At the beginning of the startup stage, I’m in favor of dreaming big. But I think we as solopreneurs are being fed too many empty-calorie “just follow your dream and everything will be awesome!” entrees.
So to counter all of our high-fat dreaming, this post is a heaping helping of reality.
How Much Money Are You Risking?
From a financial perspective, what’s at stake when you launch a solo business? It’s a critical question, and the more we know about our risk and reward, the better our startup planning and decision-making will be.
Let’s look at some numbers.
● Assume you left a decent-paying job (let’s say $60k per year) in order to start your business.
● Assume your new business doesn’t generate a salary for you in the first two years.
● Assume that, over a two-year period, you invest a good chunk of your savings ($25,000) to finance your business.
● Assume you pull the plug on your business after two extremely difficult years.
Add it up. You lost $145,000. (And this assumes you are able to get a good job immediately after closing your business!)
Now look at the other side of the equation.
● Assume you are able to tweak your business at the very beginning of the process — prior to branding, naming, the business plan, or anything else.
● Assume you are able to make adjustments that turn a loser business into a winner — one that nets you $45,000 in Year 1 and 75,000 in Year 2.
In the scenario above, the decision to stop and smell the reality, to find and correct the flaws in your business idea, resulted in $265,000.
Where I come from, $265k is a lot of money and My Dream better be pretty darn good if I’m going to risk that much scratch. How about you?