S7 E1(Practical Solutions to Difficult Problems) Debunking some of the myths of entrepreneurship - Jeremy Gray

Season 7 Show 1.

Segment 1 – Debunking some of the myths of entrepreneurship.

Myth 1) It will give you freedom. 

• Freedom to work where you want.
  • Some truth in this statement but WFH has eroded a lot of this benefit versus being employed
  • Connectivity remains important.
  • Clients/customers may require face to face meetings
  • Winning business without face to face meetings can be challenging
• Freedom to work when you want.
  • Clients/customers/employees will schedule meetings, calls and deadlines
  • You are expected to be available when needed. Clients/customers do not care if you are on holiday.
  • Problems need to be fixed as they occur. IT
  • Most entrepreneurs work long hours. 
• Freedom to set your income
  • Somewhat analogous to freedom to work when you want. – Work as much as you need to deliver the income you want.
  • Average one person business in the US generates revenues of $44,000. Average employed earnings are $52K, median earnings are $34K. OK for a hobby business but not enough to give much flexibility if this is your full time income.
  • Much of the work you will do is unpaid. – Finding customers, developing plans, learning new skills.
• Freedom from being an employee.
  • I trade one boss for many. Clients and their employees have demands, timetables and expectations.

Myth 2) It gives you the opportunity to generate multi-generation wealth.

• Maybe not a myth because it is true a successful entrepreneur can make far more money than any employee – even a CEO of a large corporation. The top CEOs  in 2020 made $24.2 Million. Compare that with Jeff Bezos' estimated worth of about $190 billion. In other words the average top CEO will need to work 7,500 years to match Jeff Bezos. 
• But it's probably not going to happen. The failure rate of new businesses is high and most entrepreneurs would be better off being an employee and investing their funds into an index tracking fund.
• Even a successful company may not allow you to make more than you could as an employee.

Myth 3 – All you need is a great idea.

• Firstly what you think is a great idea may not appeal to enough people to generate sufficient revenue. Lack of demand is considered to be a leading cause of failure for startups.
• Execution is more important than the idea.

Segment 2
The Risks
In Season 6 I spent a lot of time looking at what went wrong with firms that were initially successful but eventually failed. What I found was firms that went under usually had at least three or more of the following characteristics.

• They scaled up too fast
• They entered an industry which was new to them
• They changed their business model too often
• Their systems were not suited for their growing business.
• They hired the wrong people
• They continued down the path towards failure, even when the writing was on the wall.
• They ran out of money 

Segment 3 Bureaucracy 

• With protection there comes bureaucracy.  
• Factors to consider when choosing a business structure

The type of business structure you choose depends on your business needs. You should consider the following factors to determine the best structure for you:

• How much capital are you prepared to invest?
• How many owners will there be in the business?
• What liabilities and responsibilities are you prepared to assume?
• What risks are you prepared to take?
• What are the advantages and disadvantages of the different business entities?
• Is the business entity easy to close?
• As a sole trader you are essentially your own employee without the benefits
• Some form of limited liability protects your personal assets is recommended
• Brings reporting requirements which can be onerous

Time to set up a business 

• Varies by country. 1-2 days in countries such as New Zealand, Hong Kong, Singapore. To 173 days in Lao PDR and 230 days in Venezuela
• The average across the globe is 20 days
• Check tax incentives for startups in your country.

What is your risk appetite?

• It is impossible to start your own venture without a high metabolism for risk. Matched with resilience, intelligence, and a dose of luck, high risk tolerance can lead you to greatness. At the same time, low risk tolerance can keep you stuck in patterns that will leave you unfulfilled, as you watch others take the leaps and dives you dream of from afar.
• Study published in the American Economic Journal showed when faced with hypothetical high-stakes opportunities, most participants chose to take the less risky action. When faced with real, money-bearing high-stakes opportunities, even more participants chose the less risky path. In short, most individuals back down when faced with a high-risk situation in which both gains and losses might be large. Entrepreneurs are the rare breed who not only hold steady in such high-stakes scenarios, but seek such opportunities out.
• Your risk appetite will change due to circumstances. The birth of a child, taking on a mortgage will change your risk appetite.
• If you’re at the early stages of building your own company, you’ve taken that leap, and you know how it goes. If you’re still climbing the diving board, wondering if you’ve got it in you: take a step up to the edge, and take a bet on yourself. Your tolerance for risk might surprise you.

Useful Links
https://data.worldbank.org/indicator/IC.REG.DURS?most_recent_value_desc=false
 
You can contact me via the following links:
mailto:jeremy@business-in-asia.org

Or schedule time via Calendly:
https://calendly.com/3-continents-consulting

My websites include:
https://business-in-asia.org/
https://thedentistscfo.com/

My LinkedIn URL
https://www.linkedin.com/in/jeremy-gray1


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