Going on your own
It is true that a certain level of comfort and predictability can be found in full-time employment. But how do you build your net worth or savings?
Problem with Savings
If you put away 10% or so of your savings for 20-years making the average $40k/year as an american we are talking only $80,000 in savings. You are used to living on half that every year. If you are lucky and achieve 10% yearly returns maybe you'll have 4-years savings.
That is why so many people flee to real estate; but we all know the risk involved with this industry (Side note: I still think real estate has good potential and with 1.5 million family households being created a year with only 800,000/year being produced we will be seeing a shortage in 2013 and prices will go up.) But we are talking about building a true cushion over time.
Money Problems & Risk
I'm sure the following questions have been going through your head:
1) Will I pay for the start-up myself? 2) If so, where will I get the money from? I only save $4k/year and I will be 40 by the time I have enough to go on my own. Will I have the energy at that point? 3) What are my alternatives? Friends and family? They all have the same problem as me! 4) What if I lose all of my savings? 5) Loan? The bank says they are "Small Business Friendly" but I have no collateral and they won't loan me a penny...
The only option left is receiving either Angel Investment, Venture Capital or Private Equity. They have the same meaning but simply imply different values of investment.
Institutional Investment Writing an effective business plan is the first step in order to raise money. From my experience, investors don't really spend to much time on it or give it much attention; they just like to see that you've thought it through. Ken Greene says the main factors to a business success is not so much the idea but the entrepreneur, so make sure that you are on your A-Game.
It can be extremely difficult to get a hold of Venture Capitalists (VC's), but be persistent and show that you are motivated. It doesn't hurt if you know someone who knows someone.
Network
I always say that building a successful company is about:
1) Who you know 2) Follow up
It is important to ask people for help along the way; those who can help you have been through what you are doing themselves. They know it is difficult and are willing to give you pointers most of the time. Listen to them! Don't be a know-it-all or you might find people saying: "Hey, they already know everything...good luck, and see yah!"
Meeting people and networking is crucial; if someone tells you to send them an email or give them a call make sure you do it. Linkedin is a pretty good tool for tapping into your network. A couple degree's connection sometimes turns into a contract.
Sacrifice
Get ready for a wild ride! Running your own business will have many up-sides like making your own schedule being your own boss (kind of, you actually work for your shareholders). But be warned, you'll be managing a schedule with obsurdly long hours. I woke up at 5am today and I am writing this article at 8pm; I have a 9:30pm plus a 11:30pm call scheduled for later tonight and will be back at the office for an 8am meeting tomorrow. Gotta love it!
Love what you do
I cannot stress the importance of having a passion for what you are working on. Why do people play video games? Because they love it! Why do people run? Because they love it! Why do people start financial management company's? Because they love it!
If you enjoy something you will love to work on it more and more. If your passion is pottery, don't open a fast food restaurant franchise.
Don't Give up
There has been times where my account was negative account balance, we have all been there (I think so at least, maybe it was just me). I didn't let it deter me and what I am working on. It doesn't hurt to have a business partner for motivation.
Most new businesses fail, but never allow yourself to look back and say: "I wish sometimes I pushed a little harder..."
Feel free to reach out to me for any tips, thoughts or pointers.