Have you given any thought to leaving the "security" of a regular paycheck and going out on your own? If so, this blog post is for you. It is my not so humble opinion that working for yourself—owning your own business—is one of the greatest experiences a person can have. I equate it to the difference between living in your parents home and going out on your own and getting a place to live as a young adult. It is initially pretty frightening but the feeling of independence and growth is incredible and once you’ve done it successfully you cannot imagine going back to live with Mom and Dad.

I recognize that not everyone is cut out to start his or her own business or even work outside the structure of a corporate environment. The skills required to start and then successfully run a business are not always the same and require that you switch gears quite a bit.

I’ve collected a list of attributes that can help you determine if you are the kind of person that can start your own business. I’ve been networking with the owners of businesses of all shapes and sizes for many years and found quite a few common themes that I hope you will find valuable.

You are a good candidate to start a business because…

You are willing to take risks
This is the most obvious one – so obvious I hesitated including it on the list. Starting a business is a risky proposition. You need to be sure that you have set yourself up as much as possible to absorb the risk associated with starting a business, especially the financial issues. Only you can determine what level of risk is acceptable but a good rule of thumb is to have enough money or financial security squirreled away to last you through the time it would take to land a regular job. I’ve known people that didn’t feel comfortable until they had a year of living expenses and others that had virtually no savings, just a surplus of confidence. 

It may be possible for you to start your business while you are still employed by someone else – if so, that’s outstanding. Just make sure you are not going to violate any employment agreement you may have with your company. If you (like me) are a software engineer and currently gainfully employed, pay careful attention to your existing employment agreement if you have one. Many technology companies will lay claim to any invention made while an engineer is employed by them. If it’s at all possible without jeopardizing your job, let your boss know what you are doing. It is much easier to operate in the clear light of day.

You are an optimist (but a pragmatic one) 

If you are going into business by yourself it is critical that you are an optimist. Not someone that lives in a state of denial the entire time mind you—you have to be realistic—but someone that sees positive potential in most things. If you are constantly looking at why something will fail you are going to go out of business pretty quickly. It is the job of others to tell you why something can't be done and for you to prove them wrong.

This is not to say that you cannot have a pessimist as a partner. Very often having someone that balances out an optimist and throws a dose of reality on the situation creates a good balance.

You have a vision for your business and can share it with others
Having a good idea is one thing, being able to articulate it well and get others excited about it is another. If you are going to be the one that starts the business you have to be able to get others excited about it. Keep in mind that friends and family will usually love anything that you present to them. Get outside of your circle and comfort zone by asking people that would be potential customers or clients.

The list of people that you need to convince that you have a great business concept is quite long: potential employees, bankers, venture capitalists, partners, distributors, landlords, etc. All of these folks will want to hear from you why they should take a risk on your business.

I personally never felt comfortable doing large presentations to these types of groups. I’m great with one-on-ones and very small groups but my stress level rises dramatically when I’m doing a canned presentation in front of a group of people. I compensated for this by practicing my presentations over and over again until I could present the content on auto-pilot. Once that level was achieved I was able to riff during my presentations and ensure I was reading my audience and adjusting pace and humor to keep people engaged.

Because this is a personal weakness of mine I’ve had to work extra hard to overcome it.

You can accept criticism
As soon as you share your business idea outside of your familiar circle of friends and family you will be presented with criticism. Depending on the venue, that criticism may be blunt and even hurtful. You will have invested an incredible amount of time and energy into a concept and the last thing you want is for people to tear it down.

You must have the ability to not take criticism personally. It’s fine to be defensive if the critique is off the mark or fails to account for something obvious. Depending on the venue, people can have ulterior motives for their criticism that you will need to account for. Most criticism though is an opportunity to improve. If you find yourself defensive with all criticism you will likely alienate the very people that are trying to help you improve your business.

You can modify your lifestyle
When you are first starting out it is critical that you can adopt a frugal life style. While you were gainfully employed you may have eaten out often, taken nice vacations or bought a new car every couple of years. You need to be able to adjust that quickly to take up the slack and minimize your financial risk. That frugality will help you with the business as well – it’s all a mindset kind of deal.

A frugal life style will also lead to a closely monitored business.

You have a great relationship with your life partner
If you are living with someone or are married, it needs to be a strong relationship. Some people have successfully started and built up businesses while they were in a lousy relationship – the business became a sanctuary, something that kept them away from the person they didn’t really want to deal with anyway. Others have had a relatively fragile relationship fail when faced with the time commitment, stress and financial burden associated with a new business.

This one is very personal for me. I was blessed with a fantastic wife that supported me every step of the way. On the days I just felt like I couldn’t deal with it I had her to turn to. When I questioned why I was going through the painful process of starting my business I would look at the photos on my desk of my wife and three children. It was all the inspiration I needed to make it work.

If you are in a relationship you need to know if your partner is going to support you. It will not be all happiness and light mind you – my wife and I got into many heated debates on issues that were complicated by the stress of running the business. If however we had a defective relationship it likely would have failed.

You are a jack-of-all-trades
Have you ever been described or described yourself to others as a jack-of-all-trades? If so, that’s a good thing when starting a business. If you are starting the business by yourself then you are obviously the CEO, but until you get employees you will also have a couple more key titles:

• VP of Marketing: You need to develop and execute a plan to promote your product or service.
• VP of Sales: You have to develop a sales process and make it happen
• VP of Development / Production: Someone has to build your product or provide that service. That someone is you. Outsourcing it? You still have to manage it.
• VP of Support / Customer Service: You will need to deal with customer issues and resolve problems people have.
• VP of Finance / HR: Run your accounting software, pay the bills and manage any employees you may have.

Depending on the type of business you want, one person can pull off all of these roles and still lead a semi-normal life, though like anything else you need to be pretty good at them if you want it to be successful.

You get easily frustrated with bureaucracy
As companies grow larger they develop processes and systems to help them run more efficiently. Over time those processes evolve and change and can become less efficient. If you are working in a company and see all the places where processes can be improved or eliminated, you have a trait that is valuable in starting your own company. 

If you work for a company that is unwilling or unable to change an inefficient bureaucracy and it drives you nuts, you have some of the fuel required to power your business. Anger with the status quo is a powerful motivator.

You want financial independence
One day you look at your finances and realize that while you thought you were running hard in a race you are actually running on a treadmill. Between car payments, rent or a mortgage, living expenses, etc. you make a decent living but you are not advancing your lifestyle to your satisfaction. If you have children then it’s even more pronounced because you have their living expenses and education to worry about as well.

In my experience the best way to provide yourself with the opportunity for financial independence is to control your own destiny, and that means starting your own business. Not every business is destined to create great wealth for the person that starts it. Many people create life-style businesses that generate just enough revenue to pay the owners a good wage.

Whether you are creating a business with the intention of selling it to obtain wealth or you are creating a long term life-style business, either can provide you with financial independence.

You are patient and don’t give up easily
A critical characteristic for a person starting a business is persistence. You need to be able to face rejection and failure not as a personal thing but as a challenge to improve. A new business faces many obstacles that will tear you down and make you want to run screaming for the perceived safety of regular employment if you let them get to you. 

It’s also important to understand that some businesses take a very long time to succeed. We live in an age where things move so quickly—especially in the technology world—that a business that isn’t generating massive revenue or traffic in a short time is perceived as a failure. The reality is, many of the overnight successes that people see took years of build up and behind the scenes work before they got there.

You like to work really hard
The final attribute I’ll cover is your work ethic. If you want to build a successful business you have to have the capacity to work very, very hard. You will often hear people say that it’s not about working harder; it’s about working smarter. That mindset is great for employees that have well defined jobs but fails when it comes to a person starting a business. You have to work smarter AND harder because there is so much to do.

If you are a clock-punching kind of person then clearly you should not be starting a business, regardless of how insanely great your idea is. 

Making the decision to start a business is not one you should take lightly, however if you make a go of it I congratulate you. Regardless of the result of the business, the experience you will acquire will enrich you in ways few jobs can.

If you took the time to sit down and sift through the US Census Bureau data, you’d see that over the past few years, entrepreneurs are starting new businesses at an unprecedented rate.  Consistently, the number of existing businesses at the end of the year has increased by between 500,000 and 1million.

That means that before subtracting out the number of startups that fail, the gross number of new businesses started is actually much higher than 1 million per year.  And that’s in the U.S. alone.

Why are entrepreneurs starting new businesses in record numbers?  The first chapter of my new book, Conquer the Chaos, makes the case we’re in an “Entrepreneurial Revolution” and it’s happening due to five big reasons.

Corporate disillusionment.  Downsizing, outsourcing overseas, pension scandals and general corporate irresponsibility have left employees disillusioned and embittered.  The antiquated notion of going to college, getting a job and becoming a “lifer” was the ideal of the baby boomer generation.

Today’s worker holds no such ideal.  The old notion of getting a stable job with a big company has eroded, leaving many workers to feel the security of a corporate job is not so secure after all.

A technology power shift.  The Internet has changed everything.  You no longer need a bricks-and-mortar shop on which to hang out your shingle.  With your product or service, a quick website, some online advertising and an email marketing program to keep your followers apprised of your activity, you’ve got the makings of a start-up business.

All the research you need is at your fingertips.  And you can compete effectively with long-established businesses.  The Internet has simply torn down the barriers to entry and now entrepreneurs are able to jump into the game without amassing a small fortune before they get started.

The promise of overnight success. As aspiring entrepreneurs look around, they see friends, acquaintances, high school rivals and even past (less-savvy?) co-workers making it on their own.  Of course, they don’t typically see the blood, sweat and tears that went into the successful venture because that’s not human nature.

Instead, human nature sees what looks like an overnight success story—and that is a seductive siren call to the disillusioned corporate worker who’s constantly thinking, “If Bob can do it….”

An expanding work force.  Speaking of those baby boomers, many of them are entering the ranks of entrepreneurship.  The Kauffmann Foundation has done a bunch of research on entrepreneurs and, interestingly, their research shows a large contingent of first-time business owners are between middle age and the golden years.

It makes sense: Baby boomers now have a longer life expectancy, they frequently have a nest egg they’ve accumulated over the years, they’ve finished their “career” and they want to try their hand at an entrepreneurial venture they’ve always dreamed about.

The recession.  This is a biggie that’s been driving a lot of entrepreneurial activity over the last couple years.  Unfortunately, we don’t yet have the Census Bureau data on this period of time, but I’m willing to bet it will show an increase in the number of businesses started.

My daily experiences tell me this is true.  My company works with entrepreneurs and we see droves of people who’ve been forced into entrepreneurship.  They lose their job, get a severance package, take a little time to think about what’s next… and then commonly start a consulting practice or some sort of solopreneurship.  And frankly, I believe this is a great thing for our economy—to have more entrepreneurs out there creating value, filling in voids in the marketplace, conjuring up new products and services that just might become the next big thing when the market turns around.

Sure, this new breed of entrepreneurs will take their lumps and it won’t be as easy as they thought, but many will find their freedom. And that freedom is the one thing every entrepreneur seeks: freedom in terms of more money, more time, more control over their lives and more purpose in their work.  I love seeing entrepreneurs take the plunge in pursuit of their freedom.  And I believe it’s exactly what this country needs to break out of a sluggish economy.

Photo by hufse via Flickr

Entrepreneurial hope is essential. It gets us over the hump and through the dip. There's a variety of this hope, though, that's far more damaging than helpful.

This is the hope of the magic lottery ticket.

A fledgling entrepreneur ambushes a venture capitalist who just appeared on a panel. "Excuse me," she says, then launches into a two, then six and eventually twenty minute pitch that will never (sorry, never) lead to the VC saying, "Great, here's a check for $2 million on your terms."

Or the fledgling author, the one who has been turned down by ten agents and then copies his manuscript and fedexes it to twenty large publishing houses--what is he hoping for, exactly? Perhaps he's hoping to win the magic lottery, to be the one piece of slush chosen out of a million (literally a million!) that goes on to be published and revered.

You deserve better than the dashed hopes of a magic lottery.

There's a hard work alternative to the magic lottery, one in which you can incrementally lay the groundwork and integrate into the system you say you want to work with. And yet instead of doing that work, our instinct is to demonize the person that wants to take away our ticket, to confuse the math of the situation (there are very few glass slippers available) with someone trying to slam the door in your faith/face.

You can either work yourself to point where you don't need the transom, or you can play a different game altogether, but throwing your stuff over the transom isn't worthy of the work you've done so far.

Starbucks didn't become Starbucks by getting discovered by Oprah Winfrey or being blessed by Warren Buffet when they only had a few stores. No, they plugged along. They raised bits of money here and there, flirted with disaster, added one store and then another, tweaked and measured and improved and repeated. Day by day, they dripped their way to success. No magic lottery.

What chance is there that Mark Cuban or Carlos Slim is going to agree to be your mentor, to open all doors and give you a shortcut to the top? Better, I think, to avoid wasting a moment of your time hoping for a fairy godmother. You're in a hurry and this is a dead end.

When someone encourages you to avoid the magic lottery, they're not criticizing your idea nor are they trying to shatter your faith or take away your hope. Instead, they're pointing out that shortcuts are rarely dependable (or particularly short) and that instead, perhaps, you should follow the longer, more deliberate, less magical path if you truly want to succeed.

If your business or your music or your art or your project is truly worth your energy and your passion, then don't sell it short by putting its future into a lottery ticket.

Here's another way to think about it: delight the audience you already have, amaze the customers you can already reach, dazzle the small investors who already trust you enough to listen to you. Take the permission you have and work your way up. Leaps look good in the movies, but in fact, success is mostly about finding a path and walking it one step at a time.

Big-time entrepreneurs almost always look like big-time risk takers. Yet nothing could be further from the truth. While plenty go to great lengths to make their ventures succeed, spending their savings or going into debt to pursue their dream, they also tend to up their odds by systematically lowering their risks. “The experienced entrepreneurs learn that gambling is not the way to build a business,” says Saras Sarasvathy, a professor of entrepreneurship at the University of Virginia’s Darden School. In fact, when it comes to attacking problems — especially high-stakes decisions — the best entrepreneurs are downright conservative.

Take Leonard Shoen, the founder of U-Haul. Shoen had $5,000 to work with when, in 1945, he decided to launch a business renting trailers both in-town and one-way across the country. That was a fair amount for the time, but Shoen spent nearly all of it just buying and fixing up trailers he needed to get started around his home in Washington State. The problem was that for his plan to work, Shoen needed hundreds of trailers stationed across the country — a notion that looked foolish with that much money and no proven market.

But Shoen got creative as he went about figuring out ways to expand. To solve the problem of distributing the trucks across the country, he let the first wave of renters take the trailers for practically nothing on the agreement that they would establish franchise rental locations wherever they were going. He bought more trailers, but he sold them to employees, family members, friends, and investors who would then lease them back to Shoen’s company. That way the owners, not Shoen, were responsible for upkeep. Then, to set up the rental locations, Shoen leased unused parking spaces at gas stations and he then enlisted the station owners to manage the rental paperwork, making them partners in the business.

It was strategically brilliant. Shoen had put himself in the best possible spot by spreading the risk across so many people in so many locations. Had the whole thing flopped, Shoen would have been out his time and roughly the $5,000 he started with — money that Shoen decided up front he was willing to risk.

As a case study, U-Haul baffles business school students. Sarasvathy says that when she asks her students to write a business plan for U-Haul, despite knowing that the business is successful today, most of them conclude it’s just not feasible. The business requires the entrepreneur to sink too much money into assets that quickly lose their value, and there’s little that would prevent a wealthier competitor from swooping in and building the business better and faster. Even worse, at the time there was little proof that there was much of market. (Shoen determined there was a need after he tried to rent a trailer to move his belongings from Los Angeles to Portland, Ore. No one would rent him one — not exactly the kind of market research outside investors like to see).

The lessons Shoen’s story offers, Sarasvathy says, are valuable for anyone eager to make their venture work. Like many successful entrepreneurs, Shoen began by coming up with an amount of money he was willing to lose — something Sarasvathy calls the “affordable-loss principle.” It’s a simple but powerful concept, and certainly not the mark of a shoot-for-the-moon risk taker type. “By settling the question of what you’re willing to lose, you play the game more conservatively than it at first seems,” says Sarasvathy. “And you end up investing less than if you were blindly focused on the upside.”

Doing this is psychologically helpful as well, she says. When you identify the worst-case scenario — in Shoen’s case, losing $5,000 — you gain a certain amount of control in an otherwise uncertain situation. You can, after all, control how much you are willing to lose. It’s a key reason that most entrepreneurs — especially in this economy — argue that working for themselves is far less risky than working for a big company. To a large extent, they’re controlling their own destiny, and that makes life a lot less uncertain.

(U-Haul trailer photo courtesy of Flickr/Bravo Six Niner Delta, CC 2.0.)

Holiday’s are a funny thing, I mean when you really think about it we celebrate some weird things!

• On February 2^nd we wait and stare at a Groundhog for “Groundhog Day”
• April 1^st we play “pranks” on people for “April Fools Day”
• April 21^st we celebrate our administrative assistants for “Secretary’s Day”
• June 14^th we celebrate…uhh flags? for “Flag Day”
• October 31^st we dress up as weird things and celebrate “Halloween”

But what really made me scratch my head was a few weeks ago on Cinco de Mayo.  People here in Boston really took to the “holiday”.  It was a Wednesday Night and every bar had a line out the door, chips and salsa were sold out, and every Mexican restaurant was completely full.  Now let’s keep in mind Cinco de Mayo is Mexican holiday celebrating the Mexican army’s unlikely victory over the French forces.

Why if we celebrate all of these holidays is there not one day to recognize the innovators who built our country? Entrepreneurs.

Think about what our country would be like without Benjamin Franklin, Henry Ford, Howard Hughes, Richard Branson, Michael Dell, Bill Gates, Walt Disney, or Oprah Winfrey?  And the list goes on and on.  America is the most entrepreneurial country in the world, yet there isn’t a National Entrepreneurs’ Day.  One day to really recognize entrepreneurs and all the hard work they do.

This really upset our founders here at Grasshopper Group.  So they did what their hearts said, what any other entrepreneur would do…they took action.  Our founders started reaching out to other influential entrepreneurs and rallying up supporters.  We don’t want an “official holiday”, but rather to get the president (@barackobama) to recognize a day and put it on the calendar (the first day of Spring in 2011).  They decided the goal was to gain a million signatures….and so the journey began.

On May 11^th, the first all Twitter petition to the first president on Twitter (@barackobama) began – entrepreneursday.org .

Please sign it with your Twitter handle and help support the cause.  It’s unbelievable to see the community already rallying around the cause: “Should Entrepreneurs Have Their Own National Holiday? Why Not?” – RWW & “Twitter Users Campaign for a National Entrepreneurs’ Day” – INC.com

As you know, here at Grasshopper we are firm believers that anything is possible and we truly believe that entrepreneurs deserve to be acknowledged, one day to be appreciated and recognized.

Help support the cause: entrepreneursday.org

Building a Startup Culture

As the school year draws to a close, college graduates will making a move to the next stage of their lives. Will college have encouraged or discouraged them from making that next stage involve entrepreneurship?

Venture capitalist Roger Ehrenberg penned an impassioned call-to-arms on Monday, challenging the venture capital and startup industries to do a better job recruiting young entrepreneurs from college. He urges the "seeding of a startup culture."

Inspired in part by James Kwak's post "Why Do Harvard Kids Head to Wall Street?" Ehrenberg calls for better efforts to "lure the best and brightest into game-changing areas such as start-ups and social enterprises."

Ehrenberg says that it may be that too much emphasis is placed on the risks and the fears associated with startups - "bad marketing, plain and simple" - something that makes jobs on Wall Street or with established corporations seem safer. Instead Ehrenberg wants young entrepreneurs to be steeped in a "startup lore" and encourages experienced investors and founders/CEOs to tell what he contends are "better stories" about the challenges and opportunities that come with starting your own company.

Ehrenberg points to a number of VCs who have become instructors at universities in order to "use their positions as vehicles for identifying top students, building relationships that ultimately result in ideas getting funded or students placed in promising start-ups." However, he questions whether it's worth waiting for more hiring or for an institutional change at the university level to encourage entrepreneurship, and urges instead a "grassroots effort on the part of local venture investors and successful start-up executives to get into the classrooms and onto campus to re-orient talented students away from the money culture and towards the building culture."

Although some universities are working to develop entrepreneurial programs, it may be that the "culture" of business school isn't the right place on campus for the cultural transformation that Enhrenberg wants. (Entrepreneurs do major in things other than business.)

Ehrenberg's essays calls for a better "startup culture" and focuses primarily on storytelling from experienced VCs and entrepreneurs in order to foster it. How else might we go about fostering such a culture?

You can read Ehrenberg's full blog post here.