Friday, May 24, 2013
So, you want to be an Entrepeneur?
Few days ago I met a friend who is starting his homebrew business and he offered to me some samples to try, so we organized a micro-summit with him; with Jorge del Carpio who is an Entrepeneur from Fibras Andinas; with Tom McDonnell and me, the first two was real Entrepreneurs and the last two was virtual or would-be entrepeneurs.
With Jorge we had a difference on definitions of the Spanish word “emprendedor”. To me the main difference is the origin of capital, when I started to hear about "emprendedores" some 10 years ago, was refered to Amazon, Google and this kind of business. Any model of emprendedores I know are related to venture capital, angel investors or state funded. In the first two cases the entrepreneur accept capitalists as partners, and when is funded by the government is via a grant (gift) or a soft loan.
Those who risk their own money -in my opinion- are rather “empresarios” and in the early stage they are micro-empresarios. Jorge´s definition of emprendedor is for any entrepeneur the first stage of the business, no matter where the money comes. Well, I guess that the distintion of terms it matter more in Spanish than English.
To risk money from others gives the incentive to take more risk compared with bet your own money, but –as lose money from others is less painfull than lose your own- the incentive to do things right also decreases. Usually is very difficult to find venture capitalists unless your business idea is extraordinary, and the new partners probably will limit your freedom to take crucial desicions.
The advantage of working with your own money is the startegic independence, full control and no need to share the profits, the obvious disadvantage is the limited budget with wich most entrepreneurs start their own business.
It depends on personal preference to work with their own money or look for external capital, in my case and with my personality, I could not share the control of my business nor depend on someone for funding. I prefer to take the risks and responsibilities by myself and take all the prize if I do well. That limits me to businesses that do not require capital to leave, but this is my limitation, many others may not have that problem.
But I'm giving a lot of thought and ado. So you wanna be an entrepreneur? Well, here are some of my own ideas:
1. - Do something you're passionate about, it's not for discouraging you, but roughly 8 out of 10 businesses fail in the first 3 years (been there, done that), early mortality is so high that if someone gets to build a business just to make money is likely to suffer and pass pretty lousy. For new business, the ideal is build something you would do for free, turn your hobby into a business is one of the best ways of starting a business, because in the case –very likely- to do poorly, at least you had fun in the process.
2. - Do not make plans, planning is valuable for accountants and bankers when you borrow. Investment projects are usually financial ficction, estimates are arbitrary and based on wishes more than facts (there are no facts when you start) and last thing you need in your newborn company is planning (been there, done that). In the beginning everything is uncertain, and if you seek for certainties better look for a salaried job. Once the company is well established and running smooth, planning and order are indispensable: lot of businesses –initially successful- crumble due an improvised administration as they grew. Moreover potentially good companies never take off because they are dedicated to planning and lowering the uncertainty in a stage when to persevere and take risk is prioritary. There is a time to be crazy and a time to be ordained.
3. - Do not think how good or bad the business is, that should be the last thing you should be interested. Just think if you're interested, if you like it, if is fun for you an enjoyable, listen to your gut. Any excellent business is bad when you think about cold, because the gains comes always from what is improbable. He who starts a business based in data is doomed. Nothing is more common than the guy who follows trends: see what is booming and follow. If sell hot dogs it booming he starts his own hot dog business (been there, done that), that's what they teach in schools and universities, but it is utterly stupid. To create good businesses you have to go against trend, and if your business performs well, you must be prepared for someone with more capital or better skills tying you out of the market.
4.-Beware of consultants, management consultants are -usually- unemployed professionals, mediocre professors or broken entrepeneur (been there, done that, I got 3 of 3). Nobody can give you a prescription for success, if anyone would know it, he would build their own business and not tell anyone about it. Follow your instincts and be prepared to go wrong because business is betting. The probability that you made a big business is similar to the probability that you win the lottery, maybe less. The probability that your business give you for eat in a sustainable manner over time is similar to the probability that you win a raffle, maybe less. But if you set something you like, you'll just have a good time even if you go wrong. If you are obsessed with finantial success, take care not pay a disproportionate price, before you died you could regret it.
I really love the idea of micro entrepeunership, and my dream to “make money doing nothing” can be better undestood as make money having fun. Many years ago I thought that electronics was fun; then I thought that computer programming was super; then it occurred to me that with the trade I could make money without doing anything, and so on. I have gone through many experiments (some unprintable) and many failures, but I always have fun. What I have not won in cash I have earned in life. So in the end I'm going to die, and all that will matter is whether or not I lived happy.
For example Internet is my last adventure. I have spent almost 10 years writing an entry every day in my blog, I have posted a bunch of sites about all kinds of nonsense, and finally it occurred to me that online education could be entertaining, I find a way to got the required equipment and, as one thing leads to another - I happened to think in convert some issues from my blog to video format. In the almost 10 years I have not won a single cent with that, but I had made lot of friends and I earned life in abundance. If I ever get to make money with this, for example with touristic videos or online courses, will be great, more profit yet, but I already got what I wished, I'm already more than paid. Well, that would be my advice, I do not have anything more to say about this, I think.