So here are five reasons why you may want to reconsider your decision to go out on your own.
1. You will not have as much control as you think. Many people go into business for themselves because they want more control over their lives and don’t want to always have to answer to a boss. If you’re starting up a home business or want to just become a freelancer that may be okay. But if you’re looking to start a new company and grow it into something substantial then you’re going to have more people around you then you think.
Studies have revealed that 77% of the startups surveyed had more than one founder. For those that had to bring in outside investors, a full two-thirds of them feel that over the next few years the decision making power will rest more in those investors’ hands and not their own. This may not be the control you desired.
2. Money will be tight. To grow your company you’re going to need capital. Capital today is available. You can get loans from online lenders but the interest rate is very costly. But for most who are looking to bring in equity investors the competition is fierce and the dollars are dwindling.
Almost a quarter of those surveyed said that if they were not successful it would be because of lack of capital. Getting capital takes time (60% of startup founders indicated that it took them more than three months and another 60% said they had to pitch their company to more than six investment firms. More than one in ten had to pitch to more than 30 investment firms!
What’s even more concerning is that 55% of those surveyed believe that it will get even harder to raise money the next time they go out for capital? I hope you’re a good salesman.
3. You will spend more than you think. Whenever someone tells me that they’re starting up a business and asks for advice I always advise them to make sure they have two big things in reserve: a lot of time and money. Time, of course, will be a factor – a typical startup founder will spend most days and nights on their company.
Oh yes, money is also as important. If you’re starting up a business, make sure you have done your cash flow projections and have enough cash in the bank to meet those projections.
Now I want you to do one more thing – double it. Be sure you’ve got twice as much in the bank. That’s because, like all human beings, you can’t predict the future and your cash flow projections are normally wrong.
Whatever time you think it’ll take you to become cash positive is probably off by at least six months to a year.
4. Get ready to work many long hours. Did I mention time? Did I mention that you would be spending most days and nights working on your business? That’s right, I did it for three years. Most employees leave the office after 6PM. If you’re a founder you’re going to get in earlier and leave later than the rest.
In fact, you will be traveling on the weekends, answering emails at night and taking calls during dinner. Your life is no longer yours. It will be dedicated to your investors. All of this will have an enormous impact on the quality of your life. Is your family ready for this? Are you?
Starting a business is tough stuff. In fact nine out of ten startups will fail. This is a hard and bleak truth, but one that you’d do well to meditate on. I guess you are wondering why – because very optimistic entrepreneur need a dose of reality now and then. Cold statistics like these are not intended to discourage entrepreneurs, but to encourage them to work smarter and harder.
Running out of cash does not cause a startup’s failure – it’s merely a symptom of another issue. Excluding instances of ‘stupid spending’ or the inability to raise capital in the first place, startups tend to run out of cash when a CEO has overlooked all other indicators of failure. Sadly, sometimes it’s the only ‘symptom’ that the CEO sees.
So it after reading this post, you are ready to go out own your own – best of luck and much success –after fifteen years of being on my own as a small business owners, I have no regrets.