Where to start as an entrepreneur?

Even from when we are little, we used to imagine ourselves in different situation. Some of us want to become an astronaut, some of us ballerinas. When we grow up, usually our dreams change. Maybe the most common wish that we have, is to become our one boss, to start a business. Probably you too have thought at this at least once in your life. If you are trying to find out where to start as an entrepreneur, this may be for you.

Why do you want to become an entrepreneur?

Before taking any abrupt decision, you must answer one of the hardest questions of all: “Why?”. Why do you want to change your life, to enter a path that requires a lot of work, a lot of sacrifice, and setbacks? Why is your inner voice keeps pushing you to this life?

I don’t say this to discourage you but rather to prepare you for what you will encounter. I say it to prepare you to stay your ground and pass true those tough periods. It is better to prepare for the worse and hope for the best.

If you really have an internal drive to choose this path, and you have a clear aim in mind, means that you already took the first step. Now probably you are wondering where to start as an entrepreneur. The answer to this question will fuel your motivation until your aim, or your mission, is reached, or it becomes obsolete.

How to use the “5 Whys?” technique to find the true answer?

To answer this question, you need to be truly honest with yourself. Don’t say general stuff like: “I want to become an entrepreneur to build a better world”, or “I want to become an entrepreneur to help my community”. Find the true answer. Usually, to do that, you have to answer a series of “Whys?”. To do this properly, you can use the following technique called “5 Whys?”.

Practical example with Strategic Kingdom:

1. Why do you want to become an entrepreneur?
   I want to become an entrepreneur to help others reach their dreams.
2. Why do you want to help others?
   Because I have a vast experience, cumulated with knowledge, and I think I can help others shape their idea.
3. Why do you want to help others with their project?
   In my journey as an entrepreneur, I had the opportunity to encounter many challenges. Some of them I was able to overcome them form my first try, for others I had to use the trail and error method. In this process I have done a series of mistakes. Looking back, some of them can be avoided, and I want to help other entrepreneurs avoid them and build sustainable businesses.
4. Why do you want to help others by sharing your experience?
   On the sort term, I think it will be a good way for me to better connect the dots of all the experiences and knowledge that I accumulated. In the same time, I’m looking to build a structured way for building better projects in the future.
   In the mid-term, I think it will help me build a personal brand image.
   On long-term, I think I can transform this into a consulting project for Entrepreneurs.
5. Why do you want to be a consultant?
   Because this can be a profitable business, that doesn’t require assets, stocks, employees or initial financial investment. The only significative entry barrier is the knowledge and experience. Fortunately, I have both.
   I want to have an additional form of revenue, that is inflationary proof, at which I will become better and better every day. Is hard to go out of business if you don’t need initial investment and there are no fixed costs. Also, I will not be in the situation in which I will need a loan to cover the day to day business expenses.

What’s next step in finding where to start as an entrepreneur?

It doesn’t matter what will be your answer, it’s important to be the real one. If your goal in life is to have more money than your neighbor, it is fine, as long as you are aware of it and it you are being true to yourself.

              Once you have found your “Why?”, your true reason, you need to take a few days to think about the “new discovery”. Now that you know where to start as an entrepreneur, answer to the next questions:

• How does it make you feel?
• It will still be a relevant goal 5 years from now? But over 10 years?
• Is it worth it to dedicate your life to this goal?

What is the opportunity cost for becoming an entrepreneur?

Opportunity cost it’s what you give up when you choose something. It is the value of the next-best alternative when a decision is made.

If you are still reading, means that you are serious about starting this new chapter in your life. Taking this into consideration, I need to bring into discussion the most important aspect of all: “The opportunity cost”. Even if you decide to take this path of entrepreneurship or not, it is a concept that can bring you many advantages in life. I use it to guide my decision in life, at least the important one.

The opportunity cost is a concept used in the economy, that helps you put in perspective the advantages and disadvantages of two choses.

I will give you two examples to better understand where to start as an entrepreneur?

Life example: If you order pizza, the cost of opportunity would be that you didn’t order (the next best thing…) let’s say a Burgers.

Practical example:
Let’s say that at this point in life, you have an apartment with 2 rooms. One of which you rent out for 500 euros/month. You have a job that requires 8h/day of your time, which brings you 3000/month after taxes + meals tickets of 100 euros/month + health insurance 300euros/month.

Let’s say that you are thinking of giving up this job, and start a business on your one, in your field, marketing, for example.
To do that, you will need an office. The easiest way to have one will be to stop renting your extra room and use it as an office. You will need a laptop, a monitor, a chair and a desk.
Those can be rented in leasing, and you pay 100 euro/month. You will need advertising, 300 euros/month, you will need to pay utilities (electricity, internet, phone), another 50 euros/m. You need to hire an accountant 300 euros/month; you need to pay your health insurance 300 euros. From your experience at your actual job, you know that in a normal month, you can bill the clients that you manage with 7000 e, in total.

How to calculate the opportunity cost?

To find the cost of opportunity, calculate your financial state in phase one versus phase two.
T1. Your monthly income: rent 500 euros + salary 3000 euros after taxes + meal tickets 100 euros + health insurance 300 euros = 3800 euros/month; working 8h a day.

3800 euros/160 h = 23.75 euros/h.

T2. Your monthly income: 7000 euro – (equipment 100 + advertising 300 euros + utilities 50 euros + accountant 300 euros + insurance 300 euros + utilities 50 euros) = 5950 euro/month.

5950 euros/220h = 27.27 euro/hour.

*** To be able to serve the same number of clients, you will need to have sales meetings, to set up your own marketing campaign and to take care of the bureaucracy. This means that instead of 8h/day, you will need to work at least 11 h/day. (Or instead of working 40h/w, you will work 55 h/w).

In this situations we have tow opportunity costs:

1. Financial – you are giving up a 23.75 euro/h income for a 27.27 euro/h income.
2. Free time and extra responsibilities – you are giving up a guarantee salary, for an fluctuating cash flow, and in the same time you are giving up a stress free job (from the point of view of legal compliance, taxes, clients, cashflow, etc.) for a situation in which you will have to do 3 jobs in one, at least for the beginning.

The conclusion is that at a first glance you may think it would be very easy to double your monthly revenue. In reality, it would be a difficult decision to make, if the prospect of scaling up your business would be low. In the above example, from my perspective, would be better if you will stay in the actual situation, and keep looking for a better opportunity to enhance your revenue. Maybe you can take extra hours at your actual job, invest in somebody else’s business, etc.

Why do you need to take into consideration the opportunity cost?

Why this concept is so important and why do you need to weight your decision of becoming an entrepreneur in this way? This means that for every decision you make, you give up something. You need to be aware of this in order to understand the importance of your decision. Probably it would be hard to live your life in this way, weighing every decision against the next best thing.

For the important ones, you need at least to consider this approach. In this way, you will find with ease what decision is better, viable and you will take an informed decision every time. It is important to be aware of what you need to given up in order for you to move forward.

Do this exercise for yourself, and make an informed decision regarding if you are determined enough to change your life.

Conclusion

I will assume that you found the answer to the following question:

• Where to start as an entrepreneur?
• Why you want to become an entrepreneur?
• What is the opportunity cost?

Further, I will propose a practical and strategic approach. This means that you will not start with an idea. You should look for an open space in the market, a need or problem that is not properly satisfied, or a process that you can improve.

To do this, first you need to understand what are your personal qualities, or attributes, that you can rely on. To bring value added to your customer, you need to understand what you can leverage to have a good start. You can leverage ideas/knowledge, you can leverage money, or you can leverage the work of other people.

If you already have good knowledge about one particular industry, you should start from there. And if nothing in that industry seems to be good enough, look into complementary industries, and after that in industries that are trending.

In time you will benefit from an effect of “compound knowledge”. This can give you the edge that you need to succeed. The best resource to be leveraged is knowledge. This can be an under looked entry barrier, for other potential competitors, that can be overcome just in time, by learning, experimenting and trial and error.

The framework is rather peculiar, but it is tested and it will help you put the bases for long-term business success. I don’t promise you any shortcuts, it is a lot of work, but it is the right way!

Let’s dive into it!

Additional resources

This is a vast toping, and depending on your personal values, your life principles, and how philosophical you are, you can analyze this toping from different point of view. For better understanding of your inner drivers and your motivations, I recommend you to read Start with Why – by Simon Sinek. Alternatively you can at least watch this TED Talk.

If you have additional questions regarding this topic, comment or contact me.