Q&A of the Day – Is now a good time to start a business in South Florida?
Each day I’ll feature a listener question that’s been submitted by one of these methods.
Email: brianmudd@iheartmedia.com
Twitter: @brianmuddradio
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Today’s entry: I enjoy listening to you and respect your opinions because they’re based on facts. I wanted to get your thoughts on whether right now a good time is to start a new business. I’ve had a concept I’ve been interested in pursuing for a long time but hadn’t had the time to carry out because of my career. While I’m still working for the same company I’ve been with for 17 years, I’m earning less than ever because of the pandemic and I’m not sure when that will change. I have the savings to get started but it’s a big leap. How do you know when it’s the right time to go for it? How did you know it was the right time?
Bottom Line: The answer is it depends. From my experience and research there are three main reasons why you might and perhaps should pursue entrepreneurship. Perceived need, opportunity & competency. The questions are these...
- Is there a need for the product or service?
- Is there an opportunity which can be exploited?
- Are you especially competent/uniquely skilled to carry out your vision?
If you can objectively answer yes to all three of these, the risk of pursuing your vision drops considerably. If you can answer yes to at least two of those, it might be worth pursing based on other factors, more on that in a moment. If the answer is only yes to one or none – I’d likely recommend against taking the risk. But there’s one overriding factor which should be considered above all others in my mind. What are you risking? That leads me to the three reasons when the timing is right to take the risk.
- When you don’t need the business you’re creating for income to support your family
- When you don’t need to borrow money against your home or property to fund the business
- When/if you wouldn’t need to hire someone to lead the organization due to your inability to do so or lack of ability/time to dedicate to the business
This is about playing your best possible hand and improving your odds of success. It’s like this. 20% of startups fail in their first year. 50% fail within five years. Statistically the odds of survival, let alone meaningful success, aren’t better than a coin flip at the onset. You wouldn’t risk losing your house, and your family’s wellbeing (if that’s applicable) over a coin flip, or at least I hope you wouldn’t, so don’t start a business if you’re risking either of those to do it. 82% of small businesses fail due to cashflow problems. Everything you can do to minimize pressure on cashflow early in your business will help your odds of survival. That’s why you don’t want to be reliant on a salary from day one and why you don’t want to have to hire others to fill voids you could manage yourself. 31% of successful business owners never take a salary from their business. Instead they might pull money out once the business is successful and/or what’s left over quarterly or annually that they didn’t need to reinvest into the company. Generally, I think there are two prime windows for most people to pursue their own businesses. Early in life when you don’t have the responsibility of supporting a family and can dedicate most of your time and energy into your business - putting only yourself at risk if you fail, while having time to recover if you do; and when you have provided for your family/yourself sufficiently that you don’t need income from your business indefinitely. One other nugget to serve as food for thought.
According to Payscale, the average successful small business owner pulls in about $73,000 per year. While there are the Zuckerberg's, Gates’s and Bezos’s of the world, most successful businesses are obviously modest. Being realistic is important. Once you go for it, I’m all about shooting for the moon if that’s the goal. But before you do, and based on everything else I’ve shared, I’ve encountered far more entrepreneurs who believed they’d be rich, than those who thought they’d simply be comfortable if it all worked out. It’s a grind, it’s stressful, it’s 24/7. That’s also why it’s important to account for all of the factors I mentioned. It’s hard enough to be successful. You don’t want to be making compromised decisions because of factors which have nothing to do with your business. Conversely, it clearly can be extremely rewarding as well. What I personally miss most about entrepreneurship, is the freedom to have ideas and execute against them and watch them succeed or fail based on their viability and the quality of the execution. No middle managers who have to buy in, no red tape and corporate mumbo jumbo to navigate. Just you, your product or service and your customers. When it all works out it’s the most freeing experience I’ve known professionally. Hopefully that’s helpful.