Monday, September 30, 2013

How to be an Entrepreneur

I've seen this topic before. Usually in about 6 steps or so, they discuss things like business plans and innovative ideas, finding investors, etc. BAH. Written by non-entrepreneurs, most likely. Here's how to do it for real. 

1. Be willing to do (almost) anything
Within reason. Your ethics, morals, and what's legal all factor in here. But start with your talents and interests, purely because that's what you like, and that's where your attention is. You can spend years sitting around trying to be innovative and dream up some new business proposition, but it's completely unnecessary. Do something mundane well enough, and people will want you to do it for them. Mostly... keep your ears open for the phrases "somebody should" or "I wish someone would"... those are opportunities. In your mind, translate them to "I should" and "Please".
2. If people don't want to pay for what you're doing, do something else.
You may really like performing interpretive kazoo dances based on the philosophy of H.R. Pufnstuf,  but if no one wants to pay you for that, you won't be able to eat. How long you keep trying depends a lot on how much money you've got left. This is called listening to your customers.
3. When people are willing to pay you for something, DO THAT.
You found a market! It doesn't mean you shouldn't look for other things to do. Sometimes, when people like what you've done, they actually ask you if you would do other things for them. Like Step 1, these are opportunities. This is ALSO called listening to your customers.
4. If you have more requests than you can handle, raise your prices.
Sometimes raising your prices cuts the volume of work requests back to manageable levels. Sometimes it doesn't, but at least it will bring in more money, so you can...
5. Hire some people.
Part-time, full-time, piecework, contract, whatever. They'll do the extra work, and they'll do it for less than you would. Also, there's always junk you don't know how to do. For instance, you're going to have to pay taxes properly, even if you are your only employee. So muddle through and learn what you have to, but be prepared to pay someone else to do it. It's cheaper.

Congrats. You're an entrepreneur.

What, you were expecting maybe incorporation and a board of directors? Giant bags of money and silk suits? A corporate jet? That's not the way it works most of the time. Most entrepreneurs in this country go by the names of "Mom" and "Pop". Most of their businesses are sole proprietor-ships. That's who I'm talking about here.

Now, this doesn't mean you'll be rich and successful, though you've got an almost infinitely better chance than if you just got a job. Most business owners aren't rich, unless you count "getting by" as being rich. And even if you're successful going solo, then you'll have to sacrifice at that moment when you decide to hire your first employee. 

The hardest lesson fora "boss" to learn is that he is the last one to get paid. First comes the government. Then the employees. Then the bills (including the suppliers).  And by that I mean they all must get paid. If that means the clerk makes more than you.... well, the clerk makes more than you. 

Not only do you get paid last, everything's in your name. If payments are late, you're the one the creditors chase down. It's your business, and your risk. Employees have jobs, so they don't have that kind of risk. They work, they get paid. Done. If you can't afford them they may get laid off, but that's a risk distinctly different from the one you face. They stop getting paid; you're in debt.

Also, you need to put aside cash, so that in the event your business hits a dry spell, you can continue to pay your people and your bills. Part of your sacrifice is to build up that contingency fund, and then keep enough cash on hand to meet your payroll and expenses for at least six months. In the early days of Microsoft, Bill Gates kept enough to run the company for an entire year. One year to go back to Step 1. One year for the company to listen to its customers and adapt or die. But be prepared to be called "filthy rich" and a "miser" by ignorant people who don't comprehend that your contingency money, while it looks really great on paper, isn't something you can go blow on a vacation in Tahiti any old time you wanted. 

The payoff for all of this risk and consternation is that when things really do take off, you reap the benefits, because you took the chance. If you've done it right, every employee adds a little more revenue to the company than he takes home. It adds up. 

And don't for one moment feel guilty about it. No matter how big your company gets, the risk is still yours. The name on the company is your name. And yes, every employee contributes more value than he takes home, for very good reason. You provide value to the employee beyond his paycheck. You isolate him from risk. He works, he gets paid. He doesn't have to do all of the quarterly tax reporting that you do, because you're the one doing it. You see to it that his unemployment insurance gets paid. And he could have his own business if he wanted to. That's the point... with determination and sacrifice, anyone can do this.

And please... don't be put off by the ones who want the rewards without the sacrifice.

Postscript: I'd like to mention this insightful comment I recently heard because it was said so well and concisely: When [the capitalist] invests, he is putting the fruit of his _previous work_ at risk. He can lose it all, and he is accepting that he won't enjoy the leisure he could be getting right now, with the hope that one day in the future he will enjoy more. Meanwhile, the person doing the job (i.e. the employee), will get paid whether the investment is good or bad. -- "paulpach", via Slashdot

Note: the author has actually done the entrepreneur schtick. He's currently a member of a consulting group... a great big one, with lovely shiny toys. Not only is he content to bring in more value to the company than he takes home, but strives to be a bargain. 

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