4 Tests to Tell If You're Ready to Be an Entrepreneur
There are plenty of reasons for not starting a company. Odds are good that starting a company will not make you rich or famous. Only 1 in 10,000 funded startups become worth more than $1 billion, venture capitalist Mike Maples Jr. told me in a recent interview.
I am not sure how scientific that number is, but let's assume that it's close enough to indicate that starting a company is not a sure road to riches. Another reason for not starting a company is not enjoying the experience of working for a boss. Sure, there are plenty of entrepreneurs who like to determine how they spend their time and who realize that they can hold their destiny in their own hands. But the simple reality is that entrepreneurs launching their own companies take on a new -- and often a more complex set of bosses.
One of my business-school classmates has told me that he reports to his employees. Starting a company will not free you from having a boss. Bear in mind that you'll also report to your customers, investors and suppliers, too. If those two reasons for starting a company are out the window, why do it then?
Here are four reasons:
1. You've found a problem and are willing to work on its solution 80 to 100 hours a week for years.
If you passionately believe that you have found such an important problem, you may have a great reason to start a company. Just realize that following your passion to solve that problem may require neglecting your family and health. It might even mean burning through all your cash. But given the long odds against success, your being willing to work under those conditions almost justifies starting a new company.
2. Many customers see this problem as a huge pain and no other firm is offering a solution.
I recently heard about an entrepreneur who believed passionately in his venture. He burned through millions of dollars of his own cash over 15 years while developing a solution to his problem. Nonetheless, last month he shut down the business -- even though his solution was excellent.
The problem was that his solution concerned a problem that some customers thought was not a huge pain. In other words, consumers were willing to get by with less elegant solutions that they already had. This is a costly lesson. Make sure you don't make the same mistake.
3. Your vision is so compelling that you're able to build a top-notch team.
Even the smartest people in the world can't build a significant company without the help of others. If your vision for a company is compelling enough to get you to work flat out for years to realize it, you'll only succeed if you can convince talented people to join you in that quest.
Your vision must be more than just average -- since you won't be able to pay people as much as, say, Google. Your vision will have to offer them enough emotional currency so they will trade off the big salary to work for you.
4. You believe so strongly in your vision that you'd be willing to hire your replacement and walk away to realize it.
It's often true that founders lack the skills needed to turn a great product idea into a big business. Few people like Amazon's Jeff Bezos start with a business plan and end up the leader of an $82 billion company. If you're so passionate about realizing a vision that you'd even be willing to walk away from your startup if you couldn't do what was needed to grow it from, say, $10 million to $100 million in revenue, then you pass a final test of readiness.
And should you be willing to walk away from being king and hand over the throne to a leader better suited to the company's next growth stage, then you might end up being rich after all.