Becoming an Entrepreneur
Nowadays’ Holy Grail: entrepreneur, being your own boss, or having a profitable internet-based business.
Is that even possible? An entrepreneur is born or made?
It is possible to start your own profitable business from scratch not even being sure about which service or product would you offer, but if you don’t built it with common sense you will have no options to success.
In this section, we’ll teach you how (based on our experience) you should tackle the important issue of choosing the right business option, and what should you analyze before starting it whether you already have made the decision of which business will you develop or not.
* If you have not yet read the “Entrepreneur golden rules“, we encourage you to do so right now, because lot of the things we’re about to explain are directly related.
We mentioned in the “Entrepreneur golden rules” to do what you love, but what you may have not think about is how difficult sometimes is to know what your passion is (providing it is not sitting on a sofa drinking beer all the afternoon).
You will need a time to think about your options, your strengths and preferences.
Also, you need to assess your personal economic situation in order to determine your real options in case you decide to become an entrepreneur.
This stage is common to any business whether it is internet-based or not: you must develop a personal analysis of yourself, honestly describing:
- Your real strengths.
- Your preferences.
- Your hobbies (sometimes you can get a job out of it).
- Your interpersonal skills.
- Your risk tolerance.
Summarizing: your personal Resources and Capabilities.
In the “Entrepreneur golden rules” we described how important is to love what you do, and this analysis may be useful for you to discover the areas, economic sectors or activities you would be comfortable working on.
Nobody likes working in something he is terrible at.
Assessing your economic situation
We recommended to “think about the fall” in the “Entrepreneur golden rules” section, but this is a deeper concept.
We highlighted how important is to ensure a “relaxed” economic situation: If you check some of the biggest entrepreneurs, lots of them, had a relaxed personal economy that allowed them to focus just on their businesses independently of their monthly bills.
In order to start figuring out your options, we firstly recommend:
- Make a list with your monthly income.
- Disaggregate your monthly expenses.
- Highlight your dispensable expenses.
- Expensive restaurants.
- Expensive activities you can live without them.
With this list in mind, you should:
- Estimate the amount of savings you have.
- The estimated time you could “live” without a job.
- The estimated time you could “live” with a part time job.
- It will depend on where you live and how much you spend.
The target of these lists is both realizing how much flexibility you would have for launching your own business and finding out your personal investment capacity.
As we mentioned in the “Entrepreneur golden rules“, you should expect a medium-large period of time not making a single dollar with your new business, so it is important to assess how much time you would have.
This analysis seems extremely obvious, but practically nobody does it. People usually live not really analyzing their personal finances.
Sometimes, this simple and basic first step, opens the eyes of the person developing it and realizes how little is he/she saving and how many “useless” expenses has.
How much time do you have
After developing this very first economic evaluation, comes the “key” question:
- “Ok, how much time would it be optimal for building my business according to my income/ expenses?“.
Since there is not as easy answer to this question, we’ll suggest different case-scenarios:
Best Case scenario when building a business
- Having a “part time job” that just takes few hours a day, being enough to maintain your daily expenses indefinitely.
- Having also savings that could maintain your expenses at least for a full year.
- The project you are launching is Internet-based or requires almost zero initial investment as well as also zero monthly expenses.
Website e-commerce example
- You have a 4-hours-a-day part-time job that gives you 1.000$ a month.
- Your monthly expenses are 800$.
- You have 10.000$ of savings.
You are going to start a technology blog & e-commerce website.
Your risk would be almost zero, and you have unlimited time to improve your website, adapt it to your potential customers…
- It could take you 2 years of work, but finally it would success (providing you know what you are doing).
Medium Case scenario when building a business
- Quitting your job.
- Having savings for a whole year (discounting the investment required for launching your project).
- You can finance the project you are launching, but in case there is an unexpected expense, you would have to use your living-savings.
- The project you are launching generates cash quickly (not necessary benefit).
Wine export example
You are buying and selling wine between Europe and USA, in a market you know (it was your previous job) and the investment required is relatively controlled.
- In case of needing urgently some money, you could sell the stock at lower prices.
Let’s assume that:
- You have 15.000$ of savings.
- Your yearly living-expenses are 10.000$.
- The investment necessary for buying the first stock would be 5.000$.
The risks are higher in this scenario, because the unexpected risks associated with “real” businesses but, since it is a product that you can sell easily, the 5.000$ investment is almost pure cash.
You could establish quarter evaluations in order to check the business health and how much money are you really generating.
- If your savings don’t stop falling down… You should re-think your business.
Worst Case scenario when building a business
- Quitting your job.
- Having savings for 3 months or less (discounting the investment required for your project).
- You can finance the project, but you have not contemplated unexpected expenses.
- Your project initial investment does not turn easily in cash in case you need it.
- You need to generate money in 2 or 3 months in order to maintain the business.
You are going to open a new pub in your town.
You need to invest a significant amount of money to reform it.
The place is not yours so, all the money you invested, would be lost in case you leave the place.
Your monthly expenses are relatively high due to the salary of the waitresses, rental expenses and licenses.
- You have invested 5.000$ in decorating the place.
- You have monthly expenses of 3.000$.
- Your personal living-expenses are 1.000$ per month.
Either you start selling more than 4.000$ soon or you will have serious problems.
This last example is as real as it can be.
There are plenty of people assuming they will make lot of money since the very beginning of their business and it rarely happens this way.
We could summarize as:
Count every dollar you have, every dollar you spend, and assume you will not make “any” real money with your business for at least 6 months (depending on the business, of course).
We’ll now explain other important step: How to choose the final business idea to develop.
Choosing the right Business Idea
When you decide to start your own business, you don’t always know exactly what to do or how to do it.
- Few people has the “wine experience” we mentioned in the previous example or the knowledge and passion necessary for starting a successful e-commerce website.
Usually, everyone has several options and some of them are almost impossible to develop.
So, how can we start listing and narrowing down our real options?
We’ll now propose a useful and easy method to make the right decision about which business idea should you develop based on 5 steps.
* We have started a new section: “Business Ideas“
- There, we use our professional experience in Venture Capital for assessing different Business Ideas in order to find out whose could be more feasible, profitable and easy to start. Check it out.
1. Write down your realistic options
From Monday to Thursday, write down every day 5 real options you would have to “earn money” by your own, not thinking about if you like it or not (we know we insisted in doing what you love, but for this exercise this is important).
These options are surely related with your professional career, your education or the languages you know.
2. Write down your desired options
From Monday to Thursday, write down every day 5 business ideas that you desire the most. The job you have ever dreamt about.
This analysis implies researching through internet different businesses, jobs or projects you would love to develop.
3. Linking the options together
At the end of the week (we suggest on Friday) put together all the options you wrote down during the week (20 of each) and try to compose 5 options that would be both realistic and optimistic out of them.
This is the most interesting part of the analysis.
Maybe the first week, you don’t see anything interesting but over weeks of analysis, you will start having difficulties finding both realistic and ideal business options.
There is when you will start thinking deeply about new options you never thought about.
4. Filtering the composed options
At the end of the month, take all the 20 composed options (5 per week) and filter it to 5 plausible business options.
You’ll realize that some of them are not plausible due to high investments required, a lack of knowledge or the need of hiring a big team.
5. Choosing the final option
Here is where all we explained in the first part of this section becomes important (when we talked about describing yourself).
This is the most important decision you’ll take in a long time and, for doing it properly, we recommend linking:
- Your personal preferences.
- Your strengths.
- Your risk tolerance.
- Your financial situation.
- The time you would have to develop any business.
All these factors should be taken into account before starting any Business.
The answer will automatically rise because it will fit better both your preferences and the chances to success regarding your economic situation.
When you have made the final decision, you may be unsure about this final option, but trust us:
- When you start developing it, you will be more and more sure about it over the days.
This is because you chose it by analyzing multiple options, not by one-day inspiration.
Now you have your final and meditated option… what is next?
Your first step should be: Organize your tasks, milestones, targets…
* We recommend you to visit the “Success through organization” section, since it perfectly describes how to establish targets, the importance of organizing all you make, and how to do it.
Before starting any business, you must deeply meditate about your real options, your economic situation and what makes you feeling really fulfilled.
It is crucial to analyze your income and expenses when you are decided to become an entrepreneur.
- You must ensure as many resources as possible so you can focus exclusively on your project development.
Choosing the right business project or the proper business orientation (sometimes same businesses have completely different orientations) is one of the most important decisions you’ll ever take.
In order to increase your chances to success, you must (with the frequency we mentioned above):
- List your realistic options.
- List your desired business option.
- Put together the results and compose both realistic and desired options.
- Filter the final options.
- Choose the best one taking into account your own personal situation.
You will take the right decision since is has been done by analyzing hundreds of possible options and situations.