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Lifestyle Entrepreneurs

Young Entrepreneurs Shun the Nine-to-Five

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Being your own boss has its benefits. Fresh graduates who start their own businesses seek greater freedom and more money than most classmates who pursue corporate jobs.

Before the Internet bubble popped, starting a business after graduation was on the mind of perhaps one of every 100 students who entered Tom Halasj's career-counseling office. "Recently, it's about one in a thousand." says Mr. Halasj, associate director of counseling at Duke University in Durham, N.C. "So we've had quite a fall-off."

Mr. Halasj theorizes that graduating seniors don't consider entrepreneurship as promising as they did when it seemed that any dot-com business idea was a ticket to millions. "Now we've seen that you have to have more than an idea. You have to have a business plan and some capital," says Mr. Halasj. He encourages most students he sees with post-graduate start-up ideas to take a job instead.

Not everyone takes that advice. Lured by the promise of independence, the pull of an idea and the moxie of youth, some college graduates start businesses after receiving their diplomas. Some, even before. Will Pearson and Mangesh Hattikudur graduated from Duke in 2001, when the bloom was already off the Internet rose, and started a trivia magazine called Mental Floss. They took part-time positions to earn the cash to publish their pilot issues.

'Who Wants to Be a Millionaire?'

When the pilots received an enthusiastic reception, they permanently jettisoned backup plans for corporate jobs or graduate school. "We knew we were going to give this a shot," says Mr. Pearson, who acts as president and publisher of Birmingham, Ala.-based Mental Floss LLC. "It was an idea that deserved to be out there, and we wanted to find out if we were the ones to do it."

This year revenues for the magazine, a Web site, a book and affiliated ventures such as a board game are projected to reach "the low seven figures" and turn a modest profit. "It has been a blast from day one, and it was worth every bit of blood, sweat and tears to get where we are now," Mr. Pearson says.

The co-founders conceived the idea for the magazine in their junior year while watching "Who Wants to Be a Millionaire?" on their dorm-room television. Other entrepreneurs start businesses only after flirting with the workaday world.

Michael Anderson worked as a commodities broker for a couple of months after earning a business degree from Cornell University in May 2003. "It wasn't what I was looking for," Mr. Anderson says. "It wasn't as intellectually stimulating as I had originally thought." Mr. Anderson began casing about for another option and settled on smoothies, purchasing a franchise from Greenwood Village, Colo.-based Maui Wowi Inc.

Mr. Anderson opened the business selling fruit-based drinks in his hometown, Burbank, Calif., in February. He enjoys the flexibility that allowed him to squire an out-of-town friend around Hollywood one recent weekday. "So far, so good, more on the lifestyle side than the financial side," he says. "Eventually, I do expect and plan to be wealthy, but I'm still only 22 years old."

For some young business owners, now is the time to get rich--at least relative to other recent grads. Garrett Jones, a broadcast-journalism graduate of California State University at Fresno, says he is "absolutely" doing better than most of his former classmates. "I have a lot of friends who were waiting tables when they started college, and they're waiting tables now that they've ended college," he says. "I was actually able to get married. And last year, when I was 21, I had a brand-new house built."

Mr. Jones credits his prosperity to Bulldog Beverage Company LLC, a Fresno root-beer maker he co-founded in his sophomore year. The beverage was a popular offering at a local restaurant that Mr. Jones studied for a business class at the university. When the restaurant failed, he partnered with the former owner and began marketing the root beer to retailers. "It's going fantastic," Mr. Jones says, reeling off a list of regional and national retailers carrying the brew.

Mr. Jones's move into entrepreneurship was influenced in part by the $25,000-a-year jobs he saw other recent graduates taking in Fresno. He was making more than that from his business before he graduated, he says. Selling root beer was also more appealing than the one employment offer he got in his degree specialty before graduation: a job at a one-man radio station in a Midwestern hamlet. "Every day is exciting," he says about entrepreneurship. "You feel like you're living on adrenaline all the time."

A Proven System

Exemplary role models exist for young entrepreneurs. Microsoft Corp. co-founder Bill Gates and Dell Computer Corp. Chairman Michael Dell both started their companies before graduation and never received degrees. Few college-age entrepreneurs have similar prospects, however, says Timothy Stearns, professor of entrepreneurship at Cal State-Fresno. Messrs. Gates and Dell brought far more technical and operational talent to their ventures than most young entrepreneurs can muster. "A lot of them understand marketing and they can go out and sell," Mr. Stearns says. "But the operational side is where they are lacking."

For that reason, Mr. Stearns sometimes recommends franchising to recent graduates who are determined to go into business for themselves. A good franchise system provides instruction and assistance in the operational area where many new graduates are weak, he says. One significant issue remains, however. "The problem is telling Mom and Dad, 'I just got my degree and I'm going to work for Taco Bell,' " Mr. Stearns says.

Franchising, of course, involves paying franchise fees plus, usually, ongoing royalties. Average fees fall in a range from $20,000 to $35,000, according to the International Franchise Association. Many require franchisees to have much higher net worth than the typical college student. Maui Wowi's standard franchise, for instance, calls for a $29,500 fee and $250,000 individual net worth. Its most economical franchise requires a total investment of more than $60,000. Mr. Anderson says though he had savings from stock-market investments made while in college, he didn't meet the standard net-worth requirement.

"I sat down with the president of Maui Wowi franchising and had a heart to heart, and when it was done, I'd sold him on my ability to do this. We hit off on the entrepreneurial spirit and he felt I could do it," he says.

For other franchisees, graduating from college means going back to Mom and Dad for assistance. After he took a degree in economics from the University of Texas at Austin in May 2001, Avinash Bhakta and three friends split the $25,000 fee for a franchise from BatteriesPlus LLC, a Green Bay, Wis., retailer of batteries and related products. To cover the rest of the six-figure investment required to open the San Antonio store, they tapped parents, friends and family and a bank loan arranged by a friend of Mr. Bhakta's father.

Mr. Bhakta's entrepreneurial streak was activated partly by a desire to work in or near the Austin area while his wife finished law school and partly by a wish for a more flexible schedule than a job was likely to provide. He also hoped that starting his own business eventually would yield greater financial rewards than employment.

He's still waiting for the big paydays, but Mr. Bhakta reports the challenge of handling the multitude of jobs required of a small-business owner is stretching his abilities almost daily. So far, then, the parents' outlay may be considered just one more investment in education. "That's the biggest benefit," Mr. Bhakta says. "I think I learned a lot more doing this business than I learned in college."

From StartupJournal.com
Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved

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