“A Full Stack Guide To Entrepreneurship” is the first article of a series on entrepreneurship. This guide will cover common pitfalls and how to avoid them, as well as provide resources for entrepreneurs based on their stage in the process.
This post covers what it means to be an entrepreneur and why people go into business for themselves. It also discusses some of the more practical aspects like dealing with taxes, accounting, regulation compliance, employees, customers and investors.
The main idea behind entrepreneurship is that an individual creates value by trading time for money. If you run a business, then your employees are exchanging their time for your money. You can also trade things other than time, but they all ultimately come down to the same thing:
Time = money
If you want to start a company, it’s important to understand the concept of entrepreneurship because your venture will be judged against it. You’ll be expected to take risks, think big, and make an impact. This is easier said than done, though I’ve assembled a series of resources to help you maximize your chances for success.
Entrepreneurship isn’t about being able to code, design products, or raise money. It’s about taking control of your own destiny and having the freedom to pursue whatever you want. That said, there are many practical aspects that you should be aware of before beginning your business experiment. This guide covers some of the most important concepts in entrepreneurship so that you’ll be prepared for whatever comes your way.
Why Go Into Business For Yourself?
Entrepreneurship is about doing things your own way. It’s the freedom to call all of the shots and control your own destiny. If you can take this on full-time, then there’s nothing like it in the world:
Freedom in entrepreneurship comes from setting clear goals and automating your business to work for you
You have the flexibility to hire people, set responsibilities, and move at your own pace. You can also choose what type of work environment to operate from—whether that’s a home office or a high-rise in Manhattan. I’ve seen both extremes and can say with confidence that there are pros and cons to both. You can get way more done when you’re by yourself, but people are also a source of motivation and inspiration.
A common reason to start a company is to solve your own problem, which is often the most compelling new business idea:
The founder’s desire for something better provides the driving force required to see an idea through to fruition
One of the most famous success stories in entrepreneurship was when a student named Reed Hastings wanted to binge-watch TV shows online, but couldn’t find an easy way to do it. He created Netflix as a solution and now has millions of subscribers around the world.
This is one example where this type of problem solver attitude can lead to something great; however, there are also countless stories of failed startups that started with the same type of motivation. The reason for this is simple: opportunity cost.
Opportunity cost refers to what you give up when you make a decision. For example, even though Hastings believed in Netflix enough to quit his job and work on it full-time, he could have also picked any number of other projects that may have had more financial success. It’s important to understand the opportunity cost associated with entrepreneurship because it will help you make better decisions.
You can think about this concept in terms of money, time, and resources:
Time & Money
If you start a company, then you forgo your salary or hourly rate, which is your opportunity cost. This doesn’t mean that you won’t get paid. It simply means that you’re deciding to trade earning money for something else. For example, if it takes 6 months of working full-time on a new project before it’s generating revenue then you could have worked 6 months at your regular job and earned money.
You can think of this in terms of how much money you’ll need to start the company. Your opportunity cost is inversely proportional to business success, meaning that if you spend less money starting your business then there’s a bigger chance of it taking off. This isn’t always true because some people bootstrap their businesses until they’re successful.
There are also intangible benefits to entrepreneurship that don’t translate into dollars and cents:
The reward of building something from scratch is an incredibly powerful, driving force for many entrepreneurs
The combination of money, time, and resources make up the opportunity cost which you must be OK with in order to start your own business. If you’re not, then you’re better off working for someone else.
Understanding The Entrepreneurial Mindset
Having an entrepreneurial mindset is critical to being successful in business. It means that you have the mind of an entrepreneur – the same way someone doesn’t need to be a musician to love music or an engineer to appreciate bridge architecture. Understanding this concept is crucial to your success.
Entrepreneurship is about thinking differently than the rest of the population. When it comes to problem-solving, most people will try to find someone who has already solved their problem and copy what they did. If there’s no precedent for the solution then most people don’t know where to start.
This type of thinking is not only boring, but it’s also very dangerous. If you want to stand out and be successful then you need to think like an entrepreneur:
The people who make it happen are those who don’t wait around for someone else to do something about their problems before they take action
Entrepreneurship is a mindset that isn’t taught in school or emphasized by society. This means that most people are not entrepreneurs, but it also means that you have the ability to differentiate yourself from “the crowd” by simply thinking of problems differently.
There’s nothing more powerful than someone who understands how to solve a problem. It’s even better if they solve their own problem because there’s a chance that you’ll be one of those problems.
Practical Advice For Entrepreneurs
Now that you understand the basics of entrepreneurship and the entrepreneurial mindset, let’s look at some practical advice:
Focus on action
Most people think about starting a business for years before they actually do it. Don’t plan for too long because there will always be something to distract you and postpone taking action. Instead of spending time planning, choose one thing and focus on taking action every day:
The number one cause of failure is never taking any risk
Finding a co-founder – This is crucial for the success of your business. There are three basic types of co-founders: technical founder, business founder, and marketing co-founder:
Every successful startup needs a technical co-founder because they understand the technology and can guide decisions
You don’t need to be an expert in every area, but you should at least have some basic understanding of what’s involved. Hiring people to fill in your knowledge gaps is expensive because it creates a disorganized, complicated process that will slow your business down. Don’t try to become an expert in every field because you don’t have time for it – do your research and find people who are qualified instead.
The amount of money you need to start your business is much less than most people think
If you want to set up a corporation then it will cost $800. If you want to be a sole proprietor then it will cost $60. Beyond those two options, there are less than 20 others that could apply to your situation
Spend money as if it’s coming out of your own pocket – When you look at the startup costs for other businesses and realize how much they spent, it’s tempting to think that the same thing could work for you. However, there are situations where spending money doesn’t guarantee future results:
People usually spend more than is required because they want everything to be perfect
You don’t need to worry about your business page looking pretty because most of your customers will never visit it – focus on being functional and you’ll save a ton of money.
If your business is just getting started then you need to be open about something: Most businesses have failed because they tried to solve a problem that nobody had or created a solution that was way too complicated for the market. Instead of trying to come up with a genius idea, start small and gain traction.
Don’t listen to the media
News stories are designed to gain attention by emphasizing outliers. A few companies succeed, but most of them fail:
The idea that a business is a good investment just because it’s been on Shark Tank or another similar show is a scam
While some products will do well, it’s usually because they belong to a large category that is able to absorb the costs. If you’re an early-stage startup then there are generally two categories you can fall into:
If your business has any of these categories then don’t expect it to be a quick win. Some companies spend years trying to get traction and still end up failing due to a lack of resources or experience.
If you’re trying to create something new then it’s even harder because you’re building the product, marketing it, and doing everything else that’s required. If you want your business to succeed then don’t get distracted by what other people are doing – stick with your goals instead of getting caught up in their success.
The most important thing you need to do is focus on taking action every day. The longer you wait, the less likely it is that your business will succeed. Even though many entrepreneurs fail the first time, don’t let that stop you from trying again until you achieve what you set out to do.
If you’re already an entrepreneur then congratulations – it’s not easy to build a business. You won’t be able to solve every problem by yourself, so it’s important to find partners who complement your skills.
Don’t try to do everything yourself because it will lead to an inefficient and disorganized company that can’t handle the amount of work required in the long run. If you’re new then go through the entire guide because it will teach you everything you need to know about starting a business.