“I have to ask you a serious question,” Bob said.
“Go ahead,” I replied, having no idea what he was about to ask.
“How do these entrepreneurs pay their living expenses?”
Bob is a professional services vendor who is new to the entrepreneur community. He sees a lot of money and attention being focused on startups and thinks there may be an opportunity for him to sell services.
But Bob has a concern after meeting many of these entrepreneurs. If they don’t have enough money to pay their rent and buy food, how are they going to pay him for his services?
I ask this same question and get one of these answers.
- I live with my parents.
- I hold minimum wage or service jobs.
- I do consulting gigs and programming projects.
- Occasionally I hear, I saved enough money to keep me going for a while.
My experience shows there are three prerequisites to becoming an entrepreneur.
Step 1: Be self-supporting
This struggle is the first step in achieving the dream of running your own company. It is the way life works. To get started, the entrepreneur must figure out how to sustain their lifestyle.
I remember I had just graduated and secured my first professional position. I had made this big transition but was living paycheck to paycheck.
I always felt like I was on edge financially. Back then, getting a credit card was difficult, so I didn’t have one. I had to be focused on cash flow. I would prioritize my spending so I could survive.
I divided my expenses into two groups by priority. The first group, which consisted of rent, food, student loans, and insurance, took almost all my money.
The second group was entertainment. I was always checking how much money I had in my pocket and checking my bank balance before I spent anything.
Then my boss told me, “You need to dress better.”
I said, “I don’t have enough money for clothes.”
He told me I was making enough to get a credit card. I got an American Express card and bought two suits. It took me nine months to pay that card off.
Step 2: Develop Functional Expertise
The up-and-coming entrepreneur must be practiced in some functional area. My observation is that the most successful first-time entrepreneurs are great at sales, programming, or consulting.
They learned theory in school but learned application at their first job. To be great at anything, you have to enter a master-apprentice relationship. In professional occupations, this is commonly called finding a mentor or having a boss.
Learning from someone who knows what they are doing, who instructs you and holds you accountable, is a necessary experience. It makes you great at what you do, and you learn how to submit to authority. You also learn how to manage by being managed.
This all comes from on the job experience before starting your first company.
My first real boss was Richard Brock. He was the first entrepreneur I ever met, and he was one of the very best. I learned how to sell and present from Richard and also how to lead a startup. This included the importance of cash flow to make payroll.
I also learned how to borrow money, work around the clock to hit deadlines, and satisfy customers so we could get paid. Invaluable experience.
The hidden added benefit from all this work was a fantastic network. Great people who loved to work together.
Step 3: Learn a Market
Learn a market by serving a market. This step is the last milestone in becoming a successful entrepreneur. With experience comes an in-depth understanding of the inner workings and secrets of the market.
This gives the first time entrepreneur a clear definition of the problem in the industry which needs to be solved. The problem no one can articulate but, once they see the solution, must buy it.
I just received these words of encouragement from an entrepreneur I advised:
“You and I met at the ATDC as I was coming out of my last startup. Six years ago! You listened to my story. Told me I wasn’t ready and told me why you thought that. I agreed with you and went to work for another company and closed 18 hospitals in 24 months.”
He worked for a company for two years. During that time, he saw a problem in the market which was going unsolved.
He started his company with money he had saved. He used these funds to fund the initial development of the product and first few customers. He then had no problem raising money as he was poised for growth and profitability.
Many these days seem to call themselves entrepreneurs. I’m excited to see the spirit of entrepreneurship blossoming in our community and around the world. But there are prerequisites to becoming a successful entrepreneur.
I know many of my readers will hammer me with the exceptions to these three prerequisites. But my experience as a life-long student of entrepreneurship has taught me this is the most certain path to success.