Is It Risky to Be an Entrepreneur or to Start Your Own Business?
Over the past couple decades I’ve talked to lots of people who have considered or are currently considering breaking out on their own and starting a business. For lots of those people, I’d highly recommend that route. In fact, if you’re even considering it, maybe you have the propensity to be successful.
One of the most common objections I hear from those who are considering starting their own businesses is this: It’s too risky. They often prefer the steady paycheck to the stress of the usual ups and downs of absorbing the profits as well as the losses associated with the operation of a business. There are dozens of entrepreneur propensity tests you can take to get an idea of whether you have what it takes.
Hopefully my own story will also help you make the decision to jump in if you feel like it’s right for you.
There’s a good chance you have the propensity to be successful with your own business.
How will you find out?
Learn from the success stories of others.
Then write your own.
Burt Brothers Tire Stores: A Success Story
I recently visited a local Goodyear tire store to have my new motorhome checked out before heading out on a trip with my family to explore several areas in the south, where we want to re-locate our family. The past 20 years of starting, managing, and selling businesses have been good to me and my family. We’ve been blessed to say the least. Because our businesses are internet based and because we’ve saved a lot of the money we’ve made over the years, we can live pretty much wherever in the country (or outside the country…we lived in Costa Rica a couple years ago) we want to.
My experience visiting this particular automotive business brought back a lot of memories. The garage looked quite a bit different (new signage and updated design) than it did when I had previously visited the location two years before for a similar reason: to get an RV oil change, a task that I found can be a tall order for most automotive shops.
However, what triggered some deeper reflection for me was this. I quickly found out that this store was yet another one that had been purchased by the Burt Brothers, Ron and Wendell Burt, a family well-known in the Salt Lake City area for their dozen or so tire stores. From personal experience, I had learned that these guys know how to maximize the productivity of their stores, from the garage and its car lifts, tools, etc. to the parking lot to the inventory of Goodyear and other brands of tires. They are experts at putting together the components of an automotive business to serve customer needs and turn lots of profit in the process.
Almost 20 years ago, at our request the Burt brothers (with whom we had some amicable connection from the previous several decades) had done their best to help my own family with our attempt at starting a tire store similar to theirs in an area that was then outside of their competitive market. Ultimately my family’s whole tire store endeavor ended up failing. Evidently it was too risky for us.
Here’s how that story went down.
It seemed like we had our grabbed our future by the horns.
But then we let go because of fear.
Robbins Automotive: A Failure Story
After months of hearing stories from my father and older brother about their respective plights as auto mechanics – which essentially boiled down to being subordinates to people who in their opinions didn’t know what they were doing, not making as much money as they should have been, and being subjected to work environments that were highly negative – my younger brother and I decided to do something about it. We would start a family business called Robbins Automotive. It would provide a great living for our families and would become the Robbins family business for generations. Although we knew there were long hours and lots of work ahead, we had high hopes of profits and good times working together as a family.
Thinking that everyone in the family was fully on board and committed to Robbins Automotive, I spent hundreds of hours (together with my younger brother who helped with a lot of it) developing a business plan, researching various sites to locate our business, interviewing people in the areas we were considering about their automotive needs, and doing lots of other stuff to get this business off the ground. I even finished the basement of the home I’d recently purchased so that I could use the sweat equity to help finance the business. I also went through the licensing procedure for real estate agents so that I could understand the terms of our pending property purchase contract and other real estate issues related to the new business.
It seemed like we had our grabbed our future by the horns and were ready to create a profit machine and an economic pillar of the local community.
Starting a Tire Store Business is Too Risky?
Our family business evaporated in one quick meeting with a lender.
During our meeting to discuss a business loan, the banker wanted to know details about collateral for the $1.3 million loan we needed to get things rolling. He asked about how much cash we had available, how much collective equity was in our homes, retirement accounts and tucked away elsewhere. These were the standard questions for someone vetting a potential borrower. Obviously, banks and other lenders are in the business of minimizing their risks, and they don’t typically give loans based on goodwill alone.
After that meeting, the consensus from the two most capable of understanding the tire and repair part of the business was this: This business ownership stuff is just too risky! We’re out.
Having invested lots of time and money into the endeavor, I tried to salvage the deal.
“We’re not doing this to fail, so why would we think contingency plans and collateral would even come into play? It’s just a tire store. This kind of operation has been done a million times before. It’s very predictable!”
“Goodyear even did a feasibility study for our specific location and said we’re in a good spot! They’re giving us a $60k credit for startup inventory. We even have the blessings and assistance of the Burt Brothers, who have walked this road many times already.”
Umm…not for us!
My mom escalated the discussion and decided we needed to run our situation past the wisdom of Dave Ramsey, the know-it-all business and finance guru and radio entertainer, who would settle the question for us once and for all. His response to her question, “Should my husband and sons get a loan and start a new family automotive business?”, given live on air (which apparently increases its validity – wink), and with almost no pertinent information about what we were doing, was this, “Is Goodyear going to pay for your groceries when the business goes bankrupt?”
Thanks a lot, Dave!
That sealed the deal. We might as well have asked for advice from the spook alley for potential business owners.
No more Robbins Automotive.
Some types of businesses are more sure things than others. If it requires a lot of financing, maybe it’s exceeds your tolerance for financial risk.
Some business models (like blogging and content marketing – Prosperopedia’s model) don’t involve any more risk than your time.
Risk Goes Both Ways
Once Dave Ramsey’s opinion had effectively put the nail into our business’ coffin, it was time for me to regroup and figure out what to do next. I had mentally moved from the world of working for others into being set on doing my own thing.
My reasoning was this: it is simply too risky to give up control of your life to a boss, a company, or to a steady paycheck. For me, the risk of not living each day with intense purpose doesn’t make sense. I can’t lose out on the opportunity for personal development that’s involved in being creative and solving new problems consistently. It is too much of a risk for me not to experience full and unbuffered accountability for the good decisions and bad decisions I make in my career, too risky to not be directly accountable to myself and my family for how much productivity I can squeeze into a day, taking breaks to play baseball with my sons, to listen to my daughter play her violin.
The empowerment of being able to say, “I’m going to work my tail off and do this or that so that I can make twice what I made last year” are too great to pass up in favor of working a job where you’re viewed on the books as a wages expense, and your compensation minimized as much as possible for the profitability of the company. It is too much of a risk for me to have to ask my boss for time off to attend a funeral for a friend or acquaintance. I want my friends to know that when they need help, I can almost always drop what I’m doing and be there. It’s too great a risk for me to hand over that kind of freedom to someone else, someone who ends up making way too many decisions about what I do with my time and how many hours in any given day I need to spend working to financially support myself and my family.
The 20 years that followed the failure of my first attempt at starting a business have been very good to me. Shortly after we canceled Robbins Automotive, I jumped into online marketing and have built several successful internet businesses together with my wife and kids. We’ve done very well. We travel a lot. A few years ago, we moved to Costa Rica to learn Spanish.
We work like mad dogs. We also have lots of extra time for play, and for serving and helping. I’m grateful to be a beneficiary of an economic system that has provided me so many opportunities. As I’ve met other business owners and read about their successes, I realize that I could have made a similar fortune or even more in thousands of different ways. For me ecommerce retail businesses ended up being an industry that removed much of the risk, and that fit my needs well.
As an effort to give back, I’ve published lots of content that attempts to show others how to follow a path similar to mine, which minimizes risk while maintaining the ability to make it big, including a drop-shipping ecommerce business Udemy course, and articles about making a living blogging, selling products on Amazon, and other internet marketing focused businesses.
Reflections on Taking Risk and Business Ownership versus Being an Employee
As I waited at Burt Brothers for an oil change on my motorhome, I thought back on how those in my family had fared over the years since we collectively decided to disband. I even called my dad and chatted with him about some what-ifs.
Shortly after our short tire business experience, my dad found himself no longer able to work as a mechanic. If an aging body wasn’t enough, he was injured at work within a few years of our business not taking off. A car lift at work failed, dropping a car down onto his head as he worked on it. That incident finished him off in that industry. He’d warned his boss about the faulty car lift many times, but the decision had been made not to fix it, or at least to put it off. The risk to his employees (my dad included) wasn’t enough for the owner of this garage to spend the money or direct his attention to making the work environment safe.
My previous point about what actually constitutes risk couldn’t be made more clearly than through that example.
The phone call with my dad made me think about the difference in perspective on what risk is between my dad and older brother, who were the ultimate “nays” that shut the doors before they open, and who opted for being employees rather than employers.
Now my dad, at the age of 70, gets up at 4:30am and rides the train to go to work doing building maintenance, certainly a worthy occupation, but certainly not comparable to having the opportunity to spend the day with grandkids or hobbies. It’s hard not to think that he would like the choice to do one versus the other had we together taken the “risk” we should have 20 years prior.
My brother has made a good living working for another business for decades as one of their top-producing mechanics. However, he has missed lots of soccer games, scout campouts, and many other family activities in favor of working. His boss, his company have far more influence over his life than he would like.
My brother’s health took a bad turn when he developed rheumatoid arthritis several years ago. Knowing he had the genetic propensity, I still suspect the full onset of the disease was triggered in large part by the chemicals he’s exposed to every day, 10+ hours per day, 6 days almost every week. I worry about how long he can continue in his line of work. Will power can only prevail for so long when rheumatoid arthritis meets 10 hours a day of bending, lifting, crawling under, and standing. Some of the motivation for me to grow my businesses is the thought that someday he may need help re-tooling and transitioning into a new career.
I don’t think there’s any story worth dying for, but I do think there are stories worth taking risks for.
– Anthony Shadid
Which Risk Are You Taking?
I’m not encouraging you to just up and quit your job, especially if you’re currently living paycheck to paycheck, or if you have a situation that requires you to stay employed for health insurance or other benefits. When my wife and I ultimately struck out on our own, we made sure that we had enough savings for backup in case our plans didn’t materialize. When I “permanently” (I use quotes here because I’ve actually worked a few “jobs” since then, but each of them were strictly for experience, to develop new skills, and even to add structure to my day.) separated myself from the employee track and committed to the self-employed route, my wife and I actually had two internet businesses in the works, a scrapbooking store and a sporting goods store, both of which were growing steadily and predictably. We really weren’t big “risk takers.” In fact, in terms of our entrepreneurial risk taking, I’d say that we’ve been too conservative, and that we could have stood to take more business risks than we did. Had we done so, it’s likely that our businesses would have grown larger more quickly.
There are so many ways to do moonlighting, to work on something on the side that has potential to grow into your foundation for independence, that for anyone oriented towards being a creator, there is no reason for you not create a plan to take a risk.
You already are.