“I am a bootstrapper. I have initiative and insight and guts, but not much money. I will succeed because my efforts and my focus will defeat bigger and better-funded competitors. I am fearless.”
I am a firm believer in the power of entrepreneurship. I’ve started and sold a company. I’ve started and failed at a couple of others. While a lot of people rail against corporate America and complain that big companies drive too much of what happens in this country, they also forget that all of these big companies were once small. Just as LeBron James wasn’t born a 6’9”, 250 pound freak of nature, IBM, Apple, and WalMart didn’t just appear with tens and hundreds of thousands of employees. Done right, entrepreneurship can be the highest return on an investment that you can make.
I also want you to have a firm understanding of the prospects which you face. This is not to daunt you, necessarily, but to give you a clear picture of what to expect. A 2007 study by the United States Bureau of Labor and Statistics shows that 44% of companies survive through the fourth year of existence and 31% survive seven years.
If you’re probably going to fail, why start at all?
If you want to start your own business, you may feel like Odysseus at the beginning of his journey back home. Of course, Odysseus had no idea that he would spend ten years wandering the Aegean, so maybe you feel like the all-knowing narrator of the tale. Regardless, if the chances of failure are such that it seems like the odds are stacked against you, why even go through the process?
The biggest reason is that you are creating real options for yourself. As Tim Giles and Chris Walters of the London School of Economics explain, a real option is what you create when you do not have to commit to something right away. It has three components:
- The option to continue in the future if there is a success. This is important if you do find that you are able to gain traction. You invest some now (as I suggest, $1,000 and 6 months), and if it’s a fruitful investment, then you can choose to invest more later.
- The option to stop in the future if there is failure. If you find that your side gig did not work, then you are out $1,000 and have spent six months pursuing it, but you are not going to be left somewhere in a gutter, destitute as a result of your decision.
- The ability to learn more before committing more resources. Because you are pushing the go-no go decision into a future period, you’re able to learn more about what your market will bear for whatever you’re offering and to reduce the uncertainty about whether or not you will succeed.
The obvious desired outcome of the real option is that you hit a rich vein of need in the market and people are flocking to your door to buy whatever it is that you are providing. This decision is easy; you quit your day job and now you have a new day job. You trade one boss (or a few bosses) for several – your customers.