If you ask most people what’s riskier: being an entrepreneur or being an employee, they’ll tell you with conviction that being an entrepreneur is the much riskier occupation.
They might even back it up with the classic statistic that 90% of startups fail.
Okay, I’ll admit it. That sounds bad.
But there’s so much more to starting a business that’s concealed by sweeping statistics like that one.
Today, I’m going to draw from my own experience launching and building business, to bust the myth that entrepreneurship is a risky occupation, especially when you compare it to conventional employment.
In fact, I’m going to make the argument that, when approached the right way, entrepreneurship is the surest way you can secure your financial future.
So if you’ve been holding off on starting a business because you were discouraged by the prospect of failure, I’ve got a few thoughts on the matter that just might rekindle your entrepreneurial flame.
Debunking the 90% Rule
First off, let’s address this pesky 90% failure rate situation.
This statistic applies to all businesses, ranging from your high-flying venture capital (or VC) funded Uber competitors to your quaint little neighborhood pizza joint.
As it happens, both of those examples are a major driver of that 90% failure rate.
Take VC-funded companies. These companies fail all the time. In fact, chronic failure is built into the VC business model. If you ask any successful VC, they’ll tell you they expect 9 out of 10 of the companies they fund to go bankrupt.
The way VCs make money is by placing bets on hundreds of startups with the expectation that only a couple of them will succeed, and the profits from those few huge winners will cover the losses from all the failures.
So they pump these startups full of money, artificially accelerating their growth in a completely unnatural and unsustainable way, and they see if any of those companies gets enough product-market-fit to eventually generate profits on their own.
Given this reckless growth-at-all-costs VC model, it shouldn’t be a surprise that most VC companies fail. And they often fail spectacularly, making headlines like “Startup goes bankrupt after burning through $500 million in VC funding in three months”
We see these headlines and in our heads we say, “ah yes, yet another example of how risky entrepreneurship is”.
On the other side of startup land, you have your brick-and-mortar retail shops: think your corner grocery store, pizza place, or pawn shop. These kinds of companies don’t make national headlines, but they do make up the bulk of the businesses that fail every year.
These businesses have a very different challenge than the VC funded startups. They have high operating costs in the form of expensive mainstreet leases, on-site employees, and complex physical inventory management. Meanwhile, they have to contend with unpredictable foot traffic, bad weather, along with fierce competition with the store across the street.
This combination of high operating costs and competitive pricing results in razor thin profit margins, which means these businesses have very little safety buffer when business is slow. All it takes is a month or two of diminished demand to push these businesses into bankruptcy.
So between the flashy Silicon Valley failures and high volumes of small brick-and-mortar operations shutting down every year, it’s not surprising that we get the impression that starting a business is risky.
But guess what, it doesn’t have to be that way.
You don’t need VC funding to start a business. And you sure as heck don’t need employees or expensive office space to kick things off. All you need is a computer and some spare time.
Let’s talk about how you can start a business without VC funding or maxing out your credit cards. It’s what I call “Low Risk Entrepreneurship”
When it comes to low-risk entrepreneurship, your first task is to minimize your overhead. The surest way to do this is to build your business online.
That’s because when you build an online business, your costs decrease dramatically.
With services like Squarespace, Wordpress, and Shopify, instead of paying for an expensive physical shopfront, you can stand up a digital shopfront in a matter of minutes for less money per month than you spend on coffee in a week.
In terms of a product, if you’re selling your skills, you don’t need any inventory at all. You just need a website with a well-written pitch on how you are qualified to solve people’s problems.
If you prefer to sell physical goods, you can leverage the might of Amazon to handle literally every step of your supply chain, meaning no expensive warehouses or complex delivery logistics.
But the lowest-risk businesses of all, are ones with zero marginal costs, meaning your costs stay fixed no matter how much product you sell.
Common examples of this are software apps (think Slack or Instagram) and digital content (such as blogs, podcasts, or YouTube channels). These types of businesses can distribute their products to an infinite number of people on the internet with a negligible change to their operating costs.
That’s the case with this content company, Stake Your Wealth. It doesn’t cost me anymore to distribute my content to 10,000 people than it does 100 people, aside from a minute increase in server expenses.
In all of these examples, you can get a business up and running with minimal upfront investment or ongoing costs. That means you can go a very long time without a single sale and still stay afloat.
Better yet, these low operating costs give you the freedom to experiment and refine your product offering, or even work a full-time job to pay the bills while you get things up and running in your off-hours.
Now if the business never really catches on, who cares!
You didn’t spend much money in the first place and, as a huge bonus, you learned a whole new set of skills related to starting businesses that you can apply to your next venture when you get to it.
And if the business does pick up steam, congratulations.
As long as you manage your finances responsibly by investing your proceeds in the growth of the company, and keeping your overhead low, you’ll never need to worry about money again.
And you did all this from the comfort of your home office, with little more than the spare change in your pocket.
So tell me again how entrepreneurship is risky? Because as far as I can tell, if you follow the approach I just outlined, it’s about the lowest risk way to ensure your financial freedom that ever did exist.
So if you had any lingering doubts about starting a business, I hope this discussion has put your fears to rest.
Go out and make it happen.
Share Your Thoughts!
Now that I’ve shared my thoughts on low-risk entrepreneurship, I’d love to hear your thoughts. Do you think starting a business is risky? What other low-risk ways of making money do you recommend?
Share that with me and the other Wealth Stakers in the comments below.
Also, if you enjoyed this video, don’t forget to subscribe and share this with anyone who loves building wealth.
With that, I bid you adieu, and happy Wealth Staking!