So you want to become an entrepreneur. But where do you start? You don’t have a big idea that’s going to change the world, you don’t have partners to found your company with, and you don’t know how to even start pitching for funding.
Well, the truth is only 4% of small businesses are true start-ups that require angel or VC funding. In fact, if you want to even think about funding, you should know that investors expect a 10x return on investment. So unless you are building a disruptive technology, you don’t need to pitch for funding.
Sidenote: Here is a test to see whether you are building a disruptive technology:
- Is your product a radical new way of doing something that people already do?
- Does your product suck compared to current alternatives? If you improved the product enough, would people choose it over the current alternatives?
- Does your product provide something that will democratize the current method of doing something (ie: will it provide free or easy access to something that used to be out of many people’s price range?)
- Can your product bring death to an entire company or industry, the way cell phones brought death to landlines, or the way digital photography brought death to Kodak, or the way computers brought death to typewriters, or the way guns brought death to warrior swords?
If you didn’t answer yes to these questions, then you are probably not eligible for angel or VC funding. Keep reading.
The second way to get funding is through loans – from the bank, from your friends and family, or from your credit cards/home equity/personal savings. While you don’t pay back funding, you do pay back loans, if you can even qualify for them in the first place – which is getting more difficult every day.
This is all dismal news for aspiring entrepreneurs. And it makes it even harder to know where to begin building a new company.
The answer is that you start your company by yourself, part-time.
While there 60 million people who work for small businesses in the US (businesses with 500 employees or less), at least 30% of the group is working for a business with only one employee.
The chance of starting your huge business as a freelancer or consultant, then building your business one additional employee at a time, is quite high. In fact, it’s the way almost every business is built (aside from the start-ups, who artificially inflate their cash flow to gain market share quickly, because they are building disruptive technology).
So even if you have a full-time job right now, you can venture into entrepreneurship part-time, until you have enough steady business to match the suggested 50% of current income. The internet makes it easier than ever before.
Action Item #1: Set aside time for your new business.
If you are working 40+ hours a week, you already know that your time is valuable. How much can you afford to put towards your dream business? For me, it helps to think in daily terms, because then I budget enough hours to make progress during the week.
Action Item #2: Turn your business dream into a part-time, freelance, or consulting job.
Let’s say you want to open a coffee shop. Well, you can’t exactly do that part-time, single-handedly. What you can do is start a coffee blog. You can open an e-commerce site and sell imported coffee grounds online. You can decorate coffee shops, or teach coffee shops how to use social media. You can invent new drinks and sell the recipes to local coffee shops. Or you could just work part-time at a coffee shop, to gain the experience.
Whatever you want to do, take one step towards doing it today. There’s no excuse.
Action Item #3: Create your transition plan.
At some point, you will have to make the leap from your coffee blog to your coffee shop. In some cases, you will take many jumps before you even get into a position to leap. But once you have a goal in mind, you can create a timeline – transition plan to get there. Consider these questions:
- What is your unique selling proposition?
- How much do you need to start your company?
- How long could your company survive without revenue?
- What is the breakeven point for your company?
- How are you going to fund your company?
- How much do you need to be saving (personally) to make the leap?
- When can you expand? How will you expand?
This is just a scratch of the information you may need to start a business. What do you want to know more about?
Monica O'Brien is the Director of Digital at Fizz and author of the book Social Pollination, which helps businesses leverage social media for crazy growth!
