You might have heard the daunting statistics that most entrepreneurs will fail to create a successful business. The idea of failure could even prevent you from starting in the first place because, well “Why should I even attempt a business if failure is so high?”
It’s no secret that business “failure” is high (I put failure in quotes because they are really just learning lessons), but that shouldn’t deter you from starting. The bright side to this doomsday statistic is that many entrepreneurs that continue to stick to the path eventually figure it out and build a successful venture.
Going for Home Runs
Now, this isn’t to say that business setbacks aren’t devastating. They can be a huge financial set back especially if you’ve sunk your entire life savings into the business without having any other sources of income.
Many ambitious people I know tend to hear about Silicon Valley entrepreneurs building multibillion-dollar businesses and want to try to replicate that on their first go-around. I can see the appeal. Who wouldn’t want to build a unicorn business ($1+ billion-dollar company) within 3-5 years with a nice exit, netting you a lifetime fortune where you can live in paradise anywhere in the world.
However, the reality is, most people aren’t able to build a monstrosity of a success on their first shot. I’m not saying it’s impossible but it’s difficult, really difficult, as it should be. I know there will be some that argue that it’s the best move to make because you want to take bets that have really high upside since you’re going to do the work anyway.
Some people might be cut out for it, no doubt. They also might have the resources that allows them to easily bounce back if they do end up in failure. But those are the exceptions not the norm.
Going for Base Hits
I would argue, for most, the smartest path to business success is by playing the “leveling up” business strategy.
What do I mean by this?
Instead of going for home runs on your first business attempt, learn how to hit some grounders and get on base.
How does this play out in the entrepreneurial world? The first things first, is having a base income. Base income is having a source of income that will allow you many attempts at business even if you fail. This lowers your business setbacks and also takes the pressure from having to make poor choices in your business because you’re dealing with something called debt stress.
Debt stress is a real thing; I’ve experienced it and it sucks. When you’re worried about having a roof over your head, having enough money to pay for basic necessities, or if you’ll be able to eat, your ability to stay focused declines.
I know there are stories of successful entrepreneurs that laid it all on the line, eating ramen for months on end and eventually built a successful business. However, remember, those are the exceptions not the norm. I think we over glorify the ridiculous entrepreneurial struggle stories and under represent those that have take a more strategic approach.
I know that having your back against your wall can actually be a good thing because it’s motivating but it also doesn’t hurt to set yourself up so that you can continue to take consecutive hits in business and keep going.
Creating a Base Income
Having a base income allows you to fund your business and pay for your basic necessities. Even if your business doesn’t work out, you can save up again and go for another shot.
What are forms of base income?
The easiest form of a base income is having a job. You get a stable income and you get it immediately as you get hired. It’s advisable to keep your job until you’re able to build a business that allows you to quit your job.
Other forms of base income are simple hustles that you can work as long as you put in the work. With a little bit of money, you can start a side hustle like flipping phones, luxury watches, computers, etc.
Leveling Up Your Business
Once you’ve established a baseline of income, and it’s become simple for you to do, now you can start “leveling up” by finding another business that has higher potential, more scale, and automation.
It’s better to find a business model that is proven. You can view some of those business models here. There are business models that you know work because there are others already having success with. It’s like purchasing a franchise. You know it works and the systems are already in place. The chances of your success are higher than creating a unique business like the Teslas, Amazons, and Ubers of the world.
As you develop your new business, you’ll develop unique skills and a business asset that will continue to pay you. Your goal would be to save enough so that you can fund your next business that is a bit riskier but has even more upside and potential.
Because you’ve established a baseline of income and have leveled up your business, you can take more risk without worrying about losing everything when you pursue new business ideas. You can take on more and more risk (more risk usually means more upside).
The other benefit of the leveling up your business strategy is the ability to self fund your next business venture. This gives you more ownership of your company.
Also, as you progress in your businesses, you’re building multiple streams of income. This allows you to weather different financial storms that might come your way. Diversifying your income is a great hedge against the unknown and one thing you can expect from being an entrepreneur is the unknown.
So next time you hear about daunting failure statistics for entrepreneurs, you don’t have to be so intimidated. You can be strategic about your approach no matter your level of risk appetite. The most important thing is getting started. Find a business that’s exciting to you and let’s get that base income!