9 Unconventional Steps to a Thriving, “Very Small” Business

Chris Guillebeau, photo stolen from Gwen Bell.

Editor’s note: This is a guest post from Chris Guillebeau of The Art of Non-Conformity.

For more than ten years I’ve operated a string of one-man businesses. My model is: keep it lean, hire no one, and outsource very little. I’ve made my share of mistakes (a long list!), but one thing has remained constant—I want to add extreme value to my customers, and I want to make a good living without simply creating a job for myself.

Here’s what I’ve learned.

1. Hire no one. My Unconventional Guides business took off in early 2009, and for a while I felt an internal pressure to hire some kind of virtual assistant—mostly because that’s what everyone in the internet world seems to advise these days. “Get someone to do the things you don’t want to do,” is how the idea is usually sold.

I finally realized that another answer to dealing with “the things you don’t want to do” is to just not worry about doing them at all. If I have to supervise someone else doing boring work, it’s not that different from doing it to begin with. The things are still on my mind one way or another. Therefore, it’s just me in the virtual shop, working from more than 20 countries a year.

2. Outsource very little. The conventional alternative to hiring employees is to outsource your life through overseas agencies or virtual assistants. But instead of outsourcing, you can just stop doing stuff. I don’t want employees, assistants, or clones in India to answer my email. I actually like hearing from my customers and don’t want to create a barricade between them and me.

3. Offer no customization. As Henry Ford famously said about his Model-T automobile, “They can have any color they want, as long as it’s black.” Once you start providing options, color, sizes, and so on, things get complicated. If you want to stay deliberately small, don’t customize.

(I also offer no shipping services, since everything I sell is digital. Therefore I have no need for inventory, trips to the post office, or worries about lost orders.)

4. Pursue a lot of opportunities, but don’t be afraid to cancel. Last year I developed four new products, but I almost developed two others. No one heard about them, because they ended up not being a good fit for the mission. Failing quickly is OK; dying a slow death is not. Don’t worry about what you’ve spent to get to the point where you are. In the words of Seth Godin, “The only cost that matters is the one in front of you.”

5. Offer more to the right people. Properly set up, the creative use of cross-selling and upselling can rock your business world. Most businesses earn much more money from existing customers than from new ones. When I first set up a very basic cross-sell – “Would you like fries with that?” – I increased sales by 23% immediately, without increasing the workload. Then I set up a simple upsell – “If you bought x, you’ll love y” – and increased sales a further 12%.

6. Set a clear, non-ambiguous goal. Most businesses have the goal of “maximizing shareholder value.” There’s nothing wrong with making money, but an unclear goal is hard to achieve. How will you know when shareholder value has been “maximized”?

Therefore, my goal is basic: happy customers who benefit from my work, and a good living for myself. I don’t need seven-figures or an overseas call center to achieve either of those objectives. Instead, I need to be able to travel and work from anywhere without worrying about money.

7. Provide the strongest possible guarantee, and stop worrying. I don’t mess around with guarantees. My Frequent Flyer guide guarantees that customers will receive at least one free plane ticket (25,000 miles) in exchange for $49, or I don’t get to keep their money. Everything else is guaranteed for life, or for as long as the bank that processes my Visa transactions will allow me.

Some people ask, With such a generous guarantee, what’s the refund rate? Answer: less than 1%.

But don’t people take advantage of you? Answer: most people are honest, so why worry about the dishonest ones? Life is too short.

8. Focus entirely on relationship building and cash flow. That’s it. This is what your very small business will live or die by, so avoid getting sidetracked by anything else. Relationship building activities include talking to customers and creating new products based on their feedback; cash flow activities include joint venture promotions, sales, and offers to existing customers.

9. Track two key metrics and ignore the rest. For my blog I want to know: how many new readers did we add today? For my business I want to know: what was the total revenue that came in today? Everything is evaluated according to those figures. At the end of the month I also quickly look at a few other metrics like visitor value, sales from affiliates, and a few social media stats. But it’s all very simple; it takes fifteen minutes to update monthly, and I ignore everything else.

As Zen Habits readers know well, you can often do more by doing less. What you give up is just as important as what you hang on to—and besides, choosing to be very small in business is fun.

Chris Guillebeau writes for a small army of remarkable people at The Art of Non-Conformity. Follow him on Twitter here.

—
If you liked this guide, please bookmark it on Delicious or share on Twitter. Thanks, my friends.

Previous post: Zen Habits Frequently Asked Questions (FAQs)

Next post: 12 Classic Zen Habits Posts You Might Not Have Read

I think there may be no one doing a better job at creating their own life than Chris Guillabeu at The Art of Non-Conformity. This is a guest post at Leo Babauta’s Zen Habits where Chris distills some of what he has learned into nine lessons for us.

The 80/20 rule is a powerful framework, one that helps us understand the dynamics between inputs and outputs. The rule asserts, that a minority of causes and inputs of effort, results for the majority of the output. When the rule is applied to a customer base, a skewed imbalance is often seen, where a small minority of customers contribute towards a majority of top line revenue. Many business owners overlook this fact and do not spend enough time and effort in ensuring to give exceptional service to their top 20% of customers. I was reading an article on techcrunch a few days ago regarding how Amazon is planning on giving free Kindles to its Prime customers. Prime customers are Amazon’s most frequent customers, they are the ones who apply for yearly memberships to get free shipping on the goods they buy.

This news clearly demonstrates how Amazon is focusing on ensuring that Prime customers get access to the very best products that they have to offer. By providing these customers a Kindle, not only will they be able to increase the amount these customers buy from Amazon, it was also boost loyalty, given that Kindles are not very cheap. The investment in this however should be recouped relatively quickly, and it would further help avoid defection to Apple’s upcoming iPad which poses a serious threat to Amazon’s Kindle.

This example goes to show how a company can successfully create a higher level of service for it’s best customers and focus more effort on them. For most smaller businesses, a similar analysis to customer base can be applied to determine which ones are actually contributing the most to the bottom line. These customers are essentially cash in the bank, and if any of them defects, short term losses will need to be faced,  the longer term impact will be far greater. If you have not taken stock of your top 20% customers, I strongly suggest you do so as soon as possible. Next, find ways to provide them with exceptional service and be in constant touch with them. They are the life blood of your business, and should be treated as such!

–>

Tagged as: 80/20, amazon, apple, customers, effort, inputs, iPad, Kindle, outputs, Prime, results, Rule, techcrunch

The 80/20 rule is perhaps one of the most essential tools in an analyst’s kit. Do yourself a favor by doing a favor for those 20% responsible for your 80%!

• 94-year-old barber, his business both slowing down

by Bob Pool – Feb. 15, 2010 08:25 PM
Los Angeles Times

LOS ANGELES – Past the iron-mesh security door and the empty 20-foot-long vinyl waiting bench, Elvie Lewis gives his ancient barber’s chair a slap with a striped towel to dust off the last stray wisps of hair from the customer he has just finished.

With a weary grin, Lewis plops down in the ornate chair and tugs a lever to make it recline. With his head back and his feet up, he closes his eyes.

“It isn’t like it used to be. You couldn’t even sit down it was so busy. We kept this place full when I was in my prime,” he says softly.

If business is a bit slow, Lewis has earned a break. He has been cutting hair for 62 years. At 94, he likes to call himself Los Angeles’ oldest barber.

These days, he still has a steady hand – and an even steadier clientele. Longtime customers trickle in Tuesdays through Thursdays; a steady stream comes Fridays and Saturdays.

His regulars travel from as far as Palmdale, Calif., to the three-chair shop on South Normandie Avenue in Los Angeles that Lewis has operated since 1952. He started cutting hair in 1947.

Longtime customers praise his $15 haircuts and his upbeat attitude.

Through the years, Lewis mastered each new style that came along. There was the buzz cut of the 1950s, the bushy Afro of the ’60s, the dreadlocks and cornrows of the ’70s, the 1980s’ mullet, the high-top fade of the ’90s and today’s high-and-tight.

“My favorite style is what they ask for,” he says with a grin. In his zip-up barber’s smock, the short, cheerful-looking Lewis favors a short crop on his own receding gray hairline.

Customers said it’s his smile and encouraging outlook on life – just as much as the haircut he gives – that keep them coming back.

“He started doing this the same year that Jackie Robinson broke into the majors,” says Derrick Blakey, 50, who has frequented the shop for 22 years.

For much of that time, Lewis has allowed Blakey to sell T-shirts embossed with such uplifting sayings as “Wealth Is Good Health” and “Think Positive” in the shop.

“Mr. Lewis is more than a hairstylist. He’s an artist,” Blakey says. “And he’s an encourager. He’s supported everything I’ve done.”

Still a steady hand

Luvert Pineset, 73, a retired high-rise maintenance worker who travels from Palmdale for his trims, appreciates Lewis’ old-school, gentlemanly manner. “He’s a nice man,” Pineset says.

“He’s still got a steady hand,” adds Robert Hunter, 76, a former steelworker from South Los Angeles who has been going to Lewis for more than a decade.

Lewis puts in a 7 a.m.-to- 5 p.m. workday Tuesdays through Saturdays. He’s on his feet whenever he’s cutting hair, despite the aches and pains that come from living nine decades.

He walks with a cane now, and four years ago he turned in his driver’s license, swapping it for a simple ID card from the state.

Why didn’t he retire 30 years ago?

“Everybody I know who retires goes out and gets another job. I already have a job,” he says. “I’m not a ‘honey do’ man, you know, ‘Honey do this, honey do that.’ If I’m going to work at home, I may as well be working here.”

Lewis’ wife of 56 years, Mary, drives him to and from the shop from their home about a mile away.

“About the only places I go are to church, this barbershop and the VA hospital,” he says. “For 45 years, I went on vacation all over the United States and to places like the Bahamas. Now my favorite place is here.”

‘A good location’

Born in the Dallas area, Lewis landed in Los Angeles after World War II, where he served “three years, six months and eight days” with the Army, primarily in the Persian Gulf region.

He had worked in Texas before the war as a busboy at a Woolworth’s lunch counter and knew that he wanted to work for himself. A stint at a barbershop’s shoeshine stand persuaded him that he could cut it as a barber.

“So after the war,” Lewis says, “I went to barbers’ school and then worked as an apprentice for 18 months in Long Beach. After that I opened my first shop near the corner of Long Beach and Vernon avenues. Then I came here. This is a good location.”

Between customers, Lewis relaxes in one of his vintage barber chairs as he watches the parade passing outside the shop, tucked between a Mexican restaurant and an auto-repair shop.

His favorite chair is a circa-1927 model produced by Emil J. Paidar of Chicago, according to the emblem stamped on its stainless-steel footrest. He acquired the antique, along with two similar ones, when he bought his shop.

Pulling himself out of the chair, Lewis steps slowly toward a shelf lined with bottles of hair tonic and scented after-shave lotions. He rifles through a pile of magazines stacked near an old-fashioned manual cash register and pulls out a worn barber-supply magazine.

He flips through it until he comes to an ad for an antique chair of the same vintage. It’s priced at $5,000.

Tossing the magazine back on the pile, he pulls out another publication.

It’s a church directory, dated 1991, from Second Baptist Church, which Lewis and his wife attend. He proudly opens it to the page containing the couple’s picture.

“And that’s my daughter,” he says, pointing to a photo of Elva Brooks posted on the wall above the cash register.

Clientele has changed

Although his shop has changed little since he took it over in 1952, the neighborhood has. The once predominantly African-American area now has a heavy Latino presence. Younger men and boys are likely to seek out a spiffier-looking place rather than one with midcentury mirrors and sinks and ornate chairs. In fact, a pristine, modern hair salon has just opened four doors south of Lewis’ shop.

“In the old days, all three chairs were busy. I had police, priests, businesspeople all coming in here. I’d tell them, ‘If you’ve got the hair, I’ve got the time,’ ” Lewis says. “Now I only have another barber on Fridays and Saturdays.”

Lewis sometimes thinks hard about retiring, even if his customers aren’t eager for that to happen.

“I’m ready. When I do, I’m just going to stay home and sit down. I won’t be looking for any part-time job. If I wanted to do that, I’d keep working here,” he says.

He hasn’t set a date or a price for the place, but “make an offer,” he says.

“You can take everything in here but me.”

• Type Size: A A A
• Print
• Email

Most Popular–>

Retweet

–> Digg this–>

Digg this

OAS_AD(‘Bottom2′) –>

–>

This whole solopreneur thing isn’t new, you know. And neither is the secret of success. When asked what his favorite cut is, 94 year old barber Elvie Lewis replies, “…what they ask for.”

Buzz this!3

email

share

This series is supported by Grasshopper, the Virtual Phone System designed for entrepreneurs. Learn more about Grasshopper at Grasshopper.com.

Let’s face it: as an entrepreneur, the odds are stacked against you. Most businesses fail after the first few years, and even if you do manage to survive, that doesn’t mean your business will redefine an industry, become profitable, or change the world. Getting off on the right foot is essential to navigating a startup from its infancy to profitability.

Luckily, there have been countless entrepreneurs that have gone through the same toils building their own businesses, and most of them are happy to share their experiences to better prepare you for the journey ahead. In addition, there is now an array of social media and web apps that no entrepreneur has ever had access to before. Together, these resources can give you the edge in a fast-changing business world.

While we can’t highlight the thousands of resources at your disposal, we have put together twenty of our favorite guides, web apps, and tools that can help you build and launch a startup. This guide is divided into six sections, covering everything from coming up with the right idea to the steps you need to take and tools you’ll want to have to secure funding for your early-stage company. In total, you will find that this guide is a comprehensive resource for anybody who’s trying to realize his or her entrepreneurial dreams.

Guides to Getting Started

Before you dive into your startup (or maybe after you’re neck-deep), you should get yourself a crash course education in starting a business. There is no education like doing, but reading up on incorporating, collecting some checklists, and understanding just what it takes to get your specific business off the ground will save you plenty of headaches later on.

1. The Entrepreneur.com Startup Kits: Entrepreneur Magazine’s website has a gem for entrepreneurs: startup kits. There are kits for everything from starting a restaurant to a consulting firm, complete with articles, guides, marketing tips, and more.

2. eHow’s Introduction to Entrepreneurship: Collaborative knowledge resource website eHow has hundreds of thousands of great articles, including a strong set of guides and resources for how to open a business, how to incorporate, raising money, and bookkeeping.

3. About.com Starting a Business Hub: Another resource you should not miss is About.com’s Entrepreneurs Hub. They’ve curated some of their best content for starting a business, including checklists, a small business startup kit, and detailed articles on naming and calculating the cost of your startup.

4. Library of Congress’s Entrepreneur’s Reference Guide: Yes, the U.S. Library of Congress has an entrepreneur’s reference guide, while it’s dated (1999), it also lists a lot of great books that are updated yearly. It covers practically every topic related to starting a small business.

Inspirations for the Idea

There are few things more important to the success of your startup than having the right idea and continuing to be innovative with your product as it gets built and released to your customers. Ideas don’t just come in cans from the store, though. That’s why we’ve brought together some resources that should help inspire your creative juices and help you nail down the next big idea.

5. Vator.tv: A play on “elevator pitch,” Vator.tv is a place where entrepreneurs can upload short video pitches about their startup. Not only that, but you can follow industry news and specific companies. Watching these pitches will certainly jolt your brain’s creative juices. Also check out VentureBeat Profiles (formerly TradeVibes), which also has a great database of startups and a community discussing each one.

6. Alltop Startups: Reading the latest news and opinions in the startup world can only help jolt your brain and keep you current. Alltop has a great list of blogs and news websites dedicated to the subject (including my personal blog). Take a read, subscribe to the blogs that interest you, and you’ll be guaranteed to be reading about great ideas soon enough.

Startup Web Apps

While there is an array of great web tools for entrepreneurs (10 of the best we previously highlighted), there are some tools that just make your life easier when you’re trying to bring order to the chaos of launching your startup. Consider these tools when you’re in the early stages of building a company:

7. EvernoteEvernote

: Information is king, and there are few web apps that do a better job of collecting information in front of the computer screen or on-the-go than Evernote. The service simply helps you remember everything. You can take pictures of your receipts for easy organization or save key info while you browse, for example, among many other ways to organize and catalog the things you need to remember for your startup.

8. Zohozoho

: Zoho is a suite of online collaboration tools. Not only does it include email and spreadsheets, but it includes, wiki, chat, customer relationship management (CRM), and web conferencing as well. While it is similar to Google Apps, it is built specifically for businesses.

9. PBWorks: Wikis are amazing for organizing ideas and sharing them with team members. There are few better suited for business than PBWorks, which is not only a wiki but a collaboration tool, document manager, and project management tool.

10. FreshBooks: If your business is client-based, you need to track invoices, teams, and payments constantly. While there are many choices, Freshbooks is one of the best due to its mobile apps, integration with BasecampBasecamp

, and reasonable pricing.

Social Media for Startup Success

Social media is about connecting with people. Interestingly enough, so is business and entrepreneurship, which is perhaps why there is so much overlap between the two. If you want to get your startup off the ground, you have to network, build up your social circle, and reach out to the right people. These social tools are adept at that task:

11. PlaxoPlaxo

: There are few tasks more important in business than maintaining and organizing your contacts. You never know when someone you meet will lead you to a big business deal, venture capital, or a new team member. Plaxo acts as a digital address book that efficiently organizes everyone you meet. Plus, it integrates with Outlook, Thunderbird and the Mac OS X Address Book to make importing contacts a snap. You have to be diligent about adding contacts, though.

12. Google WaveGoogle Wave

: Google’sGoogle

experimental real-time communication platform not only has a consumer version, but also comes in a corporate flavor for users of Google apps. Having your team collaborate on projects through waves is a unique experience, one that we have used with success over here at MashableMashable

. No other social tool has the same collaboration features.

13. LinkedInLinkedIn

: This one may be obvious, but its importance in business cannot be overstated. It is the world’s most popular business social network for a reason. Its business features, especially those connecting you to friends of friends, are unmatched, and with over 50 million users, it’s a social media tool you need to be using constantly.

Raising Money

Bringing your startup to the next level takes more than willpower, determination, and grit. In most cases, you need startup capital to build the product, hire the right team members, and maintain the product after it launches. That’s why it’s vital to do your homework on how to effectively raise money.

These are a few resources that will give you a crash course education in venture capital and raising money to grow your startup:

14. Introduction to Venture Capital: If you’re clueless about how venture capital works (most people are), this short presentation by Will Price, former venture capitalist and the current CEO of Widgetbox, explains all of the basics. It was given at Stanford University in 2007:

15. TheFunded: This entrepreneurship community is very unique in that it is focused on helping you raise money. How? By giving you ratings and inside details of the practices of countless venture capital and angel investor funds. The information, once you’re in, is invaluable to choosing the firm that will help propel your business to the next level.

16. How to Fund a Startup: This guide by Y Combinator co-founder and early-stage investor Paul Graham is shockingly detailed on the different ways to raise money, the disadvantages of each approach, how venture capital firms operate, and the reality of bringing investors into your company. A must-read for any startup founder before raising capital.

Startup Social Communities

You cannot and should not build your business alone. The world’s greatest entrepreneurs not only had co-founders, but they had friends, family, and a community of entrepreneurs and advisors that helped them with difficult decisions, overcoming adversity, and fixing mistakes.

With the rise of social media and the web, a crop of incredible startup communities have popped up, each one with a unique character but with a wealth of community knowledge that you’d be crazy to pass up on your journey to build a great company.

17. StartupNation: The recently redesigned startup community network has extensive and active forums, useful knowledge hubs, community groups, and plenty more.

18. Hacker NewsHacker News

: The seed investment firm Y Combinator has built a thriving and active startup community known as Hacker News. Users add relevant and interesting stories on the topics of programming and startup entrepreneurship and consistently hold thought-provoking discussions. It’s an incredible place for insight and advice on startups.

19. Young Entrepreneur: Focused around discussion forums, Young Entrepreneur is a great place to ask any startup question on your mind or just to read the over 240,000 posts made over the years on the site.

20. PartnerUp: PartnerUp is a community that really focuses on one thing: helping you find business partners. In business, finding the right co-founders is often the difference between stellar success and a quick, painful startup death. PartnerUp is a community ideal for finding and networking with people that will shore up your weaknesses and help you answer those nagging questions about the partnership side of business.

Series supported by Grasshopper

Sound more professional and stay connected with Grasshopper, the Virtual Phone System designed for entrepreneurs. Grasshopper works just like a traditional phone system, but requires no hardware to purchase – it’s all managed online or by phone. Callers reach you whether you’re in the office, on your cell, or at home.

Get a toll free or local number, create extensions for employees, forward calls, get voicemails via email, and more – starting at only $9.95 a month.

Image courtesy of iStockphotoiStockphoto

, cmcderm1

One of the biggest problems that I am facing in getting my business started is realizing that I don’t have to figure it all out by myself. That there are generous and helpful people out there eager to pay back and pay forward. This article by Ben Parr posted at Mashable.com provides a great resource for finding shortcuts and people to help.

This blog is my effort to get out of my comfort zone and reach out. Find me on LinkedIn or follow me on Twitter. Please.

Looking to gain financial freedom by starting your own business? I’d urge caution. Most well-paid employees are better off sticking with their jobs, spending less than they earn, and investing the difference in the markets over the long-term.

Don’t get me wrong: I’m self-employed, and I’d only go back to corporate life as a last resort. I’ve also worked for several start-ups, and co-founded one that’s still in business.

I can confirm that start-up life can be exhilarating, especially if you really believe in your product or service. But as a sensible route to modest wealth, I’m skeptical.

Here are seven things to consider before quitting your day job. If you’re going to take over the world, it surely pays to know your enemy?

1. Your innovative business will almost certainly fail

I know it’s a great idea. I understand you’ve done years of research, talked to friends and family, and maybe even started working on the business in your spare time (good – but watch out for legal claims by your employer).

Will you succeed? If you’re opening a Subway franchise or taking your current skills freelance, perhaps. But if you’ve thought up, say, a new Web technology, then you’re more likely to make a splash in the deadpool.

Like writing a novel, starting a business is easy to do, yet the outcomes are hugely polarized between the handful of highly visible winners and the sunken iceberg of also-rans.

Hundreds of thousands of novels are written every year. A few thousand make it into the bookstores – where only a tiny number remain on sale for years. Similarly, while we all know the success stories, most innovative businesses fail. And while your business is failing, you’re not getting paid – in fact, you’re probably seeing your savings disappear.

This isn’t to decry the idea of starting a company to try something new. It can be an amazing ride, even if you do fail. You’ll learn all kinds of new skills, discover late night takeaway food you never knew existed, make great contacts, and maybe even create something cool.

But statistically speaking, rounding down to two decimal places: there’s next to no chance of an innovative start-up business making you rich.

2. Your start-up business will destroy your life

I don’t mean that being a start-up CEO will kill you (though it might). I mean you can kiss goodbye to your current way of life.

Unless you’re very lucky (as opposed to talented or smart, which aren’t enough to guarantee anything) you’ll work harder at your own company than you’ve ever worked in your life.

Evenings and weekends will become merely annoying breaks where it’s hard to get hold of employees and customers (not that it will stop you trying). The gym? A tax on your good intentions that you’ll pay in January and rue as your weight balloons – assuming you find the time to eat.

If you’re lucky then after a year or two you’ll fail and get a job before the medical, financial or social damage becomes too great. Perhaps you’ll even get a pay rise, thanks to the new skills you’ve learned.

If you’re unlucky you’ll limp along for years, working twice as hard for half your old income, and never getting that reality check.

If you’re really lucky you’ll succeed, and considering pointing out my negative article in a speech at an industry awards dinner. But by then I suspect you’ll know how fortunate you are.

3. You’ll be too busy to make any money

My father used to work with a Cambridge PhD who hadn’t been promoted in a decade. It puzzled my dad, since the guy breezed through his day job with obvious ease.

Did he lack ambition? Had he done something untoward with a senior manager’s wife? No, this man eventually explained to my father: he was just too busy making money to handle a promotion.

I don’t remember how the guy made money exactly – I heard the tale when I was a kid. I think it was stock picking, but it could have been betting on the horses. I do remember though my father explaining with obvious incredulity that his clever workmate admitted he only ever ‘worked’ until his lunch hour. In the morning he’d conscientiously do what was demanded of him by his employer (but no more) and then after lunch he’d concentrate on making real money.

I don’t know if you’d get away with this in today’s office environment (where you need a guidebook just to survive). But if I was still in an office that’s probably what I’d be doing, whether it be researching shares, working on new income streams like an eBay store or god forbid blogging, or simply taking it easy and saving myself the medical expenses of an early heart attack.

Start a business and you can forget all about such freedoms.

A capable friend of mine who runs her own company has spent two years trying to find time to set-up a passive index tracking fund. Don’t think she’s lazy or stupid (though I’ll grant you she’s disorganized). She simply believes she should put some thought into how she’ll invest for the next 20 years, but she hasn’t found or made the ‘headspace’ to do it. (C., if you’re reading here’s why you should invest in an index fund. Again).

At least my friend hasn’t given her funds to a financial advisor to piss down the drain of high charges and chasing hot sectors. I dread to think how many time-starved entrepreneurs have to work twice as hard because they outsource their finances to idiots who whittle away their returns.

4. Friends and family will become tick boxes you ‘do’

• Your husband or wife will give up trying to make dates with you in your own home.
• Your girlfriend and boyfriend won’t be your girlfriend or boyfriend soon enough.
• Your soulmates will be the people you pay at the end of the month.
• A former workmate will show up in a fancy car looking healthy and inviting you to take a rejuvenating weekend break at his new holiday home, which you can’t afford the time to go to, let alone the travel fare, let alone the mortgage.

Okay, I’m exaggerating. A bit. Your spouse may have an affair instead, just in case your company does strike it big.

5. Your talents and skills will wither away

Love writing code? Don’t start a software company. Love writing articles? Don’t start a publishing company. Born to cook? Stay out of restaurants.

The boss of any successful company isn’t the top artist or craftsman. He’s the top sales guy, the rainmaker, the inspirational leader. And that’s fine, unless you love what you’re doing!

The best model for a start-up CEO is Steve Jobs. He’s bright, brilliant, interested in everything but essentially unemployable.

If your job is your vocation and you’re good at it, keep doing it. Don’t trade it in for paperwork and worrying about the bills.

6. You’ll spend all your time dealing with staff issues

Here’s a dirty secret that few business books will tell you: Half of a start-up founder’s time is spent dealing with people.

Ultimately your team is the key asset that will mean success or failure for your company. Unfortunately they are also human beings, so they will:

• Get sick, sometimes seriously
• Have elderly or infant relations who will get sick
• Get sick of someone else on the team
• Believe someone else is jeopardizing the whole project
• Be the person who is jeopardizing the whole project
• Fear they’ve made the wrong move joining your start-up, and take up your and their valuable hours with demands for motivational pep-talks

Perhaps you relish all this. You certainly should if you’re starting a company.

If you don’t, then there are libraries of literature written about how to deal with people effectively. I’m not saying I have the answers – I’m just warning you to get reading. With luck it’ll stop you starting a company in the first place.

7. It will be you who takes out the trash

Hey, Trump Jr., you know that superstar team you’ve recruited? You forget to include someone who’ll manage the company website. Also, there’s no one to sort out the phone lines into the office. An office that has no furniture in it because only you have a company credit card, which means it’s you who has to go shopping for desks and Macs.

Et cetera, et cetera.

Trust me on this – however efficiently and comprehensively you delegate, at some point you’ll empty the bins, clean up the junk mail, and proof read the adverts for a trade magazine.

And then on Tuesday you’ll have to do it all again.

Don’t think this stops when the business takes off; you just get a classier version of the jobs no one else wants. Why? Because those jobs have to be done and it’s YOUR company, so you’ll do them. Quite simply, you’ve got by far the most to lose.

So should you start your own company?

Starting up a company comes with a great undertow of extra work to keep yourself in business, even before your innovative idea has been brought to market.

And don’t think a Venture Capitalist is going to pay for that. Unless you’ve got a proven track record of starting companies (in which case you’re already rich and none of this applies) then a VC will want to see you’ve already your life into your new company before they’ll invest a cent.

In summary:

• If you truly want to be the next Steve Jobs and you’re prepared to risk being just another Joe Schmoe, then you should start your own business. You only live once.
• If you’ve got a great idea, a desire to change the world, and you truly believe failing would be better than doing nothing, then start a company.
• If nothing less than $10 million in the bank will do and you can’t sing, act, or kick a football amazingly, starting a business might be your only option.

For most of us though, I think a better solution is to save and invest enough money to make your job optional.

Still want to start your own business? Good for you, I wish you the best of luck. I’d also suggest you email this article to your fellow co-founders or employees. Best to shake out the weak before you get started!

Monevator is about making and investing money. If you’re new, you might check out my best posts. Please do consider subscribing for free.

–>

• Share this on del.icio.us
• Digg this!
• Stumble upon something good? Share it on StumbleUpon
• Share this on Facebook
• Tweet This!
• Share this on Tipd
• Share this on PFBuzz
• http://monevator.com/2009/01/05/start-you-own-business-risks/” title=”Email this to a friend?” rel=”nofollow”>Email this to a friend?

Filed under: Earning

Further reading:

Opportunity cost when starting a business

10 good reasons to retire early

10 reasons to be cheerful as an investor

If you insist after all this…then by all means.

Some of your friends are doing it. People who do it are in the front pages and web almost every day. Even President Obama is talking about it. So should you do it? Should you join the millions of people every year who take the plunge and start their first ventures? I’ve learned in my own years as an entrepreneur — and now an entrepreneurship professor — that there is a gut level “fit” for people who are potential entrepreneurs. There are strong internal drivers that compel people to create their own business. I’ve developed a 2–minute Isenberg Entrepreneur Test, below, to help you find out. Just answer yes or no. Be honest with yourself — remember from my last post: the worst lies are the ones we tell ourselves.

1. I don’t like being told what to do by people who are less capable than I am.
2. I like challenging myself.
3. I like to win.
4. I like being my own boss.
5. I always look for new and better ways to do things.
6. I like to question conventional wisdom.
7. I like to get people together in order to get things done.
8. People get excited by my ideas.
9. I am rarely satisfied or complacent.
10. I can’t sit still.
11. I can usually work my way out of a difficult situation.
12. I would rather fail at my own thing than succeed at someone else’s.
13. Whenever there is a problem, I am ready to jump right in.
14. I think old dogs can learn — even invent — new tricks.
15. Members of my family run their own businesses.
16. I have friends who run their own businesses.
17. I worked after school and during vacations when I was growing up.
18. I get an adrenaline rush from selling things.
19. I am exhilarated by achieving results.
20. I could have written a better test than Isenberg (and here is what I would change ….)

If you answered “yes” on 17 or more of these questions, look at your paycheck (if you are lucky enough to still get one). If the company that issued the check isn’t owned by you, it is time for some soul searching: Do you have debts to pay? Kids in college? Alimony? Want to take it easy? Maybe better to wait. Do you have a little extra cash in the bank and several credit cards? Do you have a spouse, partner, friends, or kids who will cheer you on? If so, start thinking about what kind of business you want to set up. It doesn’t matter what age you are: research by the Kauffman Foundation shows that more and more over–50s are setting up their own businesses. Talk to people who have made the plunge, learn how to plan and deliver a product or service, think about that small business you might buy, talk to people with whom you would like to work, and talk to customers.

“I like to take risks” is not on the list. People don’t choose to be entrepreneurs by opting for a riskier lifestyle. What they do, instead, is reframe the salary vs. entrepreneur choice as between two different sets of risk: the things they don’t like about having a steady job — such as the risk of boredom, working for a bad boss, lack of autonomy, lack of control over your fate, and getting laid off — and the things they fear about being an entrepreneur — possible failure, financial uncertainty, shame or embarrassment, and lost investment. In the end, people who are meant to be entrepreneurs believe that their own abilities (e.g. leadership, resourcefulness, pluck, hard work) or assets (e.g. money, intellectual property, information, access to customers) significantly mitigate the risks of entrepreneurship. Risk is ultimately a personal assessment: what is risky for me is not risky for you.

“I want to get rich” is not on the list either. All else being equal (and all else is rarely equal in the real world), on the average, people who set up their own businesses don’t make more money, although a few do succeed in grabbing the brass ring. But the “psychic benefits” — the challenge, autonomy, recognition, excitement, and creativity — make it all worthwhile.

Daniel Isenberg is a Professor of Management Practice, Babson College

Can you score an 85% or better?