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(when) should you start your own business?



Figures don’t lie: within the first year, 25% of all new companies have already quit. Five years after having started, only half of all the new companies survive. In many Western countries, these figures are more or less the same.

On the other hand, many many people are dreaming of a life as an entrepreneur. The main motivations are: freedom, making your own choices and potential wealth. It's a topic we are frequently dealing with at our firm.

You need to ask yourself the following questions: What is the best moment to start as an entrepreneur? Should I start my own company or buy myself into a company? And if so, what is the best moment to do it? Starting your career as an entrepreneur too soon might have disastrous consequences, for instance because you don’t have enough experience. Or because your financial buffer is too small. Moreover, you need to forget about your passion for a while in order to evaluate your chances of success in a rational way. What are your realistic chances of survival?

On the other hand, if you wait too long before starting, you might meanwhile have been developing an expensive life style, perhaps with a mortgage, that's not easy to temporarily give up. Furthermore, you also need to take into account the compelling impact of inertia. Given the daily rhythm, the chances that someone still takes the step at a later moment in their career, are decreasing year after year. When, at the end of your career, you regret that you have never dared to take the step, it is too late.

Noam Wasserman has been doing some extensive scientific research about founders of start-ups. His conclusions? There isn’t really an ideal age for people to start their own company. The average work experience someone has, is around 14 years. His scientific research hasn’t confirmed the popular belief that founders of start-ups like to take huge risks. However, he found some evidence for the fact that early childhood experiences have an impact.

Potential founders need to evaluate three types of circumstances before starting their adventure:
  1. Career circumstances: deep work experience, personal health, presence of golden handcuffs
  2. Personal circumstances: financial buffer, moral support at home, insight into the own motivation, endurance
  3. Market circumstances: market opportunity, probability of paying customers and the clock which is ticking
People who wait, can use the experience they have gained in order to tackle the challenges they will be confronted with when starting their own company. This way, they are developing capital in three fields:
  1. Human capital: the competences, knowledge and experience required in order to perform the start-up in an effective way
  2. Social capital: the professional and social network required in order to use the right connections
  3. Financial capital: the buffer required in order to bridge the time needed before reaching a positive cash flow. In other words: the moment when the turnover will be higher than the costs. Many potential starters already quit at this point, simply because they don’t have enough financial reserves in order to survive the time required for the start-up
Would you like to become a founder? We recommend that you first read ‘The founder’s dilemmas’ by Noam Wasserman.

If you are interested in our program for start-up coaching, let us know by sending us an e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.. In recent years, we have already been supporting many future founders.

As always, we'd love to get your insights and experience. Did you take the leap? Did you choose for a corporate career after careful consideration or due to inertia? Please use the fields hereunder.

Paul

By Paul Donkers

"my purpose is to help improve strategy execution, to create high performing teams and coach for effective business leaders"

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