Starting Your Own Business Does Not Have To Be Risky

When most people think about starting a company or business, they think of the Microsofts, the Googles and the YouTubes of the world. They tend to think big because the media focuses on these multi-million dollar success stories and over glamorizes the risks and rewards.

lottery

Photo by MarkyBon

In fact, the media tends to portray entrepreneurs like lottery winners because that’s what makes the news. Because the chances of creating a company like You Tube or Facebook are so slim, most people shy away from starting their own business because they think it’s just way too risky with very little chance of success.

Just the other day, I had one of my readers email me that they were afraid to go out on their own because they didn’t want to risk everything for a measly 1% chance at success. A 1% chance at success? Where the hell did he get this number from? Turns out that he read that “99% of small businesses fail within their first year” which made him believe that he only had a 1% chance of succeeding.

Listen to me. This 99% statistic is complete and utter BS! Starting your own business doesn’t have to be the next big thing. And if you do things right, your business doesn’t have to be that risky either.

You Don’t Have To Hit A Home Run

The first thing that you have to understand is that your business idea doesn’t have to be the next Google, You Tube or Facebook to make money. If you are planning to start a company for the sole purpose of getting acquired for a billion dollars, then your chances truly are one in a gazillion. So instead of buying a lottery ticket, start something that you can make profitable within a short time frame.

Instead of setting your sights so high, focus on what can make you some money now with very little risk. Ignore the glamor and the hit or miss ideas. Divert your attention to simpler things. The simple things that people are looking to buy. Your idea may seem boring to your friends and family and it may even be mundane, but who cares? Find something that you can do and do it well.

Take a look at Tony Hsieh of Zappos. The man sells frickin shoes over the internet and makes billions of dollars a year. He’s successful because he sells shoes in such a way that people want to buy from his company. If you need a smaller example, take a look at our wedding linens business as well. We sell frickin handkerchiefs over the internet and make six figures every single year.

You don’t have to invent the next big thing. You don’t even need to do anything fancy. Look for a small niche and exploit it. If someone has already taken your idea, don’t let that stop you because the market is probably big enough for the both of you.

If you still don’t believe me, take a look around the next time you go shopping or go out to eat. My wife and I just ate at our favorite Chinese restaurant the other night. But did we go there because it’s the only Chinese restaurant in town? NO! In fact, there are probably 50 Chinese restaurants within a 15 mile radius of our house. And all of them have been in business for years. Despite the heavy competition, they still all make money.

By choosing a business idea that is simpler and easier to execute, you can improve your chances of success by several orders of magnitude. You might not strike it rich or make instant millions, but you can make a nice comfortable profit and be your own boss.

Keep The Upfront Costs Minimal

Keeping the risk factors low means keeping the expenses low as well. By creating a presence online, you can easily start your business for only a couple of bucks a month. Our wedding linens store is an online only store and costs only 80 dollars a month to maintain. If business were to suddenly stagnate, we could literally keep our store open indefinitely at our current burn rate.

When we first started out, our upfront costs were even less. Our web hosting only cost us $6.95 a month at Bluehost and we paid absolutely nothing in development costs. If you just take the time to look around, you can find a lot of free open source software already written for you and ready to use. These days, it’s extremely easy to Create Your Own Business Online. Read my tutorials and get a head start!

If you want the absolute lowest risk business possible, then start a blog or an affiliate marketing site. At $6.95 month, you can keep your website up for as long as you want until you are profitable.

Don’t Quit Your Job Until You Are Ready

If you need even more of a safety net, work on your business while you have a full time job. Take your time! Incubate your business within the comforts of your full salary and launch only when you are ready.

My wife and I worked on our online wedding linens business while we both had full time jobs. There was no pressure whatsoever for our online business to make any money early on because we had our salaries to back us up. Had we not had this cushion, we probably would have made more rash decisions just for the sake of money.

Some people can only be motivated by placing themselves in pressure situations. But if mitigating risk is your most important criteria, then don’t quit your day job until your business is already making money.

What Does It Mean To Fail Anyways?

My biggest beef about the “99% failure rate” statistic is that all businesses are lumped into one large category. I’ll bet that if this statistic was compiled again for just internet businesses alone that the failure rate would be far less.

These days, it doesn’t take much money to start a business and it doesn’t cost that much to maintain one either. If mitigating risk is your number one concern, then play it safe and start a low cost internet business. Pick something simple and build upon it. Businesses take time to grow and you can turn any boring old business into something huge if you have the time and patience.

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26 thoughts on “Starting Your Own Business Does Not Have To Be Risky”

  1. Very good point. That statistic is ridiculous! I know many, MANY people who run successful businesses, and many of them go on to start several more after the first.

    It’s much riskier to work for someone else these days, in my opinion.

    Glad you mentioned that the upfront costs are so minimal, too. This is something most people don’t mention. I started my studio for the cost of business cards (I had the rest of the equipment, sure, but usually if you are starting up a business you’ve been doing something related to it, anyway, so you should have the minimum necessary to run the business).

    This reminds me of a quote I heard somewhere (pardon the lack of attribution…I found many people who claim to have coined it): “Don’t let perfection get in the way of excellence.” If you aim to be Google and won’t settle for anything else, you’ll likely never have a really successful business.

    1. @Colin
      Agreed. I really hate how the media portrays entrepreneurship as an extreme when 90% of the people out there are running good ole fashioned small businesses. In any case, even the big guys had to start small at one point.

      @Christie
      I’ve come to realize that statistics are just silly numbers and that everyone has their own unique talent and drive

  2. Very inspiring, thanks!! We do hear those discouraging statistics, but we forget it is possible to start very small. We don’t have to lease office space or quit our jobs – just get started creating value out there.

  3. I love reading these posts. Thanks for the real world reliability in selling a hard good (hanker chiefs). I’m keeping my job and incubating just as you’ve put it but I know that’s not for everyone. I think more than not business owners probably need to be at a fly or die moment at one point…whether to make a commitment to a business or quitting their job.

    Thanks for bringing up the point that numbers mean nothing…there’s no way to tell how many business owners failed at the first 2, 3, 10, 20 businesses before one succeeded…%99, or %89, or %10 of businesses failing doesn’t mean anything.

    “He who is not everyday conquering some fear has not learned the secret of life.”
    Ralph Waldo Emerson

    1. @Robert
      Those people who need to fly or die shouldn’t be complaining about the risks of starting a business because the level of risk is entirely in their hands. It’s just a matter of finding the right motivation to follow through. Thanks for the comment.

  4. Steve,

    Like you, my business partner and I are living proof that more that just 1% succeed at starting and maintaining a successful business.

    We launched our small, specialized search marketing agency almost 3 years ago and have been steadily and consistently growing ever since. Not only that, but we work with quite a few small business owners who have managed the same feat building from the ground up with hard work and dedication. It’s not always easy, but the odds are much better than 1%!

    Thinking back to my days as an employee, I ask those who think starting a business is too risky – is it not riskier to be stuck in a dead end job with a boss who doesn’t appreciate you or your talents and co-workers who only have their best interests at heart? What opportunities are you missing out on because of a false sense of security?

    1. @Xurxo
      I too have found that this statistic has been misleading when I look at friends and family who have started their own business. I think it has to do with who we associate with. My friends are all fairly competent and that 99% statistic represents the average. Clearly Xurxo, you and your business partner are not average either!

  5. Steven

    I can so relate to this :-) When I started my business, 10 years ago, everybody, including my relatives, told me that it’s a dead end. How could you ever succeed? You don’t have money, connections, skills. You don’t have everything.

    Wrong. i had determination, discipline and a lucid perspective on things. I was ready to learn and to change course if something went wrong. 10 years after, I enjoy a far richer and free lifestyle that I could ever dream without being self-employed.

    Thanks for a great article. :-)

    1. @Dragos
      I’ve known you for a little over a year now and I have no doubt that whatever you touch will turn to gold. This is quite evident in your drive and in your writing as well. Determination and persistent always trumps risk.

      @Lana
      Good for you! It’s nice to have a professor or mentor there to reassure you. Thanks for sharing.

  6. Great article Steve. I had an entrepreneurship professor at school who always said that staring your own business doesn’t have to be risky. Just like you he said you can keep you day job until you are ready, you can bootstrap and do lots of other things to reduce risk. I took his advice to heart, started my own business and never looked back.

  7. I love the idea of keeping it simple. If I may I’d like to ad one more statistic to the discussion. That most businesses fail with in their first 5 years of business.

    I am currently at my fourth year, and times are looking tough, I’d like to blame the recession on my falling level of success. but in all honesty, I believe that I am missing that “simple idea”.

    I realize that my service I offer is not only needed, but its also a dime a dozen, Marketing and graphic design is something every business needs, but, there are so many folks out there that do what I do its difficult to separate me from the crowd.

    I’d love to try and tap into some unique selling point or process, to make it “fun” to hire nopun, and make it to where we get recommended to others and inspire repeat business. I am not sure I have tapped into this great idea as of yet. But I like the suggestion of trying to keep it simple. maybe I haven’t found that big idea because I am working at it too hard!

    Thanks and Regards

    Noel for Nopun.com
    a graphic design studio

    1. @Noel
      Sorry to hear about your business. Times are hard right now with businesses cutting back on their budgets. But things will eventually recover and I’m sure your business will be that much stronger when it happens if you stick around. The downtime you are experiencing is also a great opportunity to brainstorm new ideas or reinforce existing ones with your graphic design business. Best of luck to you!

  8. Thanks for debunking the 99% “statistic.” Many of those 99% are businesses that never should have been started. Talk to your hairdresser, your septic pumper, your auto mechanic, your bagel-shop owner. When the complicated ego-tripping ideas have all been forgotten, those folks will still be in business. If you’re shy about talking to them about your business idea, figure out why. Is it because it’s a bad idea? Then find a better one.

  9. Starting your own business definitely does not have to be risky – if you are a person made for entrepreneurship, if you have the “right” idea and if you have the endurance to stick to your business – even in hard times.

    Even though the 99% statistic is not true, there still is a risk – no one would deny that. However, there are possibilities to minimize this risk – for example by starting “a low cost internet business” as Steven has suggested – or by buying a franchise.

    The experience gained from pilot units run by the franchisor as well as from other franchised outlets reduces the risk of failure in comparison to running a sole proprietorship. Franchisees are not starting from scratch but buying into a potentially established business, thanks to a brand that is already known on the market. The franchisor supplies his know-how and the business system, so that management is simplified and methodology has already proven successful. Moreover, communication and marketing potential is far superior to resources available to an individual acting independently and cost less.

    Steven has rightly pointed out that “If someone has already taken your idea, don’t let that stop you”. I would add this: Instead, why don’t you use this person’s know-how and make his business yours?! Together you are stronger and the market is not only “probably big enough for the both of you”, but it might even need the both of you!

  10. The 99% in a year figure is an example of how rules of thumb are often exaggerated. When I was taking my earliest biz classes, I learned that the US Census of Small Business, completed every five years, showed that 90% of all businesses were not around for the next survey (FIVE YEARS).

    The authors of my textbook pointed out that:
    * Failures included those that closed because the owner died or retired
    * Failures included those that changed their name or location
    * Failures included those that changed ownership

    I doubt that the numbers have changed that much in 20 years. http://www.amazon.com/gp/product/0030225930/ref=olp_product_details?ie=UTF8&me=&seller= is a newer version of the book.

    I don’t think most people realize that the magazine “1,000″ companies also fail, or that those big companies have cut their domestic employment year after year, probably dating back to the mid-1970s.

    Think about it: if you’re the CEO of a big company, the way to get a bonus is to “restructure”, laying off a few thousand US workers, and possibly replacing them with overseas workers. This sparks an uptick in stock prices, triggering your bonus. After a few years, the price starts to decline because of the damage to the company’s productive capacity, so you sell out to a buyout group that closes some factories, lays off some workers, and cuts benefits to enable debt repayment. Once this works, they then go public and do it over. The only consistent thing about all parts of the cycle is lower employment numbers.

    Walt Hucks (@lnxwalt on Identica and Twitter)

  11. kris says:

    Thank you so much for your posts, I am truky nervous about starting on my own, but I want to start now, don’t want to wait till I’m an old man to have regrets of things I could have done. Your posts are giving me a great deal of courage even though my brain is telling me no. My hart know what it wants and I’m going to follow it, one step at a time

  12. i have semi started my business but i have two dependants (3 including my mrs) and i hate my current job, so i cant leave until my business makes enough money but it wont make enough money until i leave my job to put the time in.. HELP!

  13. Steve – did you read “Delivering Happiness” by Tony Hsieh. I just got a copy and read it, quite the story about pursuing your dreams and building an amazing business. It was really inspirational and I loved that you included Zappos as an example!

  14. I’d qualify the remark that starting your own business does not have to be risky, by adding the following qualifier: “…because the wise entrepreneur mitigates all critical risks.”

    It is this effort at mitigating all critical risks that gives the entrepreneur a valid sense of confidence regarding starting a venture and sticking to the task of exploiting the opportunity for which the venture was launched.

    The reason why the 99% failure statistic carries weight is because readers DO NOT question what portion of the 99% resulted in lessons learned that were NOT repeated by the same persistent entrepreneurs, who subsequently launched a new venture that DID NOT fail.

    How many projects fail in large business? Yet they represent lessons learned that staff workers do not repeat (if they want to stay employed), while subsequently attempting to execute refined projects that reach success. Do we say that 99% of large businesses fail because most of these early project attempts failed? Of course not!

    The mass media is biased in favor of big business.

    Let us see the whole picture. Let us see the results of lessons learned. A successful entrepreneur is one who sees each business venture as a project. Some of these projects reach successful completion. Some do not. But overall it is the sequence of projects which makes THE business for the entrepreneur and not only ONE single venture out of many try outs, because a true entrepreneur can’t help be always…enterprising.

  15. Flora says:

    This is such a wonderful inspiring, article.. I am so glad you shared it! My mind was going over how I want to do it but can’t right now because of costs,fee’s, and whatnot. And this is here now telling me, money won’t stop me. I also work and am looking to build my wealth and secure my future. This is wonderful now I just have to get started, I am at least thinking I will try before I say I can’t,or it won’t work. So inspired, thank you again for sharing.

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