You may already own your own business. Or you may be trapped in a full time job you want to leave and dream of owning your own business. The Entrepreneur Equation, just released by author Carol Roth, helps ‘wanna be’ entrepreneurs and those who are looking to take their business to the next level ask the first necessary question: not “Could I?” but rather “Should I?” start my own business.
Carol’s book may seem like a downer, but I think it’s a much-needed reality check to what true small business ownership entails. It can save you a lot of time, money and effort avoiding small business ownership if you’re not going into it for the right reasons. The book lays out some of the things you may not have considered that are required of small business owner. And it’s an easy read.
Here are a few of the highlights:
60% of businesses don’t earn a profit over their lifetime! Yet because of widely distributed misconceptions about the freedom, flexibility and money entrepreneurs benefit from, 6 million people start businesses each year. Many of those business owners are just creating a job for themselves by going into business. Yet this job takes more time and energy and risk than any job you’d otherwise get. And the pay…well it’s likely far less than minimum wage given the time you put into the job. Sound familiar?
Most people think entrepreneurship means getting to spend most of your time doing what you love or want to do. But the reality is 90% of your time is spent handling administration, marketing, providing customer service to crabby clients, blogging, networking, selling, managing employees, dealing with vendors and bookkeeping. That leaves just 10% of your time to spend doing what you love. So before you take the leap into the land of small business ownership (or get in any further than you already are), The Entrepreneurship Equation helps you identify your motivations.
Another HUGE misconception is that you’ll be your own boss when you own your own business. The truth is, as business owner you actually have MORE people to work for. To generate income, you have to accept the reality that your clients are now your boss. Without them, you have no income. Add to this the fact that your employees are now your boss, your investors are your boss, vendors, landlords, regulatory bodies and your family are also bosses and stakeholders. Whew…that’s a lot of bosses to please. If your main motivation for going into business is to be your own boss, you may not be up for small business ownership.
Just because you have a passion for your hobby, doesn’t mean you should transition into business. The biggest difference that Carol identifies is that a hobbie is all about YOUR likes and wants and a business is all about your customers’ likes and wants. That can be a hard pill to swallow. Many pseudo business owners have what Carol calls a jobbie – a hobby disguised as a career. If you’re working full time and are not making a profit and able to pay yourself at least minimum wage for the hours you put in – you have a jobbie, not a business. The good news is that you can transition into a bona fide business. It starts with creating a business plan including financial statements (this month’s Cafe Joy teaches you how to do just that, easily). Then you can truly evaluate whether you have a bona fide business opportunity, or something that will forever remain a jobbie.
If you are dreaming of the day you can leave your full time job and pursue your hobby full time, The Entrepreneur Equation is a great resource and definitely worth the $25 you’ll spend. If you’re already a small business owner and are struggling, the book can help you understand why (hint, it’s likely the wrong motivations) and get you back on track. It’s an interesting reality check and a book I’m sure many business owners wish they had read when they got into this game.