Entrepreneurship is never without risk. On a personal level, that risk can be significant indeed.
When you choose the path of business ownership and entrepreneurship for yourself, you certainly haven’t opted for the primrose path.
You will face challenges.
You will come up against seemingly insurmountable obstacles.
You will fail before you succeed.
For many men and women, these are risks worth taking. But it’s important to be realistic and rational about the levels of risk and reward involved.
People with the entrepreneurial spirit have big dreams and big ideas. But first, you’ve got to have your feet planted firmly on the ground.
You have to have a plan. You have to have a plan B, and a plan C, and ideally, a plan D. You need to know what you’re going to do if your new business fails, or some other worst case scenario comes up. You need to plan for failure as well as for success.
In a recent article from Entrepreneur, inventor and entrepreneur Ray Zinn offers some sage advice for aspiring entrepreneurs.
1. Be frugal.
Business has ups and downs. Part of surviving the down cycles is to not blow all your cash during the up cycle.
2. Bank for disaster.
There are down cycles, and there are calamities.
Cash will get you through times of hardship better than an empty bank account or endless bridge loans. Bank your excess, and keep at least three months of operating capital in reserve. This way you can survive even the deepest of downturns.
3. Personally bank two years’ worth.
As a founder, you may have to go a while without a real paycheck. If you go bankrupt while your company is struggling to its feet, you may take the company down with you. Before you go into your startup full-time, make sure you have enough cash to pay all your essential bills for two entire years.
4. Find great mentors.
Good mentors are worth taking the time to find and consulting with frequently. Mentors should keep you focused, call you out when you indulge in wishful thinking, monitor your progress, check your books and play twenty questions with you.
5. Have an idea.
Take the time to make sure you have a great idea and a well-crafted product before marching into your market. The cost for starting weak and trying to improve on the fly is huge.
You can read the full article over at Entrepreneur, including examples from the author’s own career.