3 Best Advice for First-Time Entrepreneurs
I’ve said it time and time again: Entrepreneurship is hard and it’s not for everyone. If, after taking a realistic personal inventory of who you are and what you want to be doing, it turns out that you are ready to take the next steps in starting a business, I want to discuss the advice I always give to first-time entrepreneurs.
1. Be Practical About Your Money
The first and most important thing that I tell new entrepreneurs is the importance of practicality when it comes to to money. I’m blown away by all the “entrepreneurs” who start businesses and at launch, don’t realize the importance of generating money and how to manage profits.
Instead of focusing on the present financial needs and building an actual company, they are too busy thinking about how much money they’ll be making four years from now. It’s a complete lack of practicality.
Cash is oxygen. How much money do you have to stay afloat and for how long? Do you have one year’s worth of rent and overhead? First-time entrepreneurs always make this mistake and it’s my biggest concern for them. You have to make sure your actions can respond to the bleeding of cash that occurs before you even turn a profit.
I often see first-time entrepreneurs making one of two mistakes at the start:
(1) They do not have a funded business and haven’t raised venture capital (or any other capital). They only have six months worth of money to make their business goal come true. While they dream up every perfect scenario that will allow them to achieve their dream, by the third day of being “entrepreneurs,” the realization hits that nothing goes perfectly and they run out of cash.
(2) They are so well funded that they don’t build up the necessary muscle to generate revenue. They are so used to the idea that losing $150,000 in burn rate is “fine” because they have a funded company. Most of their attention and behavior is focused on raising their next round instead of building an actual, profitable business.
No matter the situation, starting a new business, particularly one that requires an upfront financial investment and not just your time, drains money.
You need to understand financially what it takes in order to pay for necessities like rent, supplies, and inventory (and that doesn’t even include your personal expenses). A high level of practicality is necessary for success.
2. Realize That Building a Business is a Huge Time Commitment
The next thing I remind first-time entrepreneurs is that by starting a business, you have made a decision that does not allow you any time, in your first year, to do anything but build your business.
No more binge watching Game of Thrones. You are not allowed to watch The #AskGaryVee Show going forward (maybe…). No more late night parties with your friends. You are in such a Code Red zone that every minute(let’s call it 18 hours a day if you want this to be successful), needs to be allocated for your business.
This even includes time with your family. It’s a substantial sacrifice and you have to realize the level of commitment that is required.
Also, I was trying to be very kind in the first year because I know we live in a politically correct world where leisure, “me” time, and family time are so important to so many. However, if you have this ambition of building a business, you have to make this mental commitment.
Then any time you have for family or leisure time is an added bonus. In fact, you have to ask yourself how big of a business you are actually trying to build. The bigger the business, the more years you’ll need to tack onto year one.
3. Hold Yourself to Your Word
One of best pieces of business advice I’ve ever received (and one that I try to impart on anyone entering the business world) is that your word is bond. My dad told me this at an early age and it has shaped how I’ve conducted business ever since. He told me once that if I commit to buying 100 cases of wine for the store, and I change my mind the week before it arrives, that I would have to drink all of it because I made the commitment.
If you make a commitment, no matter what happens, you have to deliver. Not only is your business’s brand at stake, but your personal brand and reputation too. Poor business decisions could put your status as an entrepreneur at risk.
While the sources vary, it’s often stated that most businesses will fail within the first 18 months. The number one reason why I think so many businesses fail so quickly is because they don’t realize how hard it is, how “all in” you have to be, and how much talent it takes to be a successful entrepreneur.
I’m not promising that following this advice will guarantee your business will survive the first year, but without these considerations, you are not setting yourself up for success.
PS: This may just be words for you on a screen right now, but I beg you to read this very carefully. Read it and make sure it sinks in. We are absolutely living through the greatest generation of fake entrepreneurship that we’ve seen in a long time. Unfortunately, many people will be hurt both financially and emotionally because of this era. I implore you to take these words seriously.