Today, I'm going to talk about how
to become an entrepreneur.Being your own boss, calling all the shots, hustling to hit your goals for many people, entrepreneurship is the ultimate career goal. But as awesome as running your own business sounds, it's also incredibly difficult. How difficult?
Well, 75% of startups fail.
But here's the good news. Starting a company can be one of the most rewarding, exhilarating, and interesting opportunities you'll ever get. If you're aware of the risks and you're still dead set on being an entrepreneur, then we have some strategies and advice for you.1. Identify a profitable startup idea.
One of the best ways to do this is
to ask your friends what annoys them.
Founders get their inspiration from their frustrations
all the time.
For instance, Andrew Kortina and Iqram Magton-Ismail
founded Venmo, which was later acquired
by PayPal after they had trouble paying
each other back by check.
With this in mind, ask your friends
to keep track of the day-to-day things that annoy them
and look for problems you might be able to solve.
Part of that involves planning for the future.
As the world changes, people need different products.
The rise of Uber, Lyft and other ridesharing apps
created a demand for a third-party app
that will tell you the cheapest fares at the exact moment.
You want to get ahead of the curve.
Read trend predictions for your industry or market
or check out universal trend forecasting publications.
Checking out what other people have come up with
can be a great way to kick your own thought process into gear.
It also presents opportunities to make
something better or cheaper.
You don't always need to develop something brand new.
If you can offer an existing product at a lower price
point, better quality, or ideally both,
you'll have plenty of customers.
Better yet, there's clearly an existing demand,
and many people start successful businesses
after noticing a gap in the market.
But be sure to focus on a category that's growing.
Pick one that fascinates you, but isn't overly competitive.
Once you do, consider questions like,
what can be done to improve the products here?
Can I add a new feature?
What about a different material?
Can I personalize it somehow?
Number two, validate your startup idea--
great, you've got an idea, but don't quit your day job just
yet.
Before you go all in, you need to know other people will
actually want your product.
And no, your friends and family don't count.
Here's where the idea of a Minimum Viable Product or MVP
comes into play.
An MVP is the simplest, most basic version of your tool
or service possible.
It's functional enough to satisfy early customers
and get a sense of what you should improve.
Doing interviews with potential customers
is a great option here.
Show them a working demo of your product.
Ask what they like and what they don't, how much
they pay for it, and how often they'd use it.
If you want to test the market's interest before building
anything, build a landing page that describes your product
or service.
Ask people to submit their email addresses
in exchange for early access--
a free subscription, membership or product, a discount,
product updates, or some other compelling offer.
Then promote the video on social media and paid search
and see how many visitors convert to sign-ups.
Number three, find a co-founder.
Conventional wisdom says you should look for a co-founder
when starting a new business.
There are three main advantages to having a co-founder.
It's easier to get funding.
Whether or not multiple founders actually
contribute to a company's success,
many venture capitalist investors believe it does.
They're reluctant to back solo founders.
As an example, single founder is the first thing
on Y Combinator co-founder Paul Graham's
list of causes of failure.
He writes, have you ever noticed how few successful startups
are founded by just one person?
It seems unlikely this is a coincidence.
A co-founder understands exactly what you're going through
and makes you feel less alone.
They can provide different skills, knowledge,
and connections.
Maybe you're great at selling while your co-founder is
more technical.
You've got lots of connections, and they've actually
started a business before.
But there are also drawbacks to having a co-founder.
There's conflict.
You and your partner will inevitably disagree.
A little healthy disagreement is productive.
But if you don't find a solution relatively quickly,
you'll waste valuable time and energy.
And you'll have to split the equity.
And where do you find a co-founder in the first place?
Well, when you do, look for someone
with the same business ethics, work habits,
and complementary personality.
In addition, they need to believe in your vision,
contribute the right skills, and have a desire
to be your co-founder in the first place.
Number four, get funding to start a business.
So how can you get your business funded?
There are a few ways.
Many entrepreneurs rely on their friends and family
for an initial investment, typically called a seed round.
You can exchange funding stake in your startup--
i.e.
your cousin receives 4% of the company
after giving you $12,000--
request personal loans with or without interest, or even
donations.
You can also apply for a small business grant.
Federal, state, and local governments
have programs to help small businesses, including
low-interest loans, venture capital, and grants.
To find programs your company qualifies for,
check out grants.gov.
There are also crowdfunding platforms.
Kickstarter, Indiegogo, GoFundMe, and Fundable
let you get backing through an online campaign.
Plus, crowdfunding doesn't just generate capital.
It can also help you get early product feedback, brand
awareness, and sometimes if you have
an interesting story or especially cool product, press.
Pitching to angel investors is another option.
These investors look for early-stage companies that can
10x or more their investment.
They'll be extremely diligent in making sure
you understand your target customers, the product
space, how you'll make money, and how you'll scale.
Make sure you're prepared with a solid business plan
and early signs of traction.
Venture capital firms-- another option--
look for young, private companies.
Like angel investors, VC firms are
looking for high-risk, high-return investments.
The returns they expect depend on how mature your startup is.
You could use a credit card for short-term cash option,
but it's typically not a good idea
to use your credit card to pay for business expenses,
unless, of course, you can pay the balance.
But sometimes you have no choice.
You need money and fast.
But sacrificing your credit score
and racking up credit card debt will hurt your business
in the long run, not to mention your personal financial health.
You can't apply for a loan in your company's first year,
as lenders are unwilling to make such a high-risk investment.
But you can take advantage of the Small Business
Administration's Microloan program.
Small businesses can receive up to $50,000.
The average SBA loan is $13,000.
Microlenders and nonprofit lenders
are other options, which often seek out minority
and disadvantage entrepreneurs.
Finally, you have the option to bootstrap
it, which allows you and your co-founder, if you have one,
to hold onto a much bigger percentage of the company.
Some companies never raise funding at all.
Their founders pay for initial costs by themselves,
and then when the company becomes profitable,
its revenue covers all expenses.
But keep in mind that you may grow less quickly
without big infusions of cash.
If you do decide to bootstrap, keep
your budget as lean as possible to extend your company's
lifetime.
Number five, incorporate your business.
At a certain point, you need to decide whether you want
to incorporate your business.
As a sole proprietor, you and your company
are considered to be the same entity,
but once you incorporate, your business
becomes separate from you.
From a legal standpoint, your business
can then buy and sell property, incur taxes, sue and be sued,
set up contracts, and commit crimes.
There are advantages to incorporating.
First and most important, a corporation
protects you from business's debts and obligations.
Creditors can typically only seek
repayment from the corporation's assets,
and not your personal assets, like your house, car,
bank account, and so on.
You're also not legally liable for the corporation's actions.
In contrast, as a sole proprietor,
anyone who sues your business is suing you.
Having a corporation lets you transfer shares.
You can sell some of your ownership in a company,
transfer it, or give it away.
If you want to accept external investments
or bring a partner on board, you need the ability to divest.
Corporation status also gives you
more credibility, which helps you attract investment capital.
Lastly, corporations can deduct normal business expenses
before they allocate income.
Of course, incorporating also has its disadvantages.
It creates an additional tax burden
since you'll have to periodically file
with the state and pay yearly fees.
The processes can be relatively time-consuming,
and hiring a lawyer can cost anywhere from a few
to a few thousand dollars.
But you don't have to incorporate.
There are a variety of business structures to choose from.
But if you have a co-founder, need external funding,
and would like legal protection, it's a good option.
Once you've decided to incorporate,
you must choose between becoming a Limited Liability
Company, LLC, or S corporation.
