How to Know if You’re Ready for Entrepreneurship

It’s close to impossible to become Monopoly-man-level wealthy without being an entrepreneur.

By living below your means for decades as a highly paid executive, you’ll be able to easily pay for your grandchildren’s college tuition and buy a summer house.

But what about owning your own jet or island? What about having a different house for every season, not just summer? What about Jesse Eisenberg playing you in a movie?

That doesn’t happen without being an entrepreneur. Owning a business can be a path to becoming mega-rich, but it’s also the path that most often leads to destitution.

There are different types of entrepreneurs, but we’re going to focus on those who make the most money -- by owning a business. Social causes are great, but sometimes building up a highly successful business and aligning it with them is the best way to go.

Here are four things to pay attention to if you decide you want to dive into business ownership.

Your finances are in order

We’ve all heard anecdotes about wealthy business owners who started a business while living in a car or right after dropping out of college. This is a form of survivorship bias. You don’t hear the stories of the other 500 businesses that failed and, before long, sent the entrepreneur back to the car or, even worse, to their parent’s basement.

If you can hold off on the new business until you’ve saved enough money to fund it and have a backstop for yourself and your family, you’ll be better off. You’ll be able to take more calculated risks in the business knowing that, if it fails, you won’t. And you’ll be able to cut out the 20% of clients who cause 80% of the problems if you have enough money to keep going without their cash.

An additional benefit of waiting until you have your finances in order is that you’ll learn more about the business world. As the saying goes, you don’t know what you don’t know. At each subsequent level of my career in various different jobs, I’ve realized I knew progressively less about the business around me. This is because, as I gained experience, I discovered all the things going around me that I haven’t mastered.

You’re mentally tough

There are a lot of facets to the entrepreneurial mindset. The most important is being mentally tough and able to keep moving despite failures and criticism.

Early in my sales career, I worked on a smallish real estate loan. It was for a CPA firm purchasing a building for around $300,000 and then putting about $100,000 in improvements. I assumed the borrower understood how the down payment worked for this type of SBA loan based on an email I had sent them, but they were under the impression it was calculated differently.

On the week of closing, we discovered that the required down payment would be $15,000 or so more than they expected. This led to some angry clients and angry managers at the bank as I raced to waive fees to try to please them.

I could have forwarded the email from months before or started an argument with them about whose fault it was. I did end up being awake until 2 a.m. trying to calm down my anxiety. That was the day I decided that sales and entrepreneurship weren’t for me.

These types of situations happen to everyone, and they happen far more often to entrepreneurs. When you own the business, everything that goes wrong might be your fault.

If you’re the type of person who would learn from a miscommunication and change your process, quickly forgetting about the whole ordeal, you would likely be a good entrepreneur. But, if you’re the type of person who would run through the various conversations in your head over and over for weeks, stick to an accounting job.

You can raise capital

Even if you wait until you’re financially stable to start a business, there will come a time when you need to raise capital -- either from full-blown venture capitalists or from family and friends. The sooner you’re able to pitch to investors, the better.

Investors are rich for a reason, and, if they uniformly doubt your potential, it may be time to go back to the drawing board. If you pitch to investors and then have several lined up at your door, you’re onto something.

That said, investors don’t need to be the only sounding board. Pitch the business to your own network and to successful business owners in the area. You may even get more honest responses if there’s no money on the line. The key is having a third party evaluate your business and point out flaws. If all your planning has been in your own head, again, you don’t know what you don’t know.

You’ve had small-scale success

Fifty years ago, if you wanted to run a business, you had to skimp and save and start it yourself. There was little opportunity to start something smaller and build up to a true full-time business.

Now that the internet exists, there are thousands of ways to dip your toes into entrepreneurship as you prepare to start a small business. Here are some examples:

• Crafts: If you can knit or sew, make some original crafts and sell them online through social media.
• Niche websites: Nearly everyone has a weird niche interest. Start a blog about yours, or, even better, start a podcast and YouTube channel and recommend affiliate products.
• Contract work: Use websites, such as Upwork and Fiverr, to do contract work in your spare time like editing writing or pictures.
• Photography: The pictures I take now with my cell phone look better than the senior picture my mom paid three figures for 12 years ago. You can do contract photography work or sell the photos to stock photo companies.

It’s unlikely any of these ideas will make you rich, but they could force you to learn time management, get organized, and even file your taxes correctly. If you’re able to become semi-successful with a side hustle, you’re all the more likely to become super successful with a small business.

Do it

You can spend time meditating on your mental toughness and side hustling, but the only way you’ll ever really know if you’re ready for entrepreneurship is to just do it. Create a product, find some customers, and dive in.