Hypothetically, let’s go back in time and say I’m about to graduate from college. I know that in my heart I want to be an entrepreneur, but I’m concerned about how to fund a new company and have enough money to live. What do I do?
It’s a common position for potential business owners to be in. I think a lot of very talented people that would start successful businesses get scared away by the financial uncertainty of starting their own business.
My advice – eliminate all of the uncertainty by using a job to fund yourself. Here’s what I would do if I was graduating today and starting out again from scratch tomorrow:
- Get a non-career job where you can work 30 – 40 hours/week and make enough money to live off of. It might not impress your parents, but that job bartending or waiting tables or being a barista or bank teller is going to afford you the opportunity to do what you truly want.
- Pick a potential business idea…then start a related service for under $100. Let’s say you’re like me and want to run lots of successful web apps. Starting a web app from scratch and building it to a point where it brings in solid revenue is very difficult and many times doesn’t work out. Instead, start a web design business first. $100 gets you some business cards, a simple website, and a Skype phone number. Throw and ad on Craigslist, work Twitter and Facebook, go to a few local networking events, and whatever else it takes to get your first clients for free. For more ideas, check out my post How To Do Client Work Right that I wrote just after we got rid of the service side of our business.
- Use the remaining time to work on your “ideal” business. If you still want to build that web app, take advantage of all of the free time that you have to slowly-but-surely build it without the stress of needing it. Build something that has true value to people, even if it takes a year or two to do it. The more stress, the more you need a web app to succeed, the more likely you are to press and make drastic changes instead of being patient. Great websites take years and years to build.
- Pump profits from your service into growing your “ideal” business. Since you are living off of your job, you can “reward” yourself by spending some or all of your service profit on growing the web app.
Here’s how your average week likely breaks down: 30 – 40 hours working, 15 – 25 hours on your service, and 5 – 10 hours on your ideal business. ~60 hours is no joke, but it’s also not a bad deal for how much benefit you’re getting.
This is a very low risk, high reward path that gives you TONS of future options:
- If things don’t take off, you can try again or get a career job.
- If the service grows, you can quit your part time job or stop working on the web app.
- If the web app grows, you can stop providing service or quit the part time job.
- If they both grow and you can cover your living expenses, you can definitely quit the part time job!
There are several advantages of taking this approach:
- There’s no time limit. Totally flop after trying for 6 months? Start over without any real penalty. You still have your job so you can take a few weeks off from entrepreneurship and then get back into it when you’re ready.
- You’re financially stable. You don’t need to worry about owing creditors thousands of dollars because you’re advancing yourself cash to live while the business struggles. By keeping your business money separate from your personal money, you really do eliminate any real financial risk.
- By bootstrapping, you learn the importance of every dollar. I love the fact that we’ve never taken outside financing. We’re pretty minimal in our spending. We value every single sale we make. Would we be nearly as stingy if we had $1M from a VC to play with? Probably not. We also probably wouldn’t be nearly as efficient or nearly as successful.
- You keep your motivation. Nothing keeps you more motivated than doing a job that you don’t want to do every day! That annoying customer who badgers you all night and never leaves a tip? He’s the reason you work so hard after work.
- You’re learning constantly. No matter the business you work for, you can learn things. What do they do that works? What doesn’t? How would you do it differently? You’re getting paid to learn. Those clients you work with are the same. To do good work for them, you’ll have to work pretty hard to learn the intricacies of their businesses.
- You avoid living in a bubble. Running a business solo can be lonely. I know. Working a job gets you out of the house, gets you some social interaction, and builds some relationships. Same goes for doing service work.
My business partners and I sort of did these things, mostly by accident. I got a job with the intention of funding SportsLizard, but it was a career job and became too conflicting. Mike and George worked part-time jobs to bridge the gap as they got their start. Greg was still going for his MBA while he was starting out. I did SEO service work to keep myself afloat while I tried to grow my websites, which eventually led me to my current partners. George and Greg did physical detailing to fund Detailed Image. All along the way, the knowledge we learned from all of those experiences has cumulatively helped us in every aspect of our business.