Wisdom From The Comments: A Cautious Argument Against Starting A Business

Every once in awhile, I’m blown away by a comment someone leaves to one of my posts, and it’s a shame that most people probably don’t get the chance to read it.  Well, I’m putting a stop to that today.  Whenever I come across a truly awesome comment that I think everyone should read, I’m going to post it and address it in an actual blog post.

This particular comment was left in response to my post about why I decided not to quit my job yet.  The comment was anonymous (no website URL included, and the name was input as “Not So Fast”), but that doesn’t take away from the depth and insight contained within it.

Essentially, it’s a an argument against why most people should NOT quit their “9 to 5″ jobs to pursue their own businesses.  While I may not agree with all of it (more like, I don’t necessarily think it all applies to my situation), I definitely think it’s a comment everyone should read.

This was the comment:

A regular paycheck is invariably underrated by those who have never done without, especially the ones who leave work at 4pm, but expect to get paid until 5pm (how are you NOT cheating your employer, exactly?).

If you look at the people who recommend the “just jump in” approach, you will discover, INVARIABLY, that they had another source of income or support that they just “happen” to fail to mention. Frequently, it’s a spouse working a full-time job with health insurance. For Bill Gates, it was a million dollar trust fund, some time at Harvard to make connections with friends with important parents, and two extremely well-connected parents of his own (IBM, anyone?). Plus, he rode the wave of the 80s.

The other alternative, usually, is a single male (frequently living at home) with no children.

Real people need two incomes to feed their kids and the mortgage, or otherwise live close to their means. Their employer pays some or all of their health insurance, sometimes life insurance, their retirement fund, and half their employment taxes; pays for their office, sometimes their vehicle, and makes sure that the copiers and the computers work when and as they are supposed to. The entire US economy is set up for people who work for others, and it severely punishes those who don’t.

People who are anxious to “start a business” don’t think about how many HOURS get spent every week on the business for the one hour that is billed out at $150 (of which the taxman takes 40% or so). Or how many months it takes to win just one big account. Or how much more difficult it has gotten in the last ten years to even infiltrate most large businesses for a sales call; as they have become extremely insular in response to “security concerns.” New businesses don’t throw off money. They CONSUME it.

Most have no idea what it means to have a marketing machine in place, and many have never cleaned their own toilet (which will probably happen if you run your own business). They don’t know what it means not to worry about your credit score, because common thieves have better scores than you do (credit scores are for people with regular income, so they can pay every bill regularly). People who say “just jump in” never had to worry about their kids starving or their credit rating, because either they had none, or the spouse worked.

I’ve owned a business. It ran for more than ten years and was (by many definitions) a success. And all good the things they tell you about running a business are true. But the bad things that get glossed over are even more true.

For most people, like it or not, working for the man is the highest and best use of their resources. Sure, maybe (and I mean MAYBE) they get less money per hour of time worked, and they DO have less flexibility. But the trade-off for a regular paycheck and decent benefits; while not having to look for business, collect for said business, and pay taxes on said business is not nearly so terrible as the few would have you believe.

So. Definitely option two. Unless, of course, you have a million dollar trust fund and friends of mommy to whom you can market a buggy piece of software.

My suggestion (and it’s only a suggestion) is to have enough income coming in every month to replace your actual living expenses, including saving for retirement, paying taxes, and taking vacations. Plus, enough left over to fund your business for at least a year (rent, utilities, marketing machine, etc) without touching the income, if any, from the business. If you can’t replace your actual living expenses with passive income, how you gonna have time to build a business while you’re scrambling around figuring out to make the student loan payments and the rent? Also, reduce living expenses to the bare minimum (get used to it now). You don’t need a $1500/mo mortgage, and you can’t afford a new car (real entrepreneurs drive beaters).

You are fortunate. You are single, and you work for a large accounting firm, and you probably make at least double (and maybe triple) what the average family of four in America lives on. You should be able to save close to $30,000 a year, even with large student loans (which you MUST pay off if you want to keep your credit score).

If you are interested in staying in accounting, you can travel the world and work where-ever you are, so starting a business that provides a valuable service people want requires only a laptop and a willingness to serve a somewhat less than Fortune 2000 clientele (and a good marketing machine, of course).

I think a reasonable timeline is three years. And start learning some basic marketing (not the on-line kind, IRL). Maybe you’ll get your company some new business in the process, and they’ll give you a raise so you can leave sooner.

I really agree with the overall message of this comment, which basically says “approach your decision to quit your job cautiously, and consider all factors.”  It’s very easy to get swept up in the excitement of quitting your job to “follow your passion,” but it’s also reckless if you haven’t fully considered how your expenses will be covered, how long it will take to make a sufficient income, etc.

I will quickly dispel a few assumptions the commenter made, however:

1) I don’t believe I make double or triple what an average family of four lives on.  The average household in the U.S. (according to the US Census Bureau 2004 Economic Survey) earned $60,528.  That data is a bit outdated, but it serves the point.  With that in mind, I earn (as an individual) almost exactly the same as an average household.

2) I do not save close to $30,000 a year.  After taxes, insurance, expenses, vacations, etc., I’m probably putting away much less than that.  This is definitely something I would need to analyze though before quitting my job.

3) I agree that learning marketing is crucial to any business, but I’m not in a position at my current firm to bring in new business (and even if I did, it likely wouldn’t affect my raise based on how they do things at my level).

Thanks again for the great comment, anonymous commenter.  If you disagree with him/her or have something to add, please do so in the comments!

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18 Responses to “Wisdom From The Comments: A Cautious Argument Against Starting A Business”

  1. Wow. Is it possible the anonymous commenter got burnt?

    I can see how too many people might jump too soon, if they read your post, it’s safe to assume they won’t!

    Eric, you are in the best position to make your move, don’t be discouraged. And follow the advice in terms of savings for a year of expenses, figuring out taxes, health insurance.

    This part of the game is not fun, but it can put a serious dent in your experiment.

    [Reply]

    Eric G. Reply:

    It does sound like the commenter had a bad experience at some point. It’s good for people to be cautious, but I agree with you, sometimes you still need to make a move even if conditions aren’t ideal. I think some people might shoot themselves in the foot waiting for the “perfect time” that never actually comes. Sometimes you need to determine if now is the best opportunity you’ll have (and I really think that within the next year or two is my “ideal” time). It’s a risk, and it needs to be one you’re willing to take.

    One good point the commenter makes is that some people just aren’t cut out for running their own business or otherwise being responsible for generating their own income. However, I think the readers of this blog or any blog in this niche are not “the majority” in that they are probably more driven to make it on their own. I definitely agree that most people, in general, are better suited as employees. There’s absolutely nothing wrong with that either.

    [Reply]

  2. Eric,

    Great comment and post! The commenter did say a few things well. People need to know their own situation well before “taking the leap”. Noone can tell you to just go ahead and do it.

    [Reply]

    Eric G. Reply:

    Absolutely, Moon. You know your own situation best, so it’s important that you are the ultimate decision maker (not someone else who thinks they know what’s best for you). Thanks for the comment!

    [Reply]

  3. Eric,

    Sense of urgency and need to survive can also be a strong motivator. Just jumping in and trying to swim to keep afloat is another perspective. I find I’m a more cautious personality, but I do reckon I have it easier as I’m single and got no family to sustain.

    I just finished a 6-month internship at an investment bank and have enough money to live for another year, while trying to make enough on my online niche websites.

    Hope to read more from you soon!

    Cheers
    Patrick

    [Reply]

    Eric G. Reply:

    Hey Patrick, I definitely agree that being FORCED to survive can go a long way to actually pushing you toward your goals. And yes, it definitely does help if your only obligation is to support yourself (and no one else). That’s the situation I’m in, which is why I’m not as afraid about “just jumping in,” though I still prefer to take a somewhat cautious approach.

    Internship in I-banking, yeah? That’s a pretty lucrative field…. ;) Thanks for the comment!

    [Reply]

  4. Great exchange of ideas you have there. I believe though that you don’t wait for the righ time, you create it.

    [Reply]

    Eric G. Reply:

    I think that’s definitely true – there’s a lot to be said for creating your own opportunities vs. waiting for them to fall into your lap. Thanks for the comment!

    [Reply]

  5. Thanks for the great post Eric!

    I personally love hearing both sides of the entrepreneurial debate. Even though I will never be convinced that being an employee for life is the lifestyle I want to lead, the advice offered by the anonymous reader is extremely valuable.

    I think there is a very fine line between being smart and being overly-cautious. It is all too easy to over-analyze your financial situation and find excuses to never take the next step. Setting goals, and sticking to the help keep you on track for financial freedom.

    That being said, I really like the points regarding employment. For some people, the “headache” of taxes, finances, and all of the other responsibilities that accompany owning a business are not worth giving up a 9-5 job with benefits that you can leave at the door.

    I’m going to keep striving for financial freedom, and hope to own my own business within 5 years. Here’s to our collective escape from the rate race!

    Thanks again,

    Keith

    [Reply]

    Eric G. Reply:

    Thanks Keith! Awesome comment. I pretty much feel exactly the same way you do. While it’s good to be cautious and plan everything out that you can, it will NEVER be the perfect time to take the next step. Like you said, there are always excuses to not do something. What do you think about the phrase “ambitiously cautious?” I think that would be a good approach – be motivated and ambitious, but also try to keep your emotions in check so that you won’t trip over the hurdles as you come to them.

    Best of luck to you, and your quest to get your business off the ground within 5 years!

    [Reply]

  6. My first reaction to this commenter is somewhat of an angry one. I completely disagree with the play it safe and wait mentality. I know of a guy entering his 50′s that has never worked a day for anyone else his entire life. He hit it big on the internet only after failing 15 some odd times with other businesses over the last 30 years with NO HELP from anyone. My point is, like others have said, that the time will NEVER be right to “jump on in” and you will always find reasons to NOT doing something. I am trying right now to start my first company, things are hard right now (planning and formation stages), but I know it will get better over time. It’s the hard work and perseverance that make people successful, not correct timing and safety nets. That’s just my opinion though. Keep up the good posts Eric!

    [Reply]

    Eric G. Reply:

    Great points, Bryan. I absolutely agree that if you’re cut out for making it on your own, you don’t need “perfect timing.” Another thing that you sort of alluded to is that failure isn’t necessarily bad. Failure is more often than not a tremendous learning experience and, if you play it right, it’ll help propel you even higher next time you to try to succeed. The example you gave with the guy failing 15 times just goes to show you that failure isn’t the end of it all.

    That’s awesome that you’re starting your first company. Best of luck to you!

    [Reply]

  7. While the person posting the comment brings up some good points, unless you’re an engineering major, a lawyer, or run a funeral home, there is no such thing as permanent job security, IMO. Business was considered can’t miss before Enron, Lehman Brothers, and all the banks went down, and now those middle management jobs get 400+ applicants. Many people might have someone helping them when they start off, but to say it’s impossible without help is bull. Ideally, yeah, you have help and money saved. I was homeless and had nothing. It wasn’t pretty, it wasn’t fun, it was miserable, but starting from using public computers to working on the biggest POS computers you’ve ever seen and earning enough money to make it to a town with friends whose floor I could crash on, I didn’t have support, structure, and all that. I went from homeless to owning my own business (granted it’s freelance writing, so aside from a laptop there’s not much to actually own) and middle class in two and a half years. I would never recommend getting started the way I did – but I had no choice. Find a way to make it or starve and freeze when winter came around. Definitely plan for the worst and have some safety nets, but when it’s time to jump, it’s time to go 100%! You have to make your own right time because no one will hand it to you on a silver platter. At least that’s my two cents.

    [Reply]

    Eric G. Reply:

    Great comment, Master Dayton. I love your story – it just goes to show you that even if you have NOTHING to back you up, you can still make it if you’re driven to do it. Thanks for sharing!

    [Reply]

  8. I would have to agree with quite a bit that the commenter said…

    You cannot quit a job when your biz is new and expect to make a million dollars the first month!

    Everyone says they don’t want a Get-rich-quick opportunity, but they get upset if they are nor rich-real-quick :-)

    You have to make it happen, and it takes time- I think 2-4 years is about average, esp on the Internet.

    I always let my clients know that it is a process.

    [Reply]

    Eric G. Reply:

    Thanks for commenting, Carolee! I agree that you won’t get rich right away, but it’s certainly possible to find ways to at least support your living expenses while growing your business. At least I hope it turns out that way!

    [Reply]

  9. I think that one of the points this commenter had was spot on for me. How are you going to build a business if your basic bills are not cared for via a passive income? I’m building my passive income now (several small sites and the accompanying blogs with affiliate and AdSense type things) and will likely launch a completely different set of businesses for the income end of things. The goal right now is to replace my current income plus 50% and then launch further businesses to be active with and generate investment income. My approach is multi-pronged and multi-stream income.
    Anyway thank you for the post on the comment and yes it resonates with me and I’m about to become an avid reader!

    [Reply]

    Eric G. Reply:

    Hey Sue, I like your plan. If you can replace 150% of your current income with passive income, I would say you are WELL on your way to being able to support yourself while you create active businesses. Thanks for the comment!

    [Reply]

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