On being an entrepreneur…

This is a response to a post on Inominandum’s blog today.

The concerns he lists are very real, and will strike you in a visceral way especially if you are the primary breadwinner in the family.  But at the end of the day you confront the fact that half of all millionaires are self-employed or own a business.  Depending on your skillset self-employment or starting a business may simply be the best road to financial independence and financial freedom.

Being your own boss is worth it

Another way to look at it is this: let’s say you’re a skilled hourly worker – auto mechanic, computer technician, plumber, electrician, HVAC repair dudette, whatever.  When someone needs your expertise they are going to pay $100 per hour, give or take.  Now, is that money you get to stick in your pocket, or are you going to work for someone who pays you $25 per hour, pays your associated costs, and sticks the excess in his pocket?  Would you rather be the guy producing the value in your job, the guy profiting the most from it, or both?

Most of us would say “of course I want to keep the value that I create.”  That’s not easy though, and lots of people try that approach and fail.

Being your own boss is risky

Something like 7% of Americans are millionaires.  Half of those are business owners or are self-employed.  Yet a shocking number of new business fail.  It’s not a panacea.

  • If you get sick, you can’t work.  If you can’t work, you have zero income.
  • There are lots of things to trip you up.  The IRS and other Government agencies can destroy your business even if you thought you were doing everything correctly.
  • Lawsuits can bankrupt you even if you have done nothing wrong.  This happens all the time and it’s part of competition in modern-day America
  • You may be great at your job but fail due to lack of business acumen
  • Cutting corners saves money in the short run but can kill you in the long run.  Something as simple as running a laundry business for local restaurants and hospitals can come to a grinding halt if you lose the hard drive you keep your business records on and you don’t have a backup.  There’s an art for risk management and figuring out what costs are necessary, and which are just absolute waste.  Adequate backups goes in the former category.  Starting with awesome stationary, in a great office, with a secretary goes in the latter.
  • Lots of people are incapable of managing their time.  If you don’t work, you can’t bill, and if you can’t bill, you can’t eat.  If there is no work then your full-time job is finding new clients.  If you’re not good at this, you fail.

Change your mindset

If you save up six month’s salary, form your own LLC, put up a web site or take out a yellow pages ad and wait for clients to call then you’re going to fail as an entrepreneur.  My experience with yellow page advertising is that it works reasonably well about three years after starting.  Marketing is an art, and the truth of the matter is that lots of fine craftsmen go broke, while those of mediocre talent who also possess a modicum of business skill succeed.

Need proof?  Look at the success of Thomas Kinkade, “painter of light.”  The work’s bland, derivative, boring, uninspired, it appeals to the lowest common denominator, and it’s also wildly successful.

When you go to work for yourself those high standards you’ve lived by and value deeply may no longer matter at all.  You’ll need to turn an objective eye toward your proposed business and ask “is this viable?  Is this something I would invest in as an outside investor.”

I’m serious about this.  My first year of my MBA I completely closed one business I was running and changed the entire focus of the other.  This is not simple, and it’s not obvious, but it is absolutely critical if you want to run a successful enterprise.  If you’re going into business because you want to do what you enjoy, that you’re good at, on your own time, and as your own boss, then I’d give you a 5% chance of success.  That success rate is only due to luck.

Backwards thinking

The typical entrepreneur’s thought process goes like this:

I’m pretty awesome at making these widgets.  And I really like making widgets.  The mark-up on them is huge.  I should totally quit my job making widgets for Uber Successful Widgets International, Inc. and do it myself.  If I can just make as much in sales as I do in salary I’ll be golden!

And the truth is that he probably won’t.  His thought process should be:

  • What are my start-up costs in the widget-manufacturing business?  Rent, equipment, etc.
  • Who buys my widgets?
  • How are my widgets better than those others are selling?
  • Do my customers care about the differences?  Do they care enough to take a gamble on my widgets rather than sticking with those they’ve been buying for years?  Are my extra features or enhanced quality something people will be willing to pay more for?
  • How will my potential customers learn about my super-uber-awesome widgets?  What is my average customer acquisition cost likely to be?  How many customers will I need to just cover my expenses?
  • How many years do I think it will take before my widget company can support itself?
  • How much money will I need to save in order to maintain my family’s standard of living during that time, and how much of a buffer will I need?
  • Will my bank finance me if I land a big contract and need to borrow $100,000 to buy the equipment to meet the needs of the client?
  • What sorts of alternatives are out there for widgets?  Is there a new technology that’s going to transform my industry?
  • What do I do if my old employer sees my success and copies my widget design, then sells it cheaper through his existing distribution network and at a lower cost?
  • Speaking of which, where will people buy my widgets anyway?
  • If everything goes right and things look good on paper, will I go bankrupt anyway because I can’t pay my bills because I’ve racked up expenses and my buyers aren’t paying me in a timely manner?

And once he can answer these questions he still needs to deal with a potential lawsuit from his old employer accusing him of theft of trade secrets that comes with a $400,000 legal bill and an injunction on selling widgets until the lawsuit is settled in five years, all while paying for rent and leases.

That seems pretty harsh

Well, you shouldn’t walk into this as an optimist.  Pray (enchant!) for the best, but prepare for the worst.

How about something a bit more uplifting?

OK.  Most readers of this blog are most likely to be selling services rather than “stuff,” and lots of those folks can do this single-handedly.  So let’s look at some basic stuff:

Manual Labor

Let’s say you’re the “chop wood, carry water” type.  You enjoy physical labor, you don’t need much money to live happily, and you dream of a job where you can exercise your body all day.  You decide to sell firewood.  You’ll never get rich, but this might totally fit your financial needs and your views on sustainability:

  • Whose trees are you going to cut up?  Are you going to start a tree removal business and sell that wood?  How will people find you, and how will they trust you not to drop a dead tree on their house?  How much insurance do you need to carry, and what will that cost?
  • These things need to season before you sell them.  How many acres will you need and how will you pay for it?
  • When are people likely to buy your wood?  What’s your profit per cord of wood, and how many will you need to sell to keep your family fed all year, and keep you in tools, vehicles, fuel, marketing costs, taxes, and so on?
  • How are people going to find you?  How did you find your firewood guy?  What if you chop wood for eight months and now you can’t find anyone to sell to?
  • Here’s the big one: add up all those potential dollars from sales, cut them at least in half to be safely pessimistic, divide by the number of hours you’re working, and see if you’re beating minimum wage while taking on more risk.  You’re probably not.

Basic questions that you need to answer before going forward with your plan.

Maybe you’ve got better skills though:

Air Conditioner Repair

This is mostly a summer job, as air conditioners don’t fail as often in the winter.  The skillset can pay well though.  But why are people going to choose you instead of someone else?

When I get my AC repaired I’m looking for someone to identify the cause of the problem (generally a leak), solve it (weld the leak), put new coolant in the system, and have the thing purr for the next five years until something breaks again.  (Ah, the joys of home ownership.)  I’m willing to pay more to know it’s done right – I don’t want to have no AC in August all of the 3-day weekend because nobody’s available to come out and fix a problem that wasn’t fixed correctly the first time.  Been there, done that, huge air conditioner repair trust issues now.

So where do you fit in?  Do you know a realtor who can recommend your services to people with empty homes?  Do you believe in advertising in the Penny-Saver or on local cable channels?  How about a billboard – do they work, and can you afford it?

Fine.  What’s your point?

The point is that when it comes down to it, it’s not your ability to do a job at a competent level that makes or breaks your business.  It’s finding people capable of paying you that are actually willing to give you a shot.

That’s business.  And it’s hard.  They offer degrees in this stuff, but it’s still an art that needs to be practiced before you’re any good at it even after you get the piece of paper.  And if you’re depending on business revenue to make survive, and you’re worried that your baby has a 104° fever and while you did manage to get health coverage, you haven’t met your deductible this year and you don’t have much money in the bank…

Shit happens.  Making well-considered business decisions when you’re new to business and you feel like your world is coming down around you isn’t the best situation for decisions that will appear adequate in hind-sight.

You need a plan.

More than that: you can’t build a reasonable plan if you don’t know anything about all this boring business crap.

So you need to educate yourself.  You can go buy books on business, but that’s no substitute for taking classes on:

  • Accounting
  • Marketing
  • Management
  • Strategy
  • Entrepreneurship
  • Finance
  • Sales

Those are things you can take at any podunk college for not much cash.  And doing that now while the itch to work for yourself is starting to demand a scratch is a whole lot smarter than digging yourself a huge hole and trying to dig your way out again.

Consider Starting Small

If you think you can create real value, then start taking those classes and try working on your own on the side.  This gives you more time to learn the art of business, gives you context for all that boring stuff you’ll be learning in class, and gives you time to make important decisions with no real pressure.

Want to do Hoodoo work for folks on the Internet?  Easy – open up a web site, try marketing yourself, and see if you can develop the skills to make it grow while you keep your day job as the night manager at the local gas station.  If it fails, then you’re out a couple of hundred dollars and you’ll be paying a lot more attention to things like managerial accounting and cost controls.

Playing with statistical functions in Excel is boring, until you can go back home and plug in your revenue numbers and make some projections into the future.  Look at seasonality and see if Winters’ method applies in your business.  Suddenly that stuff that makes you want to tear your hair out in class has a function.  Want to know how busy you’re likely to be in the 3 weeks before next Valentine’s day?  The Poissan distribution is your friend.

Wait, what?

Yep – you caught me.  I’m trying to get you to stop seeing yourself as a free spirit and more of a business person, because the latter are way more in charge of their lives than the former.

Here’s another way to look at it.  What if you could learn an entire new magical skillset.  This would fill books with arcane formulas, would require rigorous calculations, would involve more worldviews and maps of the world, and when you were done you would have learned the magical technology responsible for most of the world wealth creation through history.  You’d never get bored either, because there is always more research being published by other practitioners, and your experiments have a real impact on your wealth.  An impact those without this skillset can’t imagine.

Would you learn it?

What if it took way longer than the Abremelin rite – this took years.  Would you still do it?

Well, you can.  It’s called going to school and getting a business education.

Ha!

Dude, this is a fucking MAGIC BLOG!

Yeah, well, deal with it.  A lawyer can make more money with a given wealth magic ritual than someone working at McDonald’s.  A 30% increase in income means more when you’re starting at $80,000 per year than when you’re starting at $15,000 per year.  The former feels like a powerful mage when nearly $25,000 rolls in, while the latter will be disappointed that $4,500 just barely covers his car repairs.

If you want to work magic on a business venture then you can do way more if you’re building an app for iPhones than if you’re making cute piggy thingies on etsy.  And a game that appeals to ages 5-80 like Candy Crush has the potential to greatly outperform an app that does an amazing job of calculating horary astrological charts.  The latter is more useful and might have an audience of a few hundred people, while the former makes it’s creators something like $929,000 per day.

Deciding what business to be in is a huge deal – it sets up limits on the maximum you can make.  You can be the best cake maker in the world, but at the end of the day you only have 24 hours to spend on everything.  Start a cake-making store in a good city and you’ll do better.  Specialize in cinnamon buns, simplify it, franchise it, and have a shop in most malls in the country and you’ll do better yet.

Those first steps are huge.  And most people make them without even looking around first.  Business education helps you not only look around, but read a map.  If you’re good you’ll be able to look at maps for the last 20 years and pick out the current trends, and compare that with maps from other places in the country.

Way better than starting off blind.

9 thoughts on “On being an entrepreneur…

  1. Ulysses

    I’m kind of embarrassed that I’m even typing here because obviously to me, you know your shit and I have no fucking clue. However, I get a feeling that you’re talking more about what HAS been true rather than what CAN be true. Which does not strike me as “create your own reality” thinking.

    I’m interested in learning the system to game it. But complying to it to increase sales… eh, not so much. I guess it depends on the industry. And admittedly, being a musician, my mind goes to the terrifying prospect of having to tour with a pop country band in order to make a living.

    Reply
    1. RejectDogma Post author

      I guess the question becomes one of intent: do you want to make the best music you can and reach your potential as a musician, even if that means the best you ever do is play small clubs? Or do you want to figure out what kind of crap sells the best, take your chances doing that, roll the dice and maybe make a ton of money at it?

      Or would you like to make music a hobby rather than a full-time gig, and pick up a profession that pays well?

      That other thing Jason said, about learning to loathe something you love once you do it as a profession. That’s pretty real for a lot of folks too.

      Reply
  2. Ulysses

    You see, I feel these are questions steeped in axioms. This makes it difficult to counter. Music being my utmost passion though, I will take the challenge.

    First, I defy the implication that this is an either/or proposition. My answer to your questions is, I want it all. I want to make money by not compromising on my artistic vision. I would not be the first to do so. As evidence, I point to the hundreds of artists who sell out and have sold out large venues. NIN, Phish, Neil Young, and ilk. More contemporary examples: Jack White, Ani DiFranco (who started by selling music from the trunk of her car), Tragically Hip (a mostly touring act), Warduna, Buck 65… I could keep going. Some of these made decent money, some made a lot. I get that it’s a gamble, so are most things, no?

    To keep on track, I want to say that I think there is tremendous value in learning financial skills. As much value as staying true to one’s values. I guess I’m seeking a balance as well as not accepting that the way things is the way things need to stay.

    Reply
    1. RejectDogma Post author

      Hey, make it happen! I’m not saying you can’t.

      My position here is this: for most of us, there’s this thing we want to be spending our time on, and there’s all this other crap that we need to do in order to do things like buy food, pay rent, and so on. For those that want to break out of that, it *is* possible to grow wealthy. And it’s possible to make money doing stuff you like. Business methods and magical methods tend to work really well together, so that’s what I’m covering.

      You seem to be on a different path, which is awesome if it’s what brings you fulfillment. Maybe that means you’ll be a businessman while you’re hustling to sell CDs and get yourself heard. Magic helps, but so does all that business stuff. Maybe you’ll want to set some money aside after you “make it,” so you don’t end up bankrupt like way too many musicians end up – that’s investing, and those are skills like any other that need to be learned and practiced. Human nature is to think that the good times will go on forever. My take is that you need to think about your future goals and make sure you’re taking steps to meet them.

      With regard to accepting the status quo and working with it or staying true to yourself, I’ll just say that the world is what it is. You can work with it, you can work to change it, you can do your own thing and refuse to play along – whatever makes you happy. But each of those paths has a destination, and you should look as far down the path as you can and make sure you’re happy with it. Because backtracking takes time, and time is very, very precious.

      Reply
  3. JP Bear

    As an occultist who runs a non-occult business I commend you for putting up this post. What you say tallies very strongly with my own experience and it is a message that people really need to hear but one that almost no-one wants to. The bit about how if have no clients your full time job is getting one is absolutely spot on!

    A couple of questions I would add for people who want to go into business for themselves:
    What problem am I solving with my product or service?
    Who am I solving it for (who is your ideal customer)?

    The most surprising thing I learned working for myself was just how hard it was to be disciplined and manage my own time – coming out of many years in a corporate environment where there was always someone, at least figuratively, watching over my shoulder I was shocked at how strong was the temptation to just slack off even when I knew I should be working… it took me weeks post-realisation to really become the self disciplined adult that I needed to be.

    My one dissent would be your faith in formal business education. In my professional experience, unless you get into one of the top schools (Harvard, Stamford, Wharton, Kellogg etc) and/or want to work in a investment bank or big consulting firm, MBAs are very over-priced. I’d recommend books like ‘The Personal MBA’, online courses on accounting, community college / night-school courses etc instead for people that want a good foundation to build their own business.

    Oh, and sales. You have to be able to sell. You might think it is sleazy, but if you have the best product in your market-space that solves a problem better then any other then it it is not sleazy to promote – it’s your duty.

    None of this is to say that it can’t be done, on the contrary, but magic is a probability enhancement technology not simply wish fulfilment. Occult practice can have a huge impact on your business success, as it does for many other very powerful people (read Gordon White @ Runesoup) but you have to have that business in the first place and at least know the rules of the game you are trying to play.

    Occult practice is not effective when we isolate ourselves from the world, we need to be out there doing the hard yards for the good things to happen. This goes for other areas to: you want a girlfriend or boyfriend? By all means enchant your heart out – but then go outside and put yourself in a situation where she or he can manifest in your life. Too often, I think, members of this community get involved with it because they see it as a way of avoiding the messy, hard and uncomfortable parts of life – who wouldn’t want to just fire off a sigil or two and then wait for the money to start rolling in and the girl/boy to knock on the door – but if we do that then we are just wasting our time. This world needs more of us engaged in it, now more than ever.

    Reply
  4. RejectDogma Post author

    Excellent comments. I think we are mostly in agreement. Except possibly here:

    My one dissent would be your faith in formal business education. In my professional experience, unless you get into one of the top schools (Harvard, Stamford, Wharton, Kellogg etc) and/or want to work in a investment bank or big consulting firm, MBAs are very over-priced. I’d recommend books like ‘The Personal MBA’, online courses on accounting, community college / night-school courses etc instead for people that want a good foundation to build their own business.

    I live in small town America, and school isn’t cheap, but if you can live at home it’s not terribly expensive, either. I just poked around at tuition costs in fairly rural areas and it looks like if you attend most places you’re looking at $6,000 per year for tuition, give or take 30%. That’s not cheap, but it’s well worth the investment. Hell, I’d even consider taking out student loans, and I tend to avoid debt.

    With regard to choosing a top school vs a local school I agree, to a point. At the end of the day in a mid-tier master’s level finance course you’ll be using the same book as the Ivy League schools, but you won’t go as deep. So you’ll cover what derivatives are, but you won’t do much work on pricing them. The more advanced work is there if you’re willing to dig in, however.

    But I’m really looking at someone who wants to take charge of his own financial future – you aren’t going to school to get a piece of paper that will impress hiring managers; you’re going to school to learn the skills that you will practice and apply in your own life. Taking it seriously (which means graduating with a respectable GPA) will grant dividends, even if going to Wharton instead would have stretched you more and been a better educational experience.

    If you want to be a successful small business owner, then you need to rely on more than luck. In my experience most small business owners are clueless folks who got lucky and are in a much more perilous situation than they realized. Look at all the home builders who went from > $1,000,000 in annual profits for the owner each year to nothing during the housing crisis. Most failed, because they didn’t any strategic vision.

    I would hope that a degree in business from the most lowly school would offer graduates the tools to do better than that. But I was the sort who graduated at the top of my class (not so hard when you’re in middle age and sex and intoxication aren’t the draw they are to youth) and had the context to see why most everything was meaningful to my future success. If that’s not there, then I can’t say what outcomes are likely to be.

    I’m supportive of online courses, but I can’t say I really believe in them. I learned more in class, but maybe I’m an old fuddy-duddy who can’t get with the times…

    Reply
    1. JP Bear

      Thanks for the great response to my comment. I’m really enjoying the blog and looking forward to reading more from you in the future.

      Just one clarification – I don’t believe the content of the courses is what differentiates a place like Wharton (and lots of those big schools are starting to put their course content and lectures on-line now anyway), the big differentiator (and what you are paying SO much for) is the network building that you do with your classmates plus the doors opened by alumni. As you rightly point out, that is not relevant for small business folk.

      I totally agree with you that people need to get some education before they start a business, I just think that there is more than one way of doing that.

      Reply
      1. RejectDogma Post author

        I agree, and I’d add that the natural competitiveness that can happen at top schools against the smartest and most motivated peers possible can really drive one to greater success than otherwise.

        But now we’re talking about people choosing a good path at a really early age – college age kids at Wharton got there because of decisions they made years prior, often before high-school. I don’t know about you, but I wasn’t where I needed to be as a human being to really walk the magical path until I was much older that the kids we’re talking about here. Sure, I was doing smaller workings, and trying to digest Crowley, but I wasn’t “there” yet.

        And I envision my target audience as those with a serious affinity for the occult who are way out of their twenties.

        Reply
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