurs who learn – too late – they’ve traded corporate boredom for financial stress and logistical overwhelm. So as you contemplate abandoning a corporate career for a new life that puts you in charge of your professional destiny, make sure you’re leaving for the “right” reasons. The need to strike out on your own is a very personal decision, typically driven by a wide variety of motivations. If you’d like to read my top ten commonalities among those who make a successful transition to entrepreneurship, you can review them here.
Let’s Look at the Numbers . . .
The idea that financial independence is just waiting for anyone willing to make the commitment and do the work is a compelling argument. And based on such straightforward logic, we should see a steady and ever-increasing number of new business start-ups annually.
However, the facts tell us otherwise.
Historically, the number of full-time workers starting or running their own businesses is a consistent 13 percent (source: Global Entrepreneurship Monitor). This may jump a point or two in the short term, but after factoring in the number of new businesses still operating after five years, the number doesn’t change much.
(Yes, other sources – the Freelancers Union, Entrepreneur, and MBO Partners for example – claim much higher percentages, often alleging as much as a third of the workforce is engaging in some kind of self-employment. But these higher percentages often include work-at-home or at-a-distance employees, as well as those employed for term projects as independent contractors. These numbers can also be influenced by including those who generate a second or side income by working in the so-called “gig” economy. For those reasons, I’ve chosen to focus on data obtained from conservative, longer-term sources that are less likely to be “weighted” with a bias specific to the sponsor’s intentions and objectives.)
The five-year failure rate tells an even more sobering story. According to the SBA (Small Business Administration) and the Bureau of Labor Statistics, about 20 percent of all startups fail in the first year. At the end of two years, a third will be out of business, and after five years, only fifty percent will remain. These numbers have remained relatively consistent over the last twenty years and, surprisingly, are not radically affected by the general economy.
These numbers are a cruel reminder of the inescapable risk of being an entrepreneur. Start your own business, and there’s a damn good chance you’re going to fail. In fact, it’s a fifty-fifty proposition by year five.
With that in mind, here’s the question every budding entrepreneur needs to ask themselves . . .
Knowing that after working and investing your capital in your own business for five-years you face a fifty percent chance of failure, does it still make sense to give up your professional relationship with a large, financially stable and successful company?
For the sake of argument, let’s say you’re willing to take the risk. Then ask yourself this: By comparison, where you will be in five years on both career tracks—maintaining your corporate career versus pursuing an entrepreneurial business? Obviously, you can’t project the outcome of either track with absolute certainty. However, you can extrapolate—based on the experiences of others in the same or similar industries—the probable likelihood of success.
If you make an honest and realistic assessment of your resources, the projected expansion of your chosen industry, the competition, and a conservative estimate of how long it will take before your activities become profitable, you’ll likely come to the same three conclusions shared by successful employees who have risen to the very top of their industry:
• A job is a financial asset. It’s the source of your income and livelihood. It funds your current lifestyle, short and long term investments, and your future retirement. And coincidentally, it provides the opportunity to explore other interests without the financial pressure of needing to generate income from your off-hour activities.
• You are never more valuable (to another employer) than when you are currently employed. When you’re ready to move up, there’s no better leverage than being employed. It means new companies must “court” you, ostensibly offering you an increase in compensation, and often, more authority and recognition to motivate you to leave your current position.
• Your “insider” status enhances your access to the movers and shakers of your industry. You are part of the picture, and you have the privilege of looking at it from the inside. An outsider will seldom have the opportunity to establish the number of professional and personal relationships that a successful employee can. And it’s the quality of those relationships that can help you advance to the very top of your profession.
I want to make it clear that I’m not suggesting the corporate environment is the only viable method of finding career success. Instead, I’m advocating an extensive and cautious evaluation of any new career opportunity, especially if it involves a radical change in the source and reliability of your income.
Here’s the bottom line on entrepreneurship. If you find the realities of financial risk, 24-7 responsibility, and putting the personal aspects of your life on hold are out of sync with your personality, work ethic, personal values, or stress tolerance, you’re probably better off—and will be happier in the long run— if you remain a company man or woman.