A quick Sweaty Startup Podcast episode about what sucks in entrepreneurship culture. I’ve been trying to be positive and avoid being negative. So, let me rant for a bit. I noticed lately how the media romanticizes building a startup business and gaining hype around starting a business with these “new” ideas.
Frankly, that’s absurd.
All you need to do to start a business is get out there and sell somebody a service or product. Get out there and sell somebody something and do some work for a few people. That’s how you start a business. Build your business after making some money. Let me repeat that: Go out there and do some work for somebody personally. Trade your time for money. If you start making money, build a business around that.
The biggest mote in business is geography. Too many people look at their computer screen wondering about how they’re going to make money on the internet. The fact is that everyone needs their physical world to be maintained, upgraded, or improved. There may be a good operator of a certain service or business in another town, but he might not be in your town. And guess what? He’s not going to ever be in your town. He can’t go and operate all over the world on the internet.
One company on the internet can operate anywhere. You’re competing against the people in Silicon Valley, against Stanford grads, and brilliant engineers. You’re competing against the entire world when you sell something on the internet. I’m not saying you can’t succeed. I’m just telling you about the good risk-adjusted return.
Not enough people think about entrepreneurship from a risk-adjusted return perspective. A lot of people think about entrepreneurship as a big shot, a big success. We read about all these individuals who took giant shots, like Elon Musk and Steve Jobs, who made it big and made a ton of money. We don’t hear about the nine-hundred-ninety-nine others out of every thousand that started a business and failed, having to shut it down and get a job because they tried to do a new “revolutionary” business idea and change the world on the internet.
Revolutionary entrepreneurship is what I call “unicorn business”.
This model does not provide good risk-adjusted returns for founders. What do I mean by risk-adjusted returns? If you start a tech unicorn and make a billion dollars, the returns are great, but how much risk did you take to get there? What were the odds of your success? Every return that you make has to be risk-adjusted. If I had a risk-free return of 5% or 6%, that may be a lot better than a 50% return on a cryptocurrency that could go to zero on me in the flip of a switch. That’s how risk-adjusted returns work.
And this I’m also going to tell you that creating a monopoly, or market all to yourself from the blue ocean strategy that we read about is BS.
Find a market where you can carve out a piece of an existing pie. There’s a business already happening with customers and companies. Study it. You can figure how, when, and where you can get some of that pie and make some money. All you need is a piece of it.
Copy what other businesses are doing and look for small ways to improve the industry. That’s what we did with our student storage pick-up and delivery business. All we did was make tiny, incremental improvements to run a business and carve out our piece of the pie. And guess what? We had a multi-million-dollar exit. We sold that company, started in real estate, and made a bunch of money.
Another thing to think about is competition.
Would you compete against a bunch of Stanford grads, a group of brilliant computer and software engineers, and a bunch of big Amazon sellers in China with big data and research budgets? Would you prefer to compete against them, or the guy down the street in your town who makes a lot of money, but operates with a fax machine?
It’s a no brainer right?
The last thing I want to tell you is that you should not get emotionally tied to your business. The more fun your business is and the more interested you are, the more likely other people will be passionate about it as well. It’s also more likely that it’s going to be hard to make some money. Getting emotionally tied to your business is a recipe for failure. It’s dangerous and scary to compete with people who don’t make decisions based on economic factors.
Entrepreneurship should be viewed differently than the way the media portrays it. Most successful entrepreneurs don’t start with a revolutionary, new, groundbreaking business idea that made them billionaires. Most of them started a business that was unsexy, not notable, or not revolutionary. They found a way to carve out a piece of the pie, doing something that no one else was willing to do well.
If you’re not sure how to start a startup, I have a handful of courses where you’ll find everything you need to build a business.
Three Key Takeaways:
- The best way to start a business is to get out there and sell somebody a service or product. The media romanticizes and builds so much hype around with new ideas when in reality, all you need to do is trade your time for money. Once you start making money, build your business around that.
- The biggest mote in business is geography. So many people look at the internet as a place to make money that they don’t see the people who need their physical world maintained, upgraded, or improved. The difference is that you’re not competing against the world when trying to make money on the internet.
- Find a market that already exists. Look at existing companies with customers and study them. Look for ways to make small improvements to what they are already doing. You can figure how, when, and where you’re going to carve out your piece and add value.
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