Last year I signed up to volunteer as a mentor to an aspiring entrepreneur. He sent me an email the other day with two great questions. Here they are with my replies following:
Should I follow the money or my passion?
I get idea’s here and there on what sort of ventures I’d like to pursue. That’s when the shoulder angels start. One getting me all excited, the other being the voice of reason. I struggle answering the question ‘Is the idea good enough to give 10 years of my life to’. Most of the time I feel like it’s a resounding no, but if that’s always the case I’ll never start anything. My question is, have you felt similar, and how did you work through it?
Reply: Good question. It’s great that you’re thinking proactively this way. It’s common to see successful entrepreneurs that hate what they do.
As cliche as it sounds, I agree to focus on ventures that you can be passionate about. I’ll tell others in similar discussions to figure out what they like and know that they’re passionate about and then reverse engineer how to monetize it. That way you know what you like instead of choosing from whatever options are still standing after reviewing a list that is focused on money first.
The other thought process behind this is to minimize regret. If you pass on pursing something you have more of a personal interest towards in order to pursue a unicorn for money, and it fails, you’ll regret not trying the passion project. But if you pursue your passions and it fails, you’ll learn a lot and be proud that you tried.
Jeff Bezos’ “Regret Minimization Framework” mindset supports this idea.
I also often get distracted with new ideas to consider. There are clear opportunities in these ideas. But, more often than not, I choose not to pursue them because I don’t want to risk good time/money for “maybe” time/money.
Many other successful entrepreneurs I network with take on too much and wish they narrowed their focuses down. They’ll admit that they feel the could be more productive in those lesser quantity items, while also feeling less burned out.
Question: Should I take on debt to start a company?
I’m still fairly young and don’t have a lot of financial means personally. I firmly believe that the more I can contribute myself, the better off I’ll be in the long run. Would you suggest waiting until I can acquire my own funding (bank loans, etc.) to start something, or is the loss of equity worth taking investments and partnering? If I do need a partner, what is your experience finding financial partners, do you find people who would specifically be interested in your product, or do you approach a generic investor and try to convince them that yours is the risk worth taking?
Reply: This answer will probably vary wildly depending on who you talk to.
I’ve never taken funding. And, until last year, I never spent a dollar on advertising for SEO National. Ironic for a marketing company.
Lately I’ve been experimenting with further growth strategies, and using funding to fuel that. My choice of funding was a business credit line. That way I still own 100% of the company, I don’t have to report to anyone, and I can use as much or as little of the funds as needed, always. I don’t have to go find another source time after time after time.
I’m a firm believer that you don’t need money to start a business. I have nothing against doing so, but it is totally possible to become successful without.
If you do take on funding, my vote would go towards pursuing funding to grow your company, not start it. Get it going first. Especially since the majority of your plans will change once you start. It would be unfortunate to take on funding, then start, then realize how different your strategy needs to be now that you’re in the market and can see more clearly.
I’ve also avoided investors because I didn’t want to make hard decisions between what I felt was right for the company versus what someone else thought was right. Sometimes you just want to take a day off or make a dramatic pivot in strategy. Hard to do with investors.
Someone Wanted to Buy My Company
There was a VC company that was interested in acquiring SEO National about five years ago. They wanted to roll it into the purchase of another marketing company to have a full-service agency. I ended up backing out of the deal because I didn’t like the negotiations, but I learned two really valuable items. If and when you sell your business, you must have these to maximize your exit:
- Streamlined procedures
- Consistent source of scalable leads/customers
Business buyers want to come in, take the keys, and go (1). And on their way they want to know where the fire is so they can pour more fuel on it to grow as fast as possible (2).
I say that because you could likely build and sell a small business that has the two items above, but no funding, for the same or more money than a bigger business that took on funding but was just a rapid growing mess.