The American dream is all about making a fortune on your terms, not working for The Man on his. If you’ve got big ideas and feel stifled by your current career path, it’s natural to begin pondering what it would be like to kick down the walls of your cubicle and start fresh with a company you believe in and trust: your own. However, the worst mistake would be to act purely on passion without reasoning how you’ll make your dream come true, logically and deliberately, only to end up back where you started. As two entrepreneurs who’ve had some success in going our own way (and plenty of failure we’ve learned from as well), we can show you how to bring this fantasy to fruition.
FOLLOW YOUR HEART
According to researchers at the University of Tennessee, about 50% of all businesses fail, with 25% closing their doors by the end of Year One. Often, the reason boils down to greed and impatience: People want to get rich quick and can’t handle losses, so they pack it in before they’ve given their venture a chance to succeed.
Says Gary Vaynerchuk, an expert on e-commerce and the best-selling author of Crush It!, business today has too many “wantrepreneurs” and
not enough entrepreneurs. That is, too many people are motivated by money and lack any emotional connection to what they’re peddling. It doesn’t matter if car washes, for instance, have high profit margins— if soap and car wax don’t get you excited, you’re not likely to succeed in this line of work.
Research shows that the amount of money you make correlates with overall happiness only up to a certain point, anyway—about $75,000 per year, according to a 2010 study from Princeton University. Greater enjoyment of life was not reported with earnings beyond that figure. So if you’re looking to start a business just so you can sell it off and retire early, you’re not only chasing the wrong idol, you’re also unlikely to feel any better about your station in life even if the outcome is positive.
Whether it’s gardening, laser tag, or a business related to working out, build your company around some- thing you’re truly excited about. It’s passion that will power you through the many risks you’ll have to take to make it lucrative, keep you plugging away during hard times, and give you the greatest satisfaction when it ultimately does succeed.
FIND YOUR MARKET
Unfortunately, there’s no guarantee you can turn a hobby you love into a profitable enterprise. So it’s essential to determine if there’s room for your idea in the current marketplace, or if you have a concept that fills a gap in the industry.
“Room in the market” means there’s currently a growing demand or surge in the product or service, so you should be able to get a piece of the pie, too.
A great example is craft alcohol, such as beers or ciders. In the past 10 years, this market has experienced a boom. More people are willing to spend money on smaller-brand products, so you could, hypothetically, open a bourbon distillery, because there’s room in the market for growth. Or maybe you could combine your passion for drinking and nutrition (who says they can’t coexist?) and focus on producing gluten-free alcohol, which is a hot topic these days. Whatever your vision may be, when you identify a new trend that’s successful, you can start a business that has some legs.
Nevertheless, this comes with a caveat: You want to make sure you’re investing in a field that won’t disappear in its entirety before too long. Alcohol is a good example, because people will always drink. As a matter of fact, it’s a recession-proof business. On the other hand, starting a tech company is a riskier bet—unless you’re confident you have a good grasp of the latest innovations and a window into what’s possible on the horizon, you may find your products surpassed and rendered obsolete in short order.
As for filling a gap in the marketplace, this can be your approach when an industry is already saturated but you have a new idea that addresses a problem or supplies a better solution to what’s currently available. For instance, Uber, the taxi cab–supplier app. There’s no shortage of cabs or car services in most major cities, but Uber puts the power of getting a cab in people’s hands with their mobile devices. It allows them to get a ride when they want it, instead of running from street corner to street corner trying to hail one.
If you’re not comfortable with other people owning a part of your company, forget about investors. But if you do want to go it alone, be prepared to ask the bank for a big loan and expect the debt you’ll incur.
A relatively new source of funding that relies on other people’s money but doesn’t let them determine how you spend it is kickstarter.com. There, you can post a description of the product or service you want to launch and the amount you need to bring it home; then, visitors can choose to pledge money if they believe in it. If you raise the amount you asked for, you get it, no strings attached. If you fall short, you won’t see a dime.
Of course, you can always dig into your own savings to start your enterprise. How much should you invest? This is highly personal, but in general, we wouldn’t spend more than 50% of our nest eggs on a new venture. However, if you’re a natural risk-taker—that is, your ability to focus and work is not negatively affected by the risks you take—you’re free to spend as much as you want. But be aware that the more money you invest, the more anxious you’ll be to make it back, and that can hurt your judgment. Your goal must be to make the company succeed, not to refill your own bank account as soon as possible.
And if you’re afraid to spend your own money? Well, if you won’t invest in your company, you can’t expect anyone else to.
GET THE WORD OUT
Once you’re up and running, you need to promote what you’re doing. You can hope that the media decide to share information about your business, but it usually follows the footprint and noise left by marketing buzz. The paid variety includes everything from old-school billboards and ad space to online media, such as Google or Facebook ads. But get as much for free as you can. You want to generate organic traffic from word of mouth and referrals, and social media is the best way.
Your company must have a Facebook page and a Twitter account, and, if appropriate, a presence on Instagram and Pinterest or other relevant social media, too. None of these accounts are expensive or complicated to create, but they do require maintenance. Invite friends to “like” your page and solicit them for reviews and ideas about how you can improve the operation. Just remember that you won’t be immune to harsh criticism—and a few bad Yelp reviews can crush a new restaurant in no time.
The only way to really guard against haters is to leave them nothing to hate on. Whatever you’re making or offering, be sure it’s great. High quality appeals to customers more than anything. When you’ve got that covered, you’ll get noticed for the right things. The cream, as they say, always rises to the top.