Entrepreneur’s Guide to Success

Entrepreneur’s Guide to Success

Hint: Try the opposite of what is taught in business school.



Many
people would like to be self-employed but fear the risk — with good
reason. Within five years, half of new businesses are out of business.

Ironically,
you’re particularly likely to fail if you follow such standard business
school exhortations as "Innovate!" While such advice makes for
interesting class discussions and may be appropriate for
"intrapreneurs" inside deep-pocketed corporations, it puts the average
entrepreneur at grave risk of going bust.

The key to maximizing your chances of success is to do the opposite of what is taught in business school:

1. Don’t innovate; replicate. Being a guinea pig is so
risky: Your idea or its execution could easily be flawed, or it can be
so new that the public isn’t ready for it. Tivo, an unquestionable
improvement over the VCR, lost hundreds of millions of dollars in its
first five years as it tried to educate the public. You probably don’t
have hundreds of millions of dollars and five years to wait for
profitability.

Instead, clone a simple, small-investment business that, in multiple
locations, is successful. How can you tell? Check out retail shopping
areas. Which stores are busiest? When I did that recently in the San
Francisco Bay Area, I found that burrito joints are booming. The Bay
Area is very anti-establishment yet needs fast food — burrito joints
are perfect.

2. Don’t seek status; avoid it. Many business school case
studies focus on high-status businesses, for example, biotech or
high-tech. But the higher a business’s status, the tougher its
competition. Instead, consider what Thomas Stanley in The Millionaire Next Door
calls "dull-normal businesses." Few graduates of prestigious MBA
programs start sand-blasting, plumbing, mobile home park-maintenance,
or truck brokerage businesses, let alone develop a chain of burrito
carts.

A dull-normal business not only has less competition, it’s simpler
to run, so less can go wrong. One of super investor Warren Buffett’s
axioms is to invest only in ventures he can understand. So, he’s in
such relatively simple businesses as a paint manufacturer, a food
distributor, and a furniture store.

You’ll probably find that success — even in a grungy business — is
much more satisfying than a high-flying failure. In addition to the
money, it feels good to have lots of grateful customers — even if what
you’ve sold them is only a burrito.

Would you feel uncomfortable telling friends that your career is
pushcart peddler? No need to. Try, "I’m the president of Bigshot
Burritos with branches throughout the D.C. metropolitan area." Has a
nice ring to it.

3. Invest little. Business schools intone: "It takes money to
make money." For the average entrepreneur, that’s wrong. If you’ve
invested a bundle in starting your business, the nearly inevitable
costly setbacks can be deadly. So, choose a business that requires only
a small investment and then run it as cost-effectively as possible:

  • Minimize rent. For example, instead of renting a
    storefront, sell your burritos (or soup, soap, espresso, whatever) from
    a well-signed, high-foot-traffic cart or truck. Or choose a business
    you can run from home: inside sales, utility-bill auditing or
    consulting.

     

    With my own home-based endeavor – career coaching — I have no
    rent and I provide a service rather than a product. That keeps my
    expenses to a minimum — nearly every dollar is profit. Plus, I advise
    half my clients by phone so I’m often able to counsel in my T-shirt and
    shorts while enjoying my backyard’s flowers and trees.

  • Don’t take on a partner. Not only do they take half the
    profit, they deprive you of what you were seeking in self-employment:
    control. Besides, the self-employment battlefield is littered with
    partners who couldn’t stop fighting with each other. Want
    companionship? Hire a $10-$20 an hour assistant 10 hours a week. Need
    expertise? Hire a consultant by the hour or day. How to find one? For
    our burrito business, hire the owner of a successful one. Of course,
    promise not to open up shop near his or her store.

The next step

You probably don’t want to spend your life selling burritos or
sandblasting a building. So, when you get your business running
smoothly, hire someone to run it. Offer profit-sharing incentive. If
the resulting business isn’t making enough money to meet your financial
needs, clone it in another location. Keep cloning until you’re
comfortable.

Of course, it’s not easy to succeed in self-employment. You must be
a self-starter, able to sell yourself, and solve business problems
readily. But this article’s advice will increase your chances of
success, perhaps more so than an MBA. It certainly won’t cost you $100,000 plus the two years during which you could have been earning money.

Marty Nemko is a career coach and author of Cool Careers for Dummies. He has been self-employed for 22 years.

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