Entrepreneurial ideas - controlling your own destiny

[younginvestor2013]

Hello,

I have lately been considering entrepreneurial ideas in place of working for "megacorp" until retirement. As some of you may recall, I recently posted about some money I inherited. This money, combined with my personal savings, amounts to about $280,000.

I am 23 years old. I consider myself fairly astute, observant, and analytical. I come from a family of entrepreneurs (which is how/why I inherited the money I did).

Before I graduated college, I had this drive and energy about entering "the business world". Since I've started working, I've learned that (generally speaking), as long as you work for someone else, you will/should do your job the way they want you to, not what you think is best. I've received positive performance reviews, but just drag on the thought of going to work and being micro-managed.

I know this sounds superficial since it kind of "goes with my story", but it is true: when I want something bad enough, I will go to many extremes to get what I want. When I was looking for jobs before I graduated, I was so motivated and was one of my only friends to get a job.

I think if I were to start my own business I would be much happier in the long run. I like earning money and staying busy/sharp ("working"), but I don't like doing it on others terms. I think this is why I am intrigued by the idea of "early retirement".

If any of you were in my shoes (with a $280K net worth at 23 - with no family, debts, or other financial obligations), what would you do?

I've thought so much about these scenarios lately that it is somewhat sickening. I've concluded that the main two paths for me are:

1) Quit corporate america to pursue my own endeavors. Take more risk, possibly fail and lose some substantial money. The more risk might equate to much more happiness and control down the road

2) Suck it up in corporate america. Make the most of my free time and still likely retire early anyway.

I realize the big "caveat" to this is that I don't necessarily have an entrepreneurial idea. As of now, I am thinking of more "bread and butter" type ideas such as franchises (more along the lines of "up and coming" franchises), land lording full time, gas stations, dry cleaners, seven eleven, etc.

Do any of you think that you wouldn't be as focused on "early retirement" if you weren't working for megacorp and instead were working for yourself?

Your input is appreciated! Thanks

 

[Meadbh]

I admire your entrepreneurial spirit. Before quitting your job you need an Idea, a business plan, and you need to prove that the idea is viable, e.g. Initial sales. As you no doubt are aware, most start ups fail, but that's not to say you shouldn't try. Coming from an entrepreneurial family, hopefully you have some mentors. And possibly access to some venture capital.

So........back to the drawing board!

 

[MBAustin]

I admire your entrepreneurial spirit. Before quitting your job you need an Idea, a business plan, and you need to prove that the idea is viable, e.g. Initial sales. As you no doubt are aware, most start ups fail, but that's not to say you shouldn't try. Coming from an entrepreneurial family, hopefully you have some mentors. And possibly access to some venture capital.

So........back to the drawing board!

+1

You need to know what you are moving towards, not just what you are leaving. Do that homework before you leave Megacorp, or your "venture capital" fund will be gone before you know what hit you.

That said, go for it - as long as you know what "it" is first!
Good luck!

 

[MooreBonds]

Personally, I'm somewhat risk-averse.

Had an opportunity to purchase part of family construction business. Passed it up because I didn't want that much of my net worth tied up in it, and because I had just finished a stressful mega project that gave me a bonus that pushed me much farther along the road to being FI.

Given the above, I'd just stick it out with a job for "the man" that's both financially rewarding and that you enjoy somewhat (you likely won't find a dream job at any rate - just being realistic).

As your family can undoubtedly tell you, being an entrepreneur can take different forms: the 'independent consultant' vs owner of a company with employees. The latter will expose you to all of the things you hate with working for "the man", and then some.

You think you hate being micromanaged now....but imagine when 67% of your employees don't really give a shlt, and YOU have to end up micromanaging THEM because their productivity isn't worth a hill of beans....or dealing with 15% of your employees failing drug tests and not showing up to work on-time, impacting your profitability and productivity.

Then you have to mix in even more 'not so fun stuff', like marketing and meeting with 100 prospective clients to hope you might get 1 or maybe 2 to give you business.

Oh, and don't forget all of those gov't forms you get to fill out and send in.

Being a business owner can be an awesome thing - but don't forget that when you have a huge financial head-start like this, consider how much 'easier' it can be to reach FIRE by simply coasting along.

Some people have that drive to go for the taste of the victory of a successful business venture. Even if that is you, first do what many others have done - go to work for a company in an industry you think you might want to be an entrepreneur in, and get paid to get an education up close and personal. See what it might be like, and learn from their mistakes first.

 

[jollystomper]

The major advantage you have to pursue your entrepreneurial dream is your age. If you are single that also helps. Even if it fails after 2-3 years you still have many years to recover. And if single you are not impacting anyone but yourself.

I would suggest going for it, but set yourself a budget regarding how much you want to invest toward your dream. I would not recommended putting everything you have towards it - but, for example, you might put half of it to leave yourself a cushion. Do a lot of research, talk to those who have gone down the path, and, as mentioned above, build a business plan to ensure you have looked at all of the bases.

From a personal standpoint, if you are single, I would minimize any "romantic" involvements, because to optimize your chances to succeed you are going to have to put in a lot of your own time and close relationships are at risk - unless with someone who shares your dream and wants the same goal.

You probably have a slight advantage since you have been exposed to this through your family. But the odds are against you since most independent businesses fail. So go for it - but plan carefully and budget for it.

 

[YoungSaver]

Been there.

My advice is to set aside $15k for your entrepreneurial dream. If you can't make it work, then you're only out $15k. Invest the rest...Max out Roth for last year and this year. Keep working at whatever company you work at. At age 23 I hated working for "The Man". But eventually you'll get over it, you'll figure out corporate America, and you'll feel good inside because you've got a HUGE financial advantage with $265,000 invested. Try to put as much as you can into your 401(k). Then when you get to be 30, you'll start thinking about actual early retirement.

I've worked at the same place since a teenager, but I was about 23 when I started my own business with $500 and a couple of hundred pounds of products from the Orient. Had a lot of sales over the years, but I got lazy and the competition beat me. It was good while it lasted, but I still work at the same company and that pays my bills now.

 

[chasesfish]

I'd go into franchised fast food. Seek out an experienced owner operator and go try to be a store manager and learn the business, if you can tolerate it, that's the best path to wealth I've watched without growing up in a specific industry.

By the way - my job for the last 10 years is working with entrepreneurs. If I were in your position, that's the route it would take. Hopefully find a multi-store franchisee.


Other than that, go pick an industry you love to work in and figure out if you can find a niche and fill it.

 

[younginvestor2013]

Thanks for the advice. There are so many angles to look at it. After two years now working in corporate jobs, I come home everyday feeling unfulfilled. I am very enthused at how much my net worth is rising, but I am not enjoying the Monday-Friday ride along the way. I am happy overall, but I realize that I want more control. I love planning things and taking control (planning group trips, organizing outings/activities, researching alternatives and making the best decision possible, etc). Generally I also like to do things on "my time". These are two big examples of why I think I would be a good entrepreneur.

owever I realize there is significant risk.

@Moorebonds, I have thought about your comments. Assuming I were to go the stereotypical franchise route....going from a white collar job, where I interact with logical (relatively speaking!! ) and analytical folks to a (potential...) blue collar job would be a big adjustment. Instead of dealing with typical corporate job nuances, I might deal with more elementary issues such as showing up to work on time, petty theft, motivated workers, etc.
@Moorebonds, I think your comments primarily center around blue collar jobs. And even in such a case, assuming such blue collar job could generate a pipeline of good candidates (such as college students or part time non-bread winner moms), I think that would suffice.

I am going to read a book on franchising as I think that may be a good option. When I think of franchising, I automatically think "McDonalds down the road". My short and recent research has proven otherwise - there are countless franchises out there and it is possible to be very successful.

If I want to, I have the capital and time to build up a network of franchises. Or, I can plug away at my desk job for a while. That just sounds so boring. I am more one for adventure and risk/reward. Maybe my inheriting of this money has caused this (I've been like this for a while though!).....but at least I am being honest with myself!

 

[chasesfish]

Two things I forgot to mention:


95% of franchisors are either clowns or crooks. They think their concept is the next XYZ, or just want to collect a big fee and royalties. You have to go find the good ones, but they should require capital and industry experience.

The other option is you can take your good w-2 job and capital and go buy a rental property and experience being an entrepreneur without having to go "all-in". It's a good way to start, finding the right property, fixing little stuff, managing renters.

 

[younginvestor2013]

I see your point and while I do agree that it would be imperative to do your due diligence, I would also think that most individuals willing to put up tens of thousands of dollars of their money would be in it with their best feet forward. That said, I think there is a big difference in opening a McDonald's vs a no-name burger joint. I think the latter might be a waste of money (royalties primarily but also start up costs) while the former would be a better formula success, assuming the demand were there and all the other bases were covered.

 

[younginvestor2013]

Oh, and I have thought about landlording. I think this would be a great endeavor except for two main issues:

1) I am currently living away from home. While I do have a lot of friends where I live, I could easily see myself moving home in a few years. This pretty much prevents me from real estate investing/landlording and to a certain extent becoming a franchiser. I think with either scenario I need to decide where I want to plant my feet indefinitely otherwise I should just continue plugging away at work.

2) I don't want to take on massive debt. Given that my annual income is only 60k living in Chicago that salary doesn't allow for much house. 250k would be a lot of debt on my books and might likely hinder any entreprenuerial ideas due to restricted financing.

Sorry if I am sounding like a grouch, but I want let you know that I have already thought about these things as I do like the open dialogue and your input!

 

[inky]

I think you have your youth, your family experience, and your entrepreneurial nature on your side.

Even if your first venture doesn't turn out as successful as you would've hoped it will be a learning experience and you can move on until you achieve the level of success you desire.

Working for Megacorp is probably a less risky way to achieve ER. Having said that, I'm 41 and will likely be able to retire in 4 years. I've had a lot of good experiences at work but in many ways the journey has been pretty soul-sucking. As you mentioned... If I had to do it all over again I would've picked a job I was more passionate about; then maybe ER wouldn't be so important.

 

[ShortInSeattle]

I started my business in my late twenties, after I had accumulated about ten years of full time work experience. I'm very glad I had my corporate career first.

1) I learned how to work in a successful business.
2) I discovered my strengths and weaknesses
3) I learned from both great and terrible leaders.
4) I developed skills that qualified me to run my business.
5) I gained valuable experience as a people-manager.
6) I gained credibility.
7) I made money, which funded my business startup.
8) I made valuable connections.

No one likes working for the man. But man am I glad I did so.

SIS

 

[younginvestor2013]

@shortinseattle,

May I ask what line of work and what type of roles you worked in before starting your own gig? When you finally went on your own, what did you do? What were the biggest obstacles and challenges?

 

[daylatedollarshort]

You might consider having some sort of online business or consulting work you can do in your off hours of a regular corporate job. Keep the corporate job until you have reached the crossover point to where your side business is earning enough to support you.

Start hanging out on forums that support the kind of businesses you might want to get into, identify some posters who seem to know what they are talking about and then read all of their posts and maybe even ask for advice. I did that and one person pretty much laid out a road map for me to make a supportable living from almost the first year.

Take note of the studies on expertise. It takes 10,000 hours of deliberate practice to become a world class expert in a given field. That's how much time an average person in the U.S. spends watching TV in 6 years.

 

[YoungSaver]

Yeah, keep your current job for now. Get used to corporate life and how processes work (slowly). You're still so young.

Even if you were a franchisee, you're still going to have to deal with all the corporate folk from your franchisor.

 

[ShortInSeattle]

@shortinseattle,

May I ask what line of work and what type of roles you worked in before starting your own gig? When you finally went on your own, what did you do? What were the biggest obstacles and challenges?

I don't want to get too precise on an internet board where I am semi-anonymous, but here are the broad strokes:

1) Worked primarily in the HR field, although also as a "headhunter" which was a sales role. I worked up to management and lead a team.
2) In my mid twenties I went to grad school and added some skills.
3) Started my consulting firm after grad school and began looking for clients.

You need to find something where there is good demand, where you have an aptitude, where you can build credibility, and where you can make sufficient money. It can take some time to get the stars to line up.

It took me 6 months to get a project, 2 years to make any profit, 4 years to match my corporate income, and 5 years to break six figures. Most of the people who started at the same time as me have folded. The first years were full of struggle and self doubt. I took a side job for a while to pay the bills while I built the business.

Most biz owners I know have similar trajectories. The truth is that I love my work. Why else would all this be worth it?

SIS

 

[NW Landlady]

This is a great Thread!

I just wanted to add that I totally support you in your endeavor.
My advice in what ever business you decide to pursue,
be prudent and respectful in how you treat your money.

In my case, I worked for corporate Big co for many years,
before transitioning to my business full time in my 40s,
but it has been very rewarding, sometimes very frustrating,
but then again, the pellets are certainly good!

 

[citrine]

I agree with you....working for yourself is awesome
I also know you will do very well since you come from a family of entrepreneurs. I left mega corp once I had saved up $25,000 which paid for my schooling and added some cushion to my monthly bills. It was a lot of hard work and I started showing a profit after the first year and a half. However, I am the only one on the payroll....not sure if I would like having to manage other people.
I am in year four of my business and it has grown substantially; however, I will not be able to take on any more new clients after the next few months...it will become more work than fun!
I would take a year to save up some money, don't touch the inheritance, come up with a plan, and then take the plunge.

 

[younginvestor2013]

@citrine - thanks for the encouragement.
Can I ask you - and anyone else who has pursued entrepreneurialism - where you came up with your ideas?

I imagine the standard response is that you continued in the same line of work when you were @ megacorp. If so, what were you doing?

I work in industry accounting - so if I were to continue my line of work "on my own" it would likely be a tax oriented CPA sole proprietorship. I am not opposed to that, but I would first have to attain my CPA. Thereafter, I imagine it would take some time to build clientele.

This is not my preferred path though. I value analytics and certainly understand that the numbers must work to make any business successful in the long run. However, I would like to get into something less analytical/numbers based for the actual line of business I enter.

I would be enthused at the idea of starting my own business. As it stands now, though, I lack a plan and idea. I have enough capital which leaves me with a lot of options. Ideally, I would like one with low start up costs (service oriented/no inventory) and zero to a few employees required. Regardless, I am open to many options if the idea is compelling!

On a side note, my annual expenses (excluding the 20% savings rate of my gross salary) are only about $24,000. I have zero debt. Based on my net worth, excluding any market fluctuations, I have enough money to sustain for a long time.

But, as many of you mentioned, I would prefer not to exit until I have a solid plan. I will admit, if I want to do this, I am going to have to make sacrifices in other areas of my life (i.e., social life, working out, other hobbies), in order to devote time to this on the side while I continue to work 40 hours a week.

 

[Papa bear]

Take a look at the book, The E-Myth. It's a quick read and can change your outlook on how to run a business. It can definitely help if you're looking at franchises.

 

[ShortInSeattle]

Take a look at the book, The E-Myth. It's a quick read and can change your outlook on how to run a business. It can definitely help if you're looking at franchises.

+1 Also The Lean Startup by Eric Reis

 

[citrine]

I went the route of a nervous breakdown....don't recommend that! I got a life coach, some intensive therapy, and once I had the plan, I waited till I had the money and then took the leap of faith. I went from highly paid gofer girl/adult babysitter for the VP/Directors in MegaPharma to a Integrated Massage Therapist. I did not go into the same field at all.

 

[LoneAspen]

I'm going to jump in with my .02 based on my own life experiences. First, a little background...I'm 46, and with the exception of a couple years of my life (which I'll get to in a moment), I've worked in corporate America, specifically in the IT field. And I hate it. I don't just mean I hate my job, I hate my career. I just find IT very unrewarding and unfulfilling, and I just can't take the 9-to-5 sit-in-a-cube-all-day rat race any longer. Hopefully, I'll be able to (semi) retire in a couple years, but that's a different topic...

In 2005, I got fed up with IT, and left and got my real estate license. That lasted a couple years until I was forced to give it up because the market had crashed and didn't have enough deals closing. BUT...those two years were the best of my professional life. I was essentially running my own business, and in charge of sales, marketing, finance, customer support...everything. It was fantastic. I could visit the office when needed to meet people or prepare my marketing. Or, I could be out in the field showing homes, meeting clients, etc.

So, I would suggest go for it. If you're only 23 and already getting a negative taste of the corporate world and being "told what to do", and in many cases forced to do something "right now" as opposed to "doing the right thing" then believe me, it's only going to get MUCH WORSE the older you get.

You're young enough, and have enough reserves, that I think you could easily set some aside, leave the corporate world, and try something out without damaging your financial future.

Now, I've never tried my hand at franchising because it never appealed to me. Even as a franchisee, you're still under a corporate thumb who's telling you how to run things. Also, you have very little control (if any) on a competitor opening up nearby that steals your business, even one from the same franchise. I'm thinking specifically of the Starbucks-on-every-street-corner kind of scenario. That wouldn't interest me at all.

If I wanted to break away from the corporate world, it would definitely be running my own show. Sink or swim kind of thing.

You already mentioned landlording, but complicated by you might move in a few years. If I were in your shoes, knowing at age 23 what I know now, and having your reserves, I would seriously consider something in real estate. Either fix/flips and selling them or renting them out, or getting into residential real estate again. Both are things that could be transferred to other markets if you moved. If you invested in rentals, you could always keep them and move, and have them managed by a property management company. Yes, their fees eat away at your cash flow, but you have to factor that in. If the return is still good even after the fees, then it's no problem. Or...if you got involved in residential real estate (as I did), and you moved, just get a license elsewhere and set up practice there.

I'm biased toward real estate because from the standpoint of running your own business, it was like heaven for me. I was my own boss, ran every functional area, didn't report to anybody, no great overhead like my own building or equipment, and I didn't have to manage employees.

Anyway, food for thought. Bottom line...if I were you, I would not let me soul get sucked away by a megacorp. You're young enough and have enough reserves you owe it to yourself to go for it, and try something. Even thought I lost money practicing real estate due to the market at the time, I don't regret those few years at all - they were the best years of my career, and I'd regret NOT doing it.

Good luck to you!

 

[Milton]

Even as a franchisee, you're still under a corporate thumb who's telling you how to run things. Also, you have very little control (if any) on a competitor opening up nearby that steals your business, even one from the same franchise. I'm thinking specifically of the Starbucks-on-every-street-corner kind of scenario. That wouldn't interest me at all.

If I wanted to break away from the corporate world, it would definitely be running my own show. Sink or swim kind of thing.

Took the words right put of my mouth!

Most decent franchisors have a highly-standardized method, from which franchisees are unable to deviate at all, or at least not without first jumping through all kinds of bureaucratic hurdles. If you truly crave independence, and dislike being told what to do and how to do it, I'd suggest staying clear of franchises.

Given your situation and desires, I don't see much point to hanging around your current job unless it provides the opportunity to grow your skill set and/or qualifications (e.g., becoming a CPA might open some future doors for you). I would not stay just to increase your capital base: there is an opportunity cost to delay, plus you risk becoming psychologically trapped by the paycheque. If you are determined to become an entrepreneur, might as well get started while you are still young and without dependents: there will always be risk, but currently you have the ability to recover if things don't go as well as you hope.