Principles of Wealth #32*
Most people fear entrepreneurship because they believe it takes genius, courage, and luck. In fact, these factors are rare contributors to success in start-up business ventures. The factors that matter most are common sense. humility, cautiousness, a relentless work ethic, and perseverance.
Have you read a story like this recently?
A bright young college kid has an idea about a revolutionary new way of doing something. He mentions the idea to a few people that he respects. They tell him he’s crazy. It’s a bad idea. It won’t work.
He won’t be dissuaded. He drops out of college, recruits a few friends, and spends a year and all his money creating his better mousetrap. When it’s ready to go to market, he’s got no money left, so he borrows from his family.
The pressure is on. If it doesn’t work, he’s lost time, all his money, his family’s money, and his self-esteem. But lo and behold, the market is thrilled by his new product. Investor money pours in. His company grows. A few years later, he’s a billionaire and lauded as a genius.
That’s the entrepreneurial story dreams are made of. The reality for 99% of entrepreneurs is quite different.
It begins not with a big, world-changing idea but with a modest notion of how some business he knows (usually as an employee) could be better in some way. He works on his idea evenings and on weekends, testing it in bits and pieces with whatever money he’s been able to save. And then, several years later, when his idea is no longer just an idea but a proven concept, he launches his business.
He doesn’t quit his job. He runs his new business as a sideline. It grows in fits and starts. Three or four years later, sales reach the million-dollar mark and he quits his job and runs his new business full-time.
Some years later, revenues reach $10 million and his net worth exceeds a million dollars.
* Fact: 80% of entrepreneurial millionaires start their businesses from scratch, using their own savings.
* Fact: The average time it takes for a successful business to reach $1 million in sales is 7 years.
As in many other areas of life, the truth about entrepreneurship is less exciting than the stories we read in magazines and bestselling books. That’s not because risk-everything/ win-huge doesn’t happen. It does. But it happens very rarely. One out of a thousand startups has the sort of success that makes for a good movie. The rest are mundane.
There are two reasons we keep hearing these exciting stories.
The first and most important reason is the very fact that they are exciting. Who wants to write a book or make a movie about a guy that uses common sense and grit to grind his way to merely millionaire status?
The second is that when founders of super-successful businesses are interviewed, they prefer to talk about the fun and the thrilling moments they remember. Why bore the writer with accounts of the daily grind?
Also, because they don’t want to look like braggarts, when asked about the success of their business they will usually attribute it to luck – the luck of having great people as employees and the luck of good timing.
And there’s some truth to that. When you look back on an extremely successful career, it often does feel like luck. But when you are starting out and looking forward, you aren’t looking at a crystal ball. You are looking at 16-hour working days, six or seven days a week.
But all this is actually good news for anyone wishing to start a business. The facts tell us that luck and genius are not necessary prerequisites.
What you do need are:
* Enough common sense to come up with or recognize a sensible idea
* The humility to modify your idea if facts prove it wrong
* Cautiousness about spending your money so it doesn’t run out
* A relentless work ethic
* And enormous perseverance
* In this series of essays, I’m trying to make a book about wealth building that is based on the discoveries and observations I’ve made over the years: What wealth is, what it’s not, how it can be acquired, and how it is usually lost.