by Joe Kirkpatrick
The American Dream: Owning your own business. Unfortunately, this dream for most ends in a nightmare. In a study done by The University of Tennessee in 2012, 25% of all new businesses fail within the first year. By year four, 50% have failed, and by year ten, a staggering 71% are gone. Before you take the leap, ride around in the city in which you live and look at all the empty buildings for rent - they all used to house a business that somebody thought was a good idea.
Why is it so hard to be successful in business? Emotion is probably the biggest reason. I have known many inexperienced people who have a "great idea," and this sparks their desire to take that idea and turn it into a business. Several years ago, I had an old gas station for rent. A lady called and inquired about renting it, and I asked her what she planned to use it for. She told me she wanted to open a restaurant. I asked if she had ever owned a business before, and she told me she had not. Not being my first rodeo, my next question was, "But I bet you are a great cook, and everybody says you ought to open a restaurant." She told me I was right. I then broke the harsh news to her that in this town, the average life expectancy of a new independent restaurant open by someone with no business experience is less than one year. In other words, it is the equivalent to committing financial suicide.
Keep your day job! Back in the 70's, I had learned to work on my 1967 Volkswagen out of necessity. I was making $520 a month (before taxes), and simply could not afford to pay someone to work on it when it broke down. I bought some tools and a book, a began to do my own work. I lived in a duplex with no garage, so I did my work in my driveway. Before long, my neighbors who owned VW's were asking me to work on theirs. Within a couple of years, I was making more money doing that than I was on my day job, so I decided to quit the day job. I told a co-worker, Patsy Parton, what I planned to do, and she gave me the best advice I have ever gotten in my life: "Don't do it - Keep your day job for your steady income and benefits, and make your real money on the side." For several more years, I did exactly what she told me to do until my business had grown so large it could no longer be done "on the side," or at my house. When I did move to a "store front" location, I carried with me several years of business growth and experience, and most importantly, an existing customer base to build on. Some side businesses can be very successful without ever moving into a business location. In our city, Jonathan Porter owns "Porter Concrete," a very successful business which pours and finishes concrete. He not only does not have a "store front location," but also works a full time day job as well, and has done so for years.
Look at buying an existing business if you are going to take the leap. You can buy a failing business cheap, but you need to look long and hard at the customer base and overhead expenses. What I like about a failing business is that the day you buy it, you have at least some customers, and you can build from that. You also get all the inventory and equipment at a great discount as well. Plus, you may be able to negotiate a lower monthly rental rate on the building as the owner might rather do that than have a vacant property. Remember, if you make an offer on a failing business, make it "low ball." Also, though rare, buying a longtime business from a retiring owner can be a good way to get into business. By doing this, you start with an existing customer base, and guidance from a successful owner as well.
This is only a light overview of starting your own business. If I have to summarize my advice into one sentence, this would be it: Don't do it! Keep your day job.