Jeffrey Lyon is the founder of Black Lotus.
Everything looks easier on TV. From the safety of your couch, you know you are a better singer than the contestants on “The X Factor.” You are a tougher cook than those on “Hell’s Kitchen,” and you would be a far better entrepreneur than those cash-strapped startups on “Shark Tank” or the fictional hopefuls on “Silicon Valley.”
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Life is different once you leave your couch and real-world stages; kitchens and startups aren’t as easy to master as they seem on screen. I don’t know whether reality TV is creating a deluge of would-be singers and chefs, but it’s definitely pushing more people to go after their dreams of founding businesses.
That seems like it should be a good thing, right? Unfortunately, there are far too many unqualified couch surfers jumping into the unforgiving waves of entrepreneurship.
There are plenty of reasons why most should not start businesses. Below are three significant signs that the risks of entrepreneurship are not for you.
If any of these derail your dreams, consider getting your entrepreneurial experiences vicariously from the folks pitching venture capitalists for funding on TV. If you read this and still want to found a company, you might be one of the few qualified to do it and succeed.
1. You want to start a business so you can get stinkin’ rich
If a big cash out is your primary motivation for founding a company, reconsider. Statistically, most entrepreneurs not only fail to get super rich, but their businesses actually fail altogether.
The financial struggles don’t make for compelling prime-time television, but any founder can tell you that they exist. Startups have limited revenue, and their founders need to manage their burn rates aggressively. Keeping track of whatever capital you receive – either through financing or, more likely, personal loans and credit card debt – can be a full-time job in itself.
In order to stay afloat, you’ll need to:
- Know how to price your product effectively to be competitive and to recoup expenses
- Watch the cycles of funds moving through your working capital, receivables and payable accounts
- Put out enough money to hire the best people to build the company and keep an eye on the bottom line
- Run two financial models – your projected and actual – then compare and contrast the two periodically
Startup founders know they need to spend money to make money, which may never happen. Investors will recover their investment first, so understand that cashing out may prove more difficult than it may seem.
2. You want to start a business so you can own your own time
Ah, the lure of being your own boss! You can sleep until 10 on a Tuesday, take month-long vacations and maintain a flexible schedule.
Well, not really. People who start their own businesses because they want more flexibility run into a harsh reality when they realize “flexibility” means working whichever 80 or 100 hours in a week they choose.
The reality of entrepreneurship is that you will be the most demanding boss you ever had; you’ll have to be in order to meet the expectations of your customers, employees and investors. Entrepreneurs are a passionate, driven group of people but most of them will tell you that founding a company was the most stressful (albeit rewarding) experience of their professional lives.
3. You want to start a business so you can become famous
“Silicon Valley” has done a great job creating characters that are true archetypes of West Coast entrepreneurs, but seeing bits of yourself in one of those portrayals is probably the closest you’ll come to fame if you decide to start a business.
Consider one of last season’s iconic moments: one after another, a score of founders profess their plans to “change the world” – a sweeping statement many share without specificity. Changing the status quo is a positive goal for a new business. Just make sure you have a clear sense of how you plan to do it and for whom.
On TV, founding a startup is all about the fortune, freedom and fame. The real world more harsh. Most startups fail, but first their founders sweat out long hours and unforgiving balance sheets, not to mention the responsibility of carrying employees, paying off creditors and meeting investor demands.
Unqualified entrepreneurs don’t last long. For those who have the expertise, the drive and some luck, building a company that succeeds with a breakthrough innovation is a more rewarding venture than what popular culture could ever convey.