Are You Ready to Be an Entrepreneur?

“Who wants to be an entrepreneur?” I asked my graduate students in a course on Decision Making. To my surprise, three-quarters of them raised their hands. It seems that the American futurist John Naisbitt was right when he said that “we are shifting from a managerial society to an entrepreneurial society.” Being customer-focused in all that I do, I added a section on entrepreneurial decision-making to the course. After all, becoming an entrepreneur and then making a go of it requires making big decisions wisely and avoiding the common traps that Noam Wasserman outlined in his book The Founder’s Dilemmas. In this column and the next, I’d like to share ten pieces of advice for entrepreneurs to help you discover if you’re ready for entrepreneurship.

Do you have an entrepreneurial mindset?

The first, and biggest, decision is whether to become an entrepreneur, or to stay with your current job. Ask yourself: Do you like creativity and change? Do you value freedom and independence? Can you tolerate uncertainty, stress and surprises? Are you willing to risk failure? Can you handle not getting a regular paycheck? Are you comfortable taking on many different roles? Are you comfortable making big decisions? Are you ready to work 24 hours a day? (The plus side, of course, is that you get to decide which 24 hours you work each day.)

If you can honestly and enthusiastically answer yes to all or most of those questions, then your entrepreneurial mindset, combined with a bit of luck, may enable you to make a success of your venture. Otherwise, you’re likely better off staying with your safe job and career.

Is your business idea really worth pursuing?

Having an entrepreneurial mindset is essential, but you also need a really strong business idea. Check the viability of your business idea by asking: Is your value proposition unique, meaningful and novel? Does it make the world a better place and improve people’s lives? Is your idea in a domain or field you’re comfortable with? Would it be difficult for others to copy?

A strong business idea might be a novel solution to a social problem, a new technological solution, or a new service. Try to avoid “Me too” ideas that are easy to copy, such as opening yet another coffee shop, restaurant or online store.

When should you start?

Even with the right mindset and a great business idea, you may still not be ready to take the plunge, as you may lack some of the necessary personal, social or financial capital that you need to succeed:

Personal capital encompasses your passion for your industry and business niche, your expertise, and your relevant work experience, which should be both broad and deep.
Social capital is your network of friends, family, and acquaintances who are potential co-founders, employees, advisors, role models, customers, suppliers, financiers, advocates and cheerleaders.
Financial capital includes both the funds necessary to get started, as well as enough of a cushion to keep the business going until it becomes profitable, which may take 6 months or more.

What if you lack sufficient capital in one of these three areas? Then you might wait a couple of years, and use the time to learn more about the field, widen your networks, or save money. Even if you have sufficient personal, social and financial capital, you must also ask:

Do your personal circumstances make this a good time to start a business? Is your family supportive?
Are the market circumstances favorable? Is the economy expected to grow? Do you already have customers who want what you’ll offer? Is this opportunity time-limited?

Should you go it alone or with partners?

Do you need partners? Ask yourself: Do you have enough human, social and financial capital? Are you comfortable working and deciding alone? If yes, then you can work alone. Otherwise, you’re going to need one or more partners.

How to structure a partnership?

If you decide you need co-founders, you have more questions to ask, and more decisions to make. Who will your co-founders be — only people you know well, or others who might be a better fit? What capital, of all three types, do they contribute? Who does what? Who gets what salary, and what equity? Be sure to check that you have enough financial capital on hand to pay for what everyone needs to get out of the new venture; otherwise you may run out of funds if revenues don’t come in as planned.

I hope these five tips have helped you decide if you should become an entrepreneur. In the next column, I will give you the remaining five tips to increase the odds of your venture being a success.

Are you ready to be an entrepreneur? (Part 1)