Today, I spoke to Carol Roth, who is the author of The Entrepreneur Equation. She will be donating one book to SCORE.org for every book sold this coming week. In this interview, Carol talks about why now is the best time to start a business, the common qualities that all entrepreneurs have, the key items that you need to start a business, and more.
Why has there never been a better time to start a business?
The current zeitgeist is that there has never been a better time to start a business because technology has created many cheap opportunities to start businesses, as well as flexible, non-location specific options to start businesses. However, cheap and successful doesn’t necessarily equate to successful business opportunities.
Cheap opportunities often mean less upside potential and low barriers to entry, which make it harder to meet your goals.
Also, just because a business is cheap to start, you still have to have the capital to operate it, grow it and live on for a couple of years while the foundation of the business is established. It is easy to get sucked in by the hype only to find out that business ownership is much more difficult than anticipated.
As so many things that I do are, the book was born out of being pissed-off and frustrated at the information that was being put out to entrepreneurs. With up to 90% of businesses failing (or failing to succeed, I won’t debate semantics) within five years, I felt there was too much complacency; if doctors, lawyers or firemen failed at a 9-in-10 rate, everyone would be up in arms. But entrepreneurs- who risk their time and money- are being sold “seven magic steps to success” and that just doesn’t exist.
There is no magic bullet for business success and entrepreneurship isn’t one-size-fits-all. Each of us has different circumstances, priorities, goals and objectives which dynamically change throughout our lives. So, there can’t be just one formula that fits everyone.
I wanted to create a framework that could be used by an aspiring entrepreneur and existing business owner alike to evaluate the risks and rewards of a business opportunity against their own personal situation at any point in time. That’s what the Entrepreneur Equation is, and it’s meant to enable entrepreneurs to make better decisions and stack the odds of success in their favor- whatever success means to them personally.
What are some common qualities that all entrepreneurs have?
Entrepreneurs come in all shapes and sizes, but successful entrepreneurs are really those who prepare and who mitigate risk. Statistics prove that entrepreneurs who write business plans find more success than those who do not. And the more milestones you can achieve and risk you can take out of the equation, the more likely you are to attract investment capital and get to the next level.
Plus, it helps if you are more of a “Santa” than an “elf”. Santa organizes the vision and orchestrates plan for Christmas, the elves execute pieces of the plan. Santa takes initiative, an elf waits for directions. If your personality is more like Santa, you are better suited (pun not intended) for entrepreneurship than an elf is.
Before you take the leap or invest in a new product or service, prototype and test it out with a defined budget that gets you quick feedback so you can assess the model. Once you have proven the market opportunity, make sure that you have enough money to support the business operations and live on for at least two years.
You also want to make sure to fill in the gaps in experience and establish a network that will help you in as many facets of the business as possible.
Plus, to maximize success, you need to focus on whether your business model and opportunity is “ABLE”:
- Remarkable– does what you offer stand out in a crowded marketplace?
- Viable– if the market opportunity isn’t big enough for you to earn a substantial profit, you may want to re-think the business.
- Scalable– can it be grown exponentially for every resource (money, people or otherwise) you put toward it?
- Suitable– does the business make sense for you? Does it achieve your goals and do the rewards of it greatly outweigh the risks you are taking on- both in terms of money and quality of life?
If you are overwhelmed and overworked by your current job, you may need to make it more “ABLE”. Be willing to take a step backwards and re-evaluate your business model and strategy so that you can take a huge leap forward with your business.
Can you compare a hobby, job and a business? How do you know which is best for you? Can that change?
I call the three types of businesses:
- a “jobbie”– a hobby disguised as a business; if you are working part time or earning less than the minimum wage with no viable plans to change that, you may have a jobbie
- a “job-business” which is a business entirely dependent upon one individual; if that person goes on vacation, the business stops earning money and
- a “bona-fide business”– which is a business not dependent upon any one person to run day in and day out
Each has its own risks and rewards, benefits and opportunities associated with it. The key is to understand what those are and what you are seeking out of an opportunity based on your own circumstances and goals at any given point in time.
If you just want a hobby that makes some money, that’s great. Make sure to invest your time and money in accordance with that. However, if you want a bona-fide business, you may need to save up first in order to invest at the appropriate rate to achieve that.
Any option is fine, as long as it suits your needs, the rewards greatly outweigh the risks and you proactively make the choice. The problem emerges when you don’t make the choice proactively and invest heavily and still end up with a jobbie or a job-business where the risk/reward equation doesn’t balance. Then you may end up overwhelmed and overworked. You want to be able to stack the odds in your favor and set yourself up for success.
Carol Roth helps businesses grow and make more money and is the author of The Entrepreneur Equation. An investment banker, business strategist and deal maker, she has helped her clients, ranging from solopreneurs to multinational corporations, raise more than $1 billion in capital, complete hundreds of millions of dollars in M&A transactions, secure high-profile licensing and partnership deals, create brand loyalty programs and more. Carol is a frequent radio, television and print media contributor on the topics of business and entrepreneurship, having appeared on Fox News, MSNBC, Fox Business, WGN TV Chicago (video) and more. Carol’s Unsolicited Business Advice blog at CarolRoth.com was recently named as one of the Top 10 small business blogs online. She holds a Bachelor of Science Degree from the Wharton School of Business at the University of Pennsylvania, where she graduated Magna Cum Laude.