Plan B: Get Franchised

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If you’re dying to start a business, but don’t have much experience, a franchise might be the way to go. Franchises are great because they are turnkey.  They teach you everything you need to know to run the business, and help with everything from choosing a location to figuring out the right marketing mix.  The franchisor has already figured out a winning formula that works, and you get the benefit of this knowledge when you sign on.  Since you don’t have to reinvent the wheel, you will have fewer startup headaches, and can save a lot of time and capital.  On top of all this, the franchise headquarters wants nothing more than to see you succeed. They make money when you make money.  Plus, they have to show successes and failures to future franchisees, so their success rate is important.  Instead of being on your own, you have a highly experienced team that you can call on for help or advice.

Franchises aren’t for everyone.  Everything is already scripted, and you have to follow the franchisor’s directions down to a tee.  If you march to the beat of your own drummer, then a franchise probably isn’t for you.  But if you’re not sure where to start, or want guidance, a franchise could be a great option.

How to Know When “It’s Time”

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Aspiring entrepreneurs often ask how they can tell when it’s time to make the leap, quit their jobs, and really go for it.  There are two indicators you can look for to know that “it’s time.”  First, it’s time to get serious when you’re emotionally ready to make the leap.  In a way, the emotional aspect is kind of like being in love.  You know that you’ve struck upon the right idea…when you know.  When this happens, you’ll have a gut feeling that this is “the one” and there’s no choice but to move forward.

Second, it’s time to go for it when you’re financially prepared.  Starting a company takes time and capital, so you must have cash in the bank before you leave your job and eliminate your income.  The general rule of thumb is that you should have at least 12 months of expenses in the bank (this includes both personal and business expenses).  If you have a spouse and kids to support, your expenses will obviously be higher.  Many bright entrepreneurs with promising ideas have failed unnecessarily because they didn’t have enough money to get the company off of the ground.

The Part-Time Entrepreneur

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It’s always debatable whether you should start out as a full-time or part-time entrepreneur. Starting a company in your spare time significantly reduces your risk and opportunity cost. But it also reduces your chances for success.  If the deck wasn’t already stacked against you, succeeding on a part-time basis is a lot more difficult than doing so full-time. When it’s a part-time project, your business will be hard to prioritize consistently, your competition will run circles around you, you’ll miss opportunities, and – most importantly – your back won’t be against the wall. If you have the stability of a full-time job, it’s much harder to get out of your comfort zone and do what it takes to get the job done.

It only makes sense to work on an idea part-time when you want to study its feasibility.  When it becomes apparent that you have a winner on your hands, your best bet is to dive in head first.  There’s just no way around it – you will have to dedicate everything you’ve got to your startup.  This is especially true for investors.  If you want to be taken seriously, you have to be serious about your business.  And that means quitting your job and building this business full-time.

Dangers in the Moonlight

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A common way to get your startup going is to keep your full-time job, and be an entrepreneur on the side. This can be smart, or it can be incredibly stupid, depending on your current employer.  When you first start a job, you sign a lot of contracts.  If you read the fine print, you’ll see that the employer almost always retains intellectual property rights.  This means that your employer might have rights to your ideas – even those you think up in your spare time.  In a moonlighting entrepreneur’s worst nightmare, it’s not inconceivable for your previous employer to sue you, claiming that it owns the rights to your invention or company.  Annoyingly, they’ll usually come after you only after you’re successful and fought through the risk.  Obviously, this is a situation that you want to avoid.  Before you moonlight, ask a lawyer to read through your employment agreements.  Make sure that you will own your company free and clear when you decide to take the leap.  Even then, don’t use your employer’s resources to build your company.  It can come back to bite you.

You Are On Your Own

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One of the hardest things about starting a company is that you are on your own. Who can you turn to for help and advice with challenges?  You can’t talk to employees, who, upon hearing there is only a month’s worth of cash left in the bank, will immediately start sending out resumes. It’s hard to be totally upfront with investors, who you will probably ask for more money down the road.  As great as mentors can be, most issues would take too long to get them fully up to speed. Unfortunately, there’s no easy solution. Isolation and complete responsibility are the burdens in the life of the CEO and entrepreneur. The best you can do is to minimize your isolation as much as possible. Surround yourself with highly capable and intelligent people who can help shoulder the load. Keep a journal that you use to organize your thoughts over time. Keep in close contact with your advisory board, which can help with key strategic decisions.  Consider joining an organization like Vistage, which hosts roundtables with other CEOs that can act as a sounding board.  Usually small things like this can go a long way to help reduce the pressure and keep you on track.

Lifestyle or Scale?

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Broadly speaking, there are two kinds of businesses – lifestyle and scalable.  A lifestyle business is meant to help the founder live a certain kind of life.  These businesses won’t become big, and usually revolve around a passion or hobby of the founder.  Scalable businesses, on the other hand, are created with the intention of becoming as big as possible – often $100 million in sales or greater.  These are usually the high-flying tech companies that you read about in the paper.

Neither kind of business is inherently superior – entrepreneurs with small lifestyle businesses can be just as happy (if not happier) than large, scalable businesses.  To know which is right for you, you have to know what you want out of life.  What will be most fulfilling for you?  Do you want the recognition, stress, and long work hours that go along with building a big business?  Or would you rather spend your hours turning your hobby into your profession, making decent money along the way?

Then make sure that your business aligns with your desired outcomes.  If you want to build a scalable business, don’t start a company with lifestyle potential, and vice versa.

Your Three Hats

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It’s easy to get frustrated working for someone else. You probably do the work better than your employer, which begs the question – why not go out on your own?  As tempting as this may be, know what you’re getting into before you jump ship.  Regardless of the industry, there are three distinct hats that every business owner must wear: technician, manager, an entrepreneur.  The technician is the person who does the work of the business.  In an architecture firm, for example, the technician is the person who creates the blueprints.  The second two hats are usually overlooked by aspiring business owners.  The manager runs the business on a day-to-day basis. This is mostly mind-numbing busywork that everyone hates to do.  The third hat is the entrepreneur who innovates and drives sales.

You have to wear all three hats when you run your own business.  Ironically, there’s often so much work for the manager and entrepreneur that the technical work that you love to do gets pushed aside.  Before you take the plunge, realize what’s required to build the business.  When push comes to shove, you might be happier as a technician.

Young at Heart

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Think you’re too old to start a business? Think again – average age of an entrepreneur is 39 years old. The Kauffman Foundation study that documented this average age also found that entrepreneurial activity is consistent across all ages. Contrary to the 20-something entrepreneurs that the mass media glorifies, people of all ages, educations, and backgrounds start businesses. Look no further than Colonel Sanders who started Kentucky Fried Chicken at the age of 65 with an investment from the Social Security Administration – his first benefits check.

No, you don’t need to be young to start a business. You don’t need to be well-off, either.  Think about the legions of immigrants who came to America, didn’t speak English, and didn’t have a penny, yet became wildly successful. While your physical age and resources don’t matter, your emotional age and resourcefulness do. You have to be young at heart to start a company because it takes boundless energy and dedication.  If you can’t put in the effort, you’re better off starting a new hobby instead. As good as Colonel Sanders’ chicken was, he got rejected more than 1,000 times before he signed his first franchisee. Now that’s young at heart.

Startups are Boring

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Entrepreneurs are the new rock stars. The press loves to write about high-profile entrepreneurs and the latest acquisitions or IPOs.  Unfortunately, $100 million IPOs, private jets, and celebrity parties are not the life of the typical entrepreneur.  To the contrary, startups are boring.  98% of the work done in a startup is monotonous and painstaking.

Part of the reason for this misconception is that the ideation phase is the most exciting time of a startup’s life.  When you’re first starting out, the sky is the limit.  Reality doesn’t matter because you’re just dreaming. Do you have customers? Who knows, and who cares? “Don’t bother me with details.”  It’s after the the initial ideation phase that startups get boring.  This is when the struggle begins.  This is when it gets hard, and the real entrepreneurs come out.

Startups aren’t all sunshine and rainbows, so don’t get fooled by the media. Reporters are great at selling fantasies, but real entrepreneurs don’t live in fantasyland.  Be ready to do the grunge work before you turn your life upside down and try to become the next rock star entrepreneur.