Recently, I'd had several friends pose this question. Included in this group were people concerned about their future - both employed and unemployed. They've asked:
- How important is the underlying economy to start up success? Answer: Somewhat important
- Can a new business really succeed in today's economy? Answer: Yes
The core consideration is your personal tolerance for risk. Risk is a great academic concept and a pivotal investment concept. On a personal basis, accepting the consequences of risk can be hellish.
First and foremost, you have to be able to define how much risk (think total dollar outlays for how long) just to get a new business to positive cash flow. Every business has a start up cost -- even a lemonade stand.
This chart represents the concept. Typically, a more complex business requires much more start up investment than a straightforward personal service business.
If you are thinking that starting a business is a way to create a salary for yourself -- you probably going to be disappointed.
Creating a business is about customers. It is not about you and your needs.
Peter Drucker famously said, "The purpose of a business is to create a customer."
In the next post, we'll dig into what it means to "create a customer".
Al:
Interesting post -- I hadn't thought of it that way. When I've talked to friends who are thinking about starting a business, it is all about creating a salary for themselves versus thinking about creating customers. I think they'd have a totally different perspective about their business by looking at it that way. I'm looking forward to the next post!
Chris
Posted by: Chris Elser | August 28, 2009 at 05:40 PM