Before I decided to leave college to start my first business, I went to my Uncle Todd for advice. He wasn’t an entrepreneur, but he played tight end for the Oakland Raiders and was the most successful person I knew.
He asked me how much money I thought I’d earn in my first year. I gave him an estimate. He then asked what I’d do if my business failed, and how long it would it would take me to know that it was a losing proposition. I told him I figured that I’d know within a year or two at most, and that I’d just go back to school if it happened. Then he said, ”Why in the heck wouldn’t you do it, then? You’re in your early 20s. This is the only period in your life that you have time to lose.”
Turns out he was right. If you’re a young entrepreneur on the verge of stepping into the great unknown, are five quick tips to help guide your path:
1. Think it through.
I left school to start my first company repairing and manufacturing electric signs, but it wasn’t a spur-of-the-moment decision. I knew the industry because I was already working in it, and I was encouraged to strike out on my own by my boss, a man I looked up to.
If you believe you’ve got a good idea and are raring to go, I’m happy for you. Realize, though, that there will never be a shortage of good ideas. Seek out the advice of smart people who you know will be straight with you. You need honesty at this point, not flattery.
Finally, put this good idea of yours on low heat, and let it simmer for a while. Take some time to think and plan. If it tastes just as good when you return to it as when you first cooked it up, you might be onto something. If it doesn’t, well, that’s what disposals are for.
2. Get all the education you can.
If you’re in school, devour as many business courses as possible. You know that second-year accounting class that your business management degree doesn’t require you to take? Take it it anyway. Same thing goes for that extra class in finance. And for the one in supply chain management, even if you don’t plan on becoming a manufacturer.
As a fledgling entrepreneur, you see, you’ll wear a lot of hats. In the beginning, you’ll wear all of them. I take it as a given that you’re passionate about the product or service you aim to provide, but a mountain of passion won’t amount to a hill of beans in the absence of a solid understanding of how businesses actually operate.
Learn how to calculate overhead. Master the basic functions of accounting. The day you open for business, you’re going to play a bunch of roles you’ve never played before. You’ll be customer service, human resources; you’ll be the chief financial officer and the marketing department; you’ll be the person who keeps your website running smoothly and the entirety of the sales team.
Prepare yourself accordingly. For those of you who aren’t in school, I’d suggest reading every good business book you can get your hands on.
Related: Mastering Business Basics at Any Age
3. Build your business credit.
When I started my company, I was a ghost to the credit bureaus. Thanks to some well-meant but faulty advice, I’d never used a credit card in my life. This made it impossible for lenders to assess me for risk, which in turn made it impossible to get financing.
It created some hellish months. I’d sell a $10,000 job, collect 50 percent down, outlay 85 to 90 percent to get the job done, and receive full payment 60 to 90 days later. I was perpetually short on funds, because I outlaid more than I brought in on the project. If I’d had strong business credit I could have floated some of that balance with vendor credit accounts, but I had to pay cash.
Start building your business credit immediately. Know your credit scores, and keep your eye on them. Don’t wait for a rainy day -- trust me, you’ll get soaked.
4. Be realistic.
Envision your first year in business, and tightly define what success will look like for you. If your idea of success is bigger than what’s practically possible, you’ll become miserable very quickly and waste tons of energy on superfluous anxiety.
The cold, hard stats are indisputable. Most small businesses aren’t profitable their first year. It would be tragic if you gave up a mere six months into the game because of unrealistic expectations. Keep in mind that it’s possible to be wildly successful for the vertical you’re in, yet interpret your progress as failure because of naive notions of where you should be.
5. Enjoy the ride.
When you’re just starting out, it’s easy to live in the future. You’ve got so much of it ahead of you, and it’s filled with so many possibilities, it can be tempting to spend your days building castles in the air. You tell yourself, “I’ll settle down and start enjoying the moment as soon as I acheive X, Y and Z.”
I’m all for long-term planning. But learning to relish the spot you’re in is every bit as valuable, both for your emotional health and the health of your business. You’ll look back on the pains and travails of your first forays into entrepreneurship as cherished lessons worth their weight in gold.
My uncle’s advice was solid. To all you spring chickens out there, I’ll say the same thing he did. Seize the day. Take a risk. Do it now, while you’re young and energetic. This is the time to work your tail off, make mistakes, dream impossible dreams, and -- against all odds -- succeed.