I’ve learned more about business in four years as an entrepreneur than in the 15 years I spent working with some of the world’s largest tech companies. If you want to continuously learn and grow, entrepreneurship may be for you. But it’s not for everyone. To ensure you’re ready to start -- and lead -- your own business, ask yourself these eight questions.
1. Am I prepared to start climbing?
When you’re starting out, you have to learn about everything, from legal issues and accounting to operations and product management. It’s more enjoyable than climbing the corporate ladder, but only if you care about more than accumulating money. So make sure you’re fully committed, which could mean several years with little or no pay, depending on your business model.
Many companies today are built to be acquired. I’ve been through many mergers and acquisitions, and that’s not enough motivation to get up in the morning -- especially when things get tough. It’s difficult to get to the top. Are you ready to start climbing? If your answer isn’t a resounding yes, you’ve already lost.
2. Do I have the right foundation?
Companies with longevity have stayed relevant because they are purpose-driven and focused. They exist to benefit others and make the world a better place. Build yours to solve problems for your customers, and you’ll be sustainable in the long term.
Your foundation should be based on the full picture of what your clients have to face. When we built MeasuredRisk, we interviewed many executives who would be our ideal clients. We uncovered their problems, what they cared about and what the market was missing. Listen carefully and find out what success means to your clients -- then make it possible.
3. Have I done my homework?
No matter how good you think your idea is, make sure there is a demand for it. Calculate your total addressable market to forecast market demand and potential revenue by multiplying the number of customers with each company in the market by the average annual revenue from each customer. You can find this information in industry reports prepared by companies like Goldman Sachs and Reuters.
Then, identify potential partners and analyze the competition to determine where your product fits in the market and your ideal launch timing.
4. Do I need investor capital?
The further you get without outside capital, the better your valuation will be when you do raise funds. If you have predictable revenue and are comfortable with slow growth, you don’t need investor capital. If you’re building complex technology that requires significant research and development, it’s worth considering.
For market research, use Crunchbase to get an idea of who’s investing in your competitors and the types of investments they’re making.
To attract investors, build a business model with repeatable annual recurring revenue, land a handful of clients and make them happy. Investors want to partner with founders they can trust; so be honest about the upside, downside and risks. You should be able to clearly explain your product development cycle, consumption model, scalability, financials and operations. Demonstrate the potential for an exit in three to five years at a profit that is at least 10 to 20 times the current value. Then, you can be selective when investors come knocking.
5. Have I chosen my business partners wisely?
I suggest starting with at least one co-founder whose skills complement yours. For example, if you’re a skilled technical developer, find someone who is a savvy business person -- or vice versa.
Then ensure your commitments are equally balanced. Your partner should prove their long-term value before you offer equity, which you should only grant to committed people. Then, put four-year vesting in place to keep them motivated.
6. Can I create a culture everyone would want to work for?
To use your capital efficiently, find freelancers on sites like Fiverr or Upwork instead of hiring full-time team members from the start. Then, as soon as you’re ready, surround yourself with the best team possible. Don’t hire yourself in terms of skill or personality. Bring together a diverse group of people with different perspectives.
At MeasuredRisk, there’s no drama, no hierarchy, and no egos — only doers. I don’t tell anyone what to do; we all support and empower each other. Our wins are the result of collective effort and commitment to solving our clients’ problems. When your team is self-motivated and inspired by your purpose, you can create a culture where everyone learns from each other and enjoys coming to work.
7. Am I ready to take risks?
Starting a business requires taking risks, and only you know whether you’re ready to make that leap. To help you decide, map out your financial picture and weigh the potential outcomes.
You can take measured risks by pursuing ideas that might yield unexpected benefits. Then, cover your downside by diversifying your offerings, creating more activity and spending your capital wisely to keep your burn rate low. To do that, overestimate your dependency costs, such as operations, data, infrastructure and marketing.
Don’t ignore your vulnerabilities. For example, if you’re developing software code, make sure it’s secure by “compartmentalizing” or limiting access to information on a need-to-know basis. Protect your intellectual property by working with a solid IP attorney who can create the appropriate legal documents.
8. Am I prepared to fail?
Be prepared to make tough decisions and, yes, to fail. Once you let go of fear, the world opens up to you. When we started MeasuredRisk, we just decided to go for it. Now, whenever the pressure is on, I’m confident that things will work out.
Remember that others have done this before you and others will do it after you. You’ll encounter people who want you to be successful and others who don’t, so don’t be discouraged by naysayers, “experts” or your own doubts. Above all, have fun and be grateful -- because you have the best job in the world.