Most of us dream of starting our own business, yet are too terrified to act. Our fear is justified.
There is a widely quoted statistic, of unknown origin, that 90 per cent of business start-ups eventually fail.
Unfortunately, I haven’t been able to source any rigorous academic study based on a large sample size corroborating that often quoted business success-to-failure 1:9 ratio.
Nonetheless, my experience as a business owner over the last 21 years has led me to believe that the grim 1:9 ratio is at least approximately correct.
I have operated a sole proprietorship (RD Book Projects) since 1995 and have controlled a company (RD WealthCreation Sdn Bhd) since my wife and I incorporated it in 2001.
I first began working for money while at university.
My first paying job was at the Strand campus of King’s College, University of London. I started there parttime as a student librarian in 1984.
In the ensuing 11 years until I started RD Book Projects, I toiled as a stockroom porter, carpet mover, technical writer, cadet broadcast journalist, business journalist, newscaster, investment analyst, and business editor. After that began my 21 years in business.
Along my 32-year work trajectory, I have seen acquaintances, friends and family members with more intelligence, street smarts and scholastic achievements start new businesses… and fail.
I salute them for taking risks, for starting their precious businesses and for trying.
In one of Robert Kiyosaki’s Rich Dad, Poor Dad sequels, a lesser known book titled Before You Quit Your Job, he recounts a portion of a conversation he had with the father of his best friend, Mike, after the young Kiyosaki had experienced yet another business failure:
“How many times do I have to do this? I’m the biggest failure I know.”
Rich dad said: “Losers quit when they fail. Winners fail until they succeed.”
If you aren’t familiar with Kiyosaki or his runaway bestseller Rich Dad, Poor Dad, pick up a copy.
In it, Kiyosaki refers to his biological father as his Poor Dad, despite the older Kiyosaki being the highly educated superintendent of education for Hawaii.
According to Kiyosaki, Mike’s father became one of the wealthiest businessmen in Hawaii. (While Kiyosaki’s books are entertaining, he has his detractors, so read his material carefully.)
In your opinion, do you have what it takes to succeed in business?
If you are tempted to try, these are my suggestions to raise your odds of success:
FIRST, if you’re employed, exercise ruthless discipline and self-sacrifice to cut your living expenses to the bone. This will create a sizeable cash flow surplus each month.
Save it. It is your EBF, or Emergency Buffer Fund.
Treat your EBF as your most precious cash pile. It is the seed capital you will use as the initial working capital of your business. Build up at least 12 months’ normal living expenses in your EBF.
SECOND, keep on saving for sufficient start-up capital for your business.
THIRD, keep toiling to stockpile more working capital to sustain your dream business for at least a year.
Commit to living on a shoestring budget now because the less you spend, the quicker you’ll become financially able to launch into the unknown.
It will, in all likelihood, take you three to eight years to raise your capital. Use that time to become an expert in your field.
Admittedly, you can shorten your preparation phase by borrowing the capital you need from family and friends.
But if you borrow too much or too early, you run the risk of not laying the foundation of skill, competence and insight you’ll need to boost your probability of success above the depressing average rate of 10 per cent.
Your trek is tough. Your path perilous. So weigh your desire for the security of a steady pay cheque against the slim chance of hitting an economic home run by building a business.
Then, choose well.
The writer can be reached at rajen@RajenDevadason.com and via Twitter: @RajenDevadason
Rajen Devadason is a Securities Commission-
licensed financial planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com. He may be
connected with on LinkedIn at https: //www.linkedin.com/in/rajendevadason