Do You Have What it Takes to be the Next Tycoon?

The question is: Are you a gambler at heart?

As children, most people don’t day dream about rising to the level of middle management in a corporate conglomerate. No one really thinks, "I can’t wait to work 9-5 in a cubicle for someone who can't remember my name." Most people want to run their own show, be their own bosses, and become the next millionaire.
You can do it, but make sure you are prepared. Preparation is the key to success in the early stages of entrepreneurship. Now, let’s talk about three keys to preparing for the jump:

1) Family Buy-In

You and your family need to be ready to commit all resources to your dream. All of your time, energy, and, most importantly, money will disappear. Your spouse better be onboard and fully bought in to your dream because he or she is not going to see you or any money for a while. Set the expectations early and save your business and your marriage.

2) Be Realistic and Study the Terrain

There is no better way for you to discover new ideas or pitfalls for your business, than to write a plan. We’re not talking about a formal, $20,000 business plan, but a preliminary written analysis of your ideas. Perform intensive market research to determine if there is an unmet need for what you will offer. Is that unmet need a cheaper price or an untapped geographical market? Perhaps there’s an unmet need for products and services that are complimentary to those already on the market. Part of your research should also include analyzing the competition and determining where your company will have the edge. As you research and analyze the data, you can then determine if anyone will actually buy what you plan to offer.

3) The Money - How, When and Where

Once you have determined that you can offer something that people will want to buy, determine your funding strategy for the first five years. Try to avoid unnecessary overhead expenditures. Work out of your house, which is quickly becoming today’s trend even for large corporate employees. Also, hire only those who are critical to the success of your company and seek out creative compensation strategies. Your goal is to keep the cash in the business as much as possible.

As for funding your venture, contrary to popular folklore, friends and family don’t want to give you their savings. There will be lots of promises to help in the beginning, but getting people to actually sign that check will be a struggle; I guarantee it.

If at all possible, plan to self-fund your venture for the first couple of years through your own savings and through loans. Loans are tough to get right now, but they are still out there. Next, get firm commitments from your friends and family as to the amount they will give you and when. By firm, I mean in writing. As for their ROI, don’t give away your equity if you can help it. Be creative - consider performance based returns to offset equity. Be stingy with your equity and try to structure the investments as loans or, at worst, a loan/equity combination.

If you build it, they will not necessarily come. It makes for a great movie, but not always a great life. Most start-ups fail, not for the lack of passion but for the lack of preparation.