As part of this entrepreneurship series, let’s focus on point #5 in my Top 5 Reasons to Become an Entrepreneur - the Upside. Yes we are going to talk about the value of money, a topic that I feel is essential for fully exploring the reasons behind entrepreneurship and the values behind business in general. Needless to say everything below is based on my own opinions and values. I do hope that my thoughts on the subject help the readers of this blog reconcile their own value system with their own interactions with money.

Money means a whole lot of different things to different people from being the source of all evil to the ultimate dream. It’s common to politely downplay its importance, yet enough people buy a lottery ticket for the cost of a coffee for there to be millions of dollars in prizes given away each week. How can people, often the same person, complain about the evils of money and yet desire it so much at the same time?

What Role Should Money Play?

Being on a “career” path that is so heavily based on money being valuable I’m very much interested in this question. It’s very easy and even fashionable to dismiss its value as anything other than a necessity. I disagree with this viewpoint, but I also find the idea of living strictly for the persuit of money rather unappealing.

Clearly I am interested in profit resulting from what I do and I don’t see that as being an inherently bad thing. I have several for-profit ventures, and one of my criteria for this very blog is that it generate enough income to be “self-sustaining” (defined here as generating enough financial value for me to make the opportunity cost of running it lower than not running it). Yet the desire for money has been and currently is at the heart of some tremendously terrible events in the world. Due to the consequences that greed can have, the blind persuit of money or wealth is not something I subscribe to, nor do I believe it’s something that anyone else should do for the sake of building a better world for everyone.

Money Is Just a Tool

Economics teaches us that money is a form of storing value, and depending on which classification you use that can mean anything from cash to bank accounts to bonds. This value is your buying power and allows you to obtain goods and services in exchange for a portion of this value. It’s a remarkable idea and must be one of the most important advancements of civilization. No longer do we need to cart around livestock or decide how many music CDs an oil change is worth. That’s all there is to it, money is a tool that represents part of the value we create.

From here on out I am concerning myself only with value creation. The endeavours that I participate in create value and this value is divided between myself and often others that my actions benefit. For example everytime I sell a copy of CustomBar, value is created. My customer has just gained an amazingly productive tool that benefits him or her enough to pull out the credit card and purchase the product. I in turn have received value in the form of a monetary payment, but I’ve also gained so much more. I now have a larger user base and the referrals that come with it, which in turn generate even more value. I also have the satisfaction of knowing that someone out there really enjoys the product that I poured my mind and heart into for two years.

I consider money valuable and important because it provides an easy medium to store and exchange some of the value I generate for other more useful things. In that sense money really becomes critical, because I have goals that require money to be achieved reasonably. On the other hand money is just a trivial detail, since I know that if I generate value for others and for myself in a meaningful and effective way then I will have no problems exchanging part of this value into a form that I can use to aquire the other resources I seek. In fact I am accidentally giving away part of the equation for reliably earning money: it’s not how hard you work, it’s how much value you generate.

Keeping in mind everything I’ve just said, here is my statement of where money fits in life:

“Money is required for some of the objectives I intend to achieve and it is therefore valuable. Money itself cannot bring happiness, but often the persuit of money can bring about the exact opposite. Therefore I will only persue money in ways that are in and of themselves worthwhile, enjoyable and in line with my value system. I expect to be rewarded with financial value only when I myself generate value for others, and this condition will be kept foremost in my mind in any business venture that I engage in.”

Where does money fit into your life? Why do you cash the cheques that you receive?

Yesterday I promised to even things out in my post on the Top 5 Reasons to Become an Entrepreneur. Today I write on why not to become an entrepreneur. This is a tougher topic for me to write authentically as I’ve been playing entrepreneur for the past four years and have no real desire to turn back. Consequently this article took me twice as long to write. I also found myself elaborating more as I poured more and more thought into each point. The result is what I feel are the top 5 cons of entrepreneurship.

#5 The Work

Put simply it never stops. As an entrepreneur you cannot ever run out of things to do until the business is gone. If you aren’t busy ordering supplies, tracking inventory, getting the books in order, finding customers, finding advertising space, working out glitches in the product, negotiating with a supplier, negotiating with a customer, seeking funding, optimizing your website, figuring out payroll, or one of thousands of other tasks out there then you can be refining your business plan to maximize growth.

In some periods I put as many 15 hours a day into my business, and looking back I didn’t always get 15 hours of work out of it. The book Getting Things Done is one of the key materials that has taught me how to make the most of my work time and allowed me to have a personal life at all. I am in the process of reading it for the third time and can partly attribute so many successes to the advice in it. For $10 it’s practically free.

#4 The Investment

A business isn’t started for free. The financial commitment can be significant if you are opening a store or be as little as the cost of a domain name and web hosting (if you seek these things for a business venture then get in touch with me). The former is a lot more likely than the latter, so there is start-up capital you must find and odds are its coming out of your pocket or a loan secured by your most prized assets.

However the money invested is only part of the equation. You also have to examine your opportunity cost. What is your next best alternative for the money and time you put into the business? What kind of retirement fund will you have on a $5000 investment with the power of compounded interest? What sort of income are you losing by putting your time into this venture instead of your next best alternative?

#3 The (lack of a) Pay Cheque

A regular pay cheque is a lovely thing to have. It pays bills, buys food, and makes sure you can always get those nice consumer comforts like the latest gadget or DVD. With the popularity of direct deposit, money just “appears” in your account every two weeks.

When you are starting up such a regular pay cheque is very difficult to get. If you are lucky enough to have an outside investment that pays you a salary or have enough revenue coming in to be able to always pay yourself a certain amount (and invest the rest in the business) then you at least have regular income in the short-term. In the long-term the only way that cheque will keep coming is if your company continues to succeed.

Most likely you will be taking a severe pay cut, and without outside funding you are risking no money coming in at all. Unfortunately the companies issuing your bills won’t be very understanding about this.

#2 The Risk

You take on risk when you start a business. This risk, like with other investments, is why that coveted upside exists. Points 3 and 4 wouldn’t be a big deal if you were always guaranteed to succeed. Instead you must do your absolute best, make the decisions you believe are right, and accept that your life will be pot marked with failures (and valuable lessons).

I had the opportunity to listen to Jim Estill speak recently, and one of the major points he emphasized was “Fail Fast and Fail Cheap”. You cannot avoid taking risks in business, and consequently you can’t avoid failures.

#1 The Discomfort  

As human beings we tend to find change uncomfortable, but there isn’t much room to be in a placid comfortable nook when you’re an entrepreneur. You must constantly be willing to try new things, make decisions without nearly enough information, and the worst fear inducer of all, take risks. The very nature of this kind of life prevents you from hitting the standby button on your brain and just slogging through the work handed to you oblivious to its meaning or consequences (not that this is how all employees work all the time - it’s just you have that beautiful option). Having to constantly grow, change, and do things out of the ordinary can bring on terrible fear along with excitement. Your outlook on life, the acceptance of your previous “40 hour work week” peer group, and the role you play in determining your future will all be drastically different.

Every other entrepreneur I have spoke to mentions that entrepreneurship is a roller coaster of emotions - it will be the source of your highest highs and your lowest lows. That’s definitely been the case for me and every business owner I have ever met. Riding a roller coaster 24 hours a day… not something everyone wants.

There’s are a lot left to hit on the entrepreneurship issue. Stay tuned for part 3 where we break away from lists!

Something that I am asked every couple weeks is “why entrepreneurship?”. This is a question that always makes me hesitate, and I’ve noticed that my reply is never exactly the same. Yet deep down I know it’s what I love and would do even if the world was topsy turvy and making a lot of money through entrepreneurship wasn’t possible.

Let’s examine the decision to be an entrepreneur. It’s a complex topic so I’m going to break it down into a few posts exploring the benefits, disadvantages, misconceptions, and motivation behind entrepreneurship. I recently read that lists are more likely to attract traffic and since I have neglected the blog this week let’s begin with what I feel are the top 5 reasons to be an entrepreneur:

#5 There is an Upside

There aren’t a whole lot of categories that most of the world’s rich fall into. Inheritance, real estate, and business are the main three as we learned in New Venture Creation at WLU. It’s hard to be born rich or inherit the family farm, but business unlocks a path to real wealth potential. Whether you build it up to a multi-billion dollar venture yourself or sell while it’s hot, there is definitely money to be made. But is it all about cash? That’s a topic for a future article.

#4 If You’re Bored You’re Doing Something Wrong

Running a business is an incredibly diverse “field” to be in. Through my ventures I have been exposed to incredible and interesting knowledge ranging from business fundamentals such as marketing, accounting, sales, and customer service to the importance of time management, goal setting, and even exercise. I literally view the world in a completely different light now than before I became involved in business. Everyday I find myself learning something new and being immersed in a different and new area. You can’t get much further from an assembly line than this.

#3 It’s More Satisfying than Roller Coaster Tycoon or Sim City

I’ve always enjoyed playing simulation games. While Doom was the hot item with most of my friends I really prefered Sim City and other empire building games. It’s an incredibly satisfying feeling to start with nothing and end up with something absolutely amazing. I believe in seizing this building attitude and applying it to life. Afterall why should I build a virtual company when I could apply the same concepts to real life? Treating life as a game may sound silly as first, but frankly I’m having a lot of fun.

#2 Thinking is Rewarded

Running a business may be hard work, but that’s certainly not what you are rewarded for. Often times burning the midnight oil is simply the bare minimum for entry into business. Your returns come from working smart, and the quality of your ideas and creativity are now directly tied into your revenue size. A single good idea can make you $10 000 in one hour while slaving away for 40 hours on a bad one can have virtually no return.

While working a regular job isolates you from the risk of no return on bad ideas, it virtually nullifies the incredible return on good ones. Imagine coming up with a way to save your boss $30 000. You’ll be lucky to get a $500 bonus, and in all likelihood you will receive nothing at all.

#1 Success is in Your Hands - A Whole New Job Security

Headlines constantly barrage us about the lack of job security in so many sectors. GM and Ford are both laying off masses of people. I’m only 21 and I have already been laid-off twice. I’ve also only ever been an employee twice. Having a job these days, even with a massive company, provides only the illusion of security. Why let your well-being depend on the decisions of a CEO, whose absolute #1 priority isn’t your future? Ensuring your own prosperity and achievement of your goals is ultimately the responsibility of one person and one person only - you.

We’ll even things out in the next entrepreneurship post when we discuss the multitude of reasons to not be an entrepreneur.