

Starting a business isn't as crazy and risky as they say - lrm242
http://blog.asmartbear.com/blog/starting-a-business-isnt-as-crazy-and-risky-as-they-say.html

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pj
It is also about the way the business is started. For example, if you get VC
and fail, then that's it folks. You've got nothing.

If you do not get VC, then how can it fail unless you give up? Go back to
work, get a job, and keep a side business. Admittedly that can be difficult. I
have been denied a position at a top 5 auto manufacturer due to my
"entrepreneurial spirit." That was odd to say the least, but probably the
correct assumption and the hirer knows better than I do. I digress...

Point being, if you start up a lean company, with no debt, no commitments to
leases, no big expenditures then really the only cost is rent and food and
maybe a car and some other stuff like that and you can expense those out of
your revenue if you do it right, but shoot... it's like free will. There are
no rules, except what the government tells you to do and those suck, but
they'll remind you if you are late on your taxes and if you aren't making
money, then it doesn't matter. Unless you are inc'ed in california, then it's
$800/yr, but that is really insurance to protect your personal assets if you
get sued... it's all about perspective.

The hardest part of a startup is figuring out all the laws and regulations and
getting over the hit by the bus syndrome if you want "real" customers. But the
solution there is to create something that doesn't need support. Build a quick
hit and if people don't care if you are around after they buy it, it's less of
a concern.

It may not be as risky as they say, but it definitely isn't a sure thing and
it isn't easier to make more money at a startup than at a corporation. The
potential is greater, but the average amount made by startups is probably
lower than the amount of salary earned by those who kept the corporate life. A
lot of the people I used to work with have multiple homes in different cities
and nice cars and are rolling in the dough making six figures. They think I am
not taking my life seriously because I don't have a bed and sleep on a blanket
and don't watch tv or do anything but write code, but heh...

But that's the thing... I'd rather make $50k at a startup I built with my own
hands than $100,000/yr working in a gray cube "slinging code" for some
corporation... not everyone feels the same way though and if you don't,
probably better to stick with the "real world"...

~~~
vaksel
the good thing about doing a startup, is that the growth is usually
exponential. If you make X in one year, chances are you'll make at least X+1
the next.

Working at a job, you are usually stuck with that 3-5% raise, that barely
covers rise in the inflation. And maybe you get lucky and switch jobs to snag
an extra 10% raise. Eventually you get tapped out in the $100-150K range.

Meanwhile if you have your own business, the sky is the limit. Your growth
rate will no doubt be higher than 3-5%. Chances are, that the first couple of
years you'll end up doubling your yearly income. The key thing is to stick it
out, keep your costs low so that you can survive long enough to reach the snow
ball effect.

~~~
pj
Stick it out, yes... that's the most important part. That's the hardest part.
I think most people who have a startup want to quit at some point. It has to
hurt. You have to move through the hurt, because everytime you keep going when
you want to give up, someone else out there with the same idea who got to the
same point where you want to give up... well, they actually gave up. They gave
up which means more customers for you...

I was at a library once and this was a very popular library. There was a whole
crowd of people waiting outside before the library opened all wanting to rush
inside and find a desk where they could sit and read the books. The security
guard had to yell at the people twice DON'T RUN! It was insane.

So what I found was, the people who went the farthest into the library were
most likely to find a spot. Some people went in say, half way and instead of
simply going farther in, they stopped and turned around and went back and
hunted through the desks they'd already passed hoping to find a desk everyone
else had passed up.

But on the next floor or closer to the corner, there were still open spots!
Those readers simply didn't go far enough. They gave up too soon and so
someone who went farther got an open spot those who gave up could have gotten.

It was a metaphor for startups... "Keep walking!" that's my motto. If a
customer says no, keep walking, find another customer. If you find a bug, keep
walking and fix it. Just keep walking. Don't stop. Don't turn around. You'll
stumble, but pick yourself up.

Damn, it's hard sometimes... it's really hard sometimes. You'll want to cry
(you'll notice those go from tears of sadness to tears of joy as you walk),
you'll want to smash your computer. You'll get depressed. You'll get hungry
and have no food. You'll sleep on the floor. Everyone will think you are
crazy. You are crazy. Crazy is good.

Just keep walking.

~~~
hwijaya
This is certainly true. I always said to myself that running a startup is like
running a marathon. If you can just move one step at a time BUT KEEP MOVING,
soon, you'll arrive.

That's what i did when i finished my marathon last year. Just one step at a
time, no matter, how much i hate it (especially started from 30km+). The
metaphor of cry from sadness to joy and everything else is so spot on pj!

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russell
The failure rate depends on the business. I remember reading that the failure
rate for restaurants is something like 75%, for some meaning of failure. The
failure for hobbies turned into retail stores is probably similar. A home
based business, particularly information based is a whole different animal.
The supplemental income can be quite nice without the drag of retail space and
employees. Just think of how many employees a restaurant takes.

Losing money in the Schedule C sense is not so bad. You can be making a nice
supplemental income but losing money as far as the tax man is concerned when
you deduct home office, telecommunications, autos, and office equipment.

And you don't care when a web site "fails", because you probably have one or
five on the back burner.

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bradgessler
I like looking at the "risk" of buying a new car vs. starting a business. When
one buys a new car, they may spend $35,000 and as soon as they drive it off
the lot, the value rapidly drops. When you talk to the average salaryman, they
never say "buying a car is risky" when in fact, its one of the dumbest
financial risks that one can take.

When starting a business, that same $35,000 investment actually has a chance
of increasing in value, even if 95% of businesses fail.

Most people who say business is "risky" are just not comfortable with
ambiguity. Buying a car is very well-known. Building a product that has never
been built before means that you're venturing into the unknown, a very scary
proposition for most people.

~~~
mseebach
You don't invest in a car, like you invest in a business. You buy it for it's
utility value, like you buy a gallon of milk.

~~~
bradgessler
If you buy a car for its utility value, you can get a perfectly usable car for
$10,000-$15,000. Say you spend that $15,000 on the car, you still have $20,000
left over that you could invest in a business.

~~~
mseebach
But what if investing in a business isn't a priority, but a flashy new car is?

Utility value isn't a one-off constant, it depends on the user.

~~~
bradgessler
You completely missed the point; this thread is about people who say "starting
a business is risky". If you measure risk in terms of ROI in dollars:
purchasing a deprecating asset vs. starting a business is a no-brainer, yet
most "average joes" that tell you "starting a business is risky" won't think
twice about blowing lots of money on a brand new car.

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pg
Starting a service business need not be risky, but starting a startup seems to
be quite risky. From what I've seen so far, the standard urban statistic about
the 10% success rate is not hard to believe.

~~~
colins_pride
My issue with the 10% rate is that the population of startups is not
homogenous. Put differently, many startups are essentially doomed to failure
at the time of the founding, and others have much better chances.

At least, that's the main thing I got from this:

<http://www.paulgraham.com/die.html>

If one takes serious measures to belong to that second group of startups which
are not (necesarily) doomed to failure, then the really relevant question is:
what is the success rate in this group? 25%? A third? A coin flip?

Of course there's also a non-trivial chance of belonging to the first group,
but not acknowledging or being aware of it.

So with all of that in mind, it would be really interesting to see an update
to the conclusions from <http://www.paulgraham.com/notnot.html>

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raintrees
The author does not seem to mention the value of cash flow. Structured
correctly, the business can be only ramen-profitable, but the cash flow can
enable many other gains (equipment, transport, facilities, etc.).

My wife and I have financed a very nice life for the last 20 years on the back
of a service company that makes a product every once in awhile (when I want
the extra challenges).

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jsonscripter
_they_

