I just finished reading Tony Hsieh’s Delivering Happiness
and it got me thinking a bit more about the whole meaning of entrepreneurship. Tony was a natural entrepreneur and he went through many business ideas when he was a kid. That first part of the book was the most enjoyable for me because it shows how an entrepreneur thinks. There are opportunities to make money everywhere and natural entrepreneurs are the one that will take advantage of those situations.
*Tony Hsieh is Zappos’ CEO. It seems this book is out of print because Amazon only has the comic version. Check your local library if you want to read the old full version.
I am not a natural entrepreneur. I never came up with any business or scheme to make money when I was a kid. I guess the allowance was easy enough for me and I didn’t have the drive/guts to be entrepreneurial. My dad on the other hand loves being his own boss. He can’t stand working for other people and he can smell opportunities everywhere.
Only an entrepreneur could come up with this beer cycle.Here are some of the businesses he had.
- Chicken farm: Started with 200 chickens in a spare bedroom and went up to 20,000 chickens in a year or so on an actual farm. Unfortunately, they all got sick and died.
- Pig farm: Not sure exactly what happened here.
- Document copy store: Similar to Kinko’s.
- Home appliance store: He expanded too quickly and lost this business due to too much debt.
- Trading in antique Buddha amulets: This is a big business in the Thai community.
- Sold durians from a truck in LA: Didn’t last long with this one because he didn’t have a permit.
- Thai restaurant: He cooked and ran a small Thai restaurant for many years.
- Liquor store: He ran a liquor store for a few years.
- Pawn broker: He lent money while holding on to various types of collateral.
- Bronze Buddha shop: Commissioned and sold bronze Buddha statues.
He also had a bunch of regular jobs, but those usually didn’t last long.
My brothers and I on the other hand went the normal route and worked regular jobs. While I always had one idea or another, I never really took the risk to follow through until last year. Even then, I was certain that we would be fine financially before I quit my corporate job. I’m beginning to think that my dad’s struggles dissuaded me from being an entrepreneur.
Being an entrepreneur isn’t for everyone. There are many downsides to it and it’s not for the faint of heart. Here are 7 downsides of being an entrepreneur from my experience.
7 Little Downsides Of Being An Entrepreneur
Success is elusive. The list of my dad’s businesses is impressive, but it’s an illusion because many of those businesses failed. According to the Census Bureau, only about 50% of new businesses survive over 5 years. An entrepreneur can’t be afraid of failure or taking risks. My dad has a very high risk tolerance because he had to fight his way through life since he was a young orphan. On the other hand, I had a pretty cushy childhood and I’m not very gutsy.
You need money to make money. My dad didn’t have any support networks or financial backing. He usually started a new business with the bare minimum capital required and as soon as there was one big financial bump in the road, he wouldn’t be able to handle it. Tony Hsieh used up all of his resources (millions) to back Zappos. If he had less money, Zappos wouldn’t have survived the dot com bubble.
You need to gain expertise quickly. My dad has degree in education and worked as a salesman before he started the chicken farm. He just went to the library and talked to local farmers on how to raise chickens. That’s the way he did things. He never cooked in his life before he purchased a Thai restaurant. He jumped in and learned on the job. Entrepreneurs have to be able to jump in with both feet like that.
You will spend all your time on your business. My dad was always working when I was a kid. Entrepreneurs will sacrifice their family time to make their business a success. My college friends who started their own businesses were chained down to their office for years. They couldn’t take a vacation or anything. It’s rough on the family. Even a small side venture like Retire By 40 is taking up about 4 hours/day of my time (including weekends.) I can easily spend 8 hours a day or more doing blog related stuff.
Healthcare is expensive and many entrepreneurs go without insurance. Healthcare is a huge issue now in the US, but it’s not new. When we immigrated to the US in the 80’s, we didn’t have health insurance for many many years. It’s just one more bill to pay when you’re trying to run your business. I’m very lucky that I’m covered under my wife’s current employer sponsored plan.
You’ll have problems with your employees. I think this is a given. This is especially true in the hospitality industry like a restaurant. An employee may show up drunk, late, or not show up at all and the turnover rate is high. It’s hard to keep an employee happy with the low pay scale. It’s just another headache to deal with as a business owner.
It’s hard to save for retirement. It’s hard to save for retirement when you’re concentrating on running a business. I think most business owners rather spend money to improve their business than save for retirement. Some businesses can be sold when the owner retires and that can be their retirement fund. My parents have some assets, but they will have to depend on the kids when they get older. That’s partly due to our Asian heritage, though. The kids are expected to take care of their parents.
It’s not all bad
Of course, being an entrepreneur has a lot of benefits too. I left my corporate job last year and I’m much happier now. As I mentioned before, I don’t have a very high tolerance for risk so I’m not planning to bet the farm on a business anytime soon. For now, I’m happy with making enough money to help pay the bills and being a stay at home dad.
I know many readers and bloggers dream of starting a business and being self employed. I hope I didn’t scare you off with this article. It’s just my experience growing up with an entrepreneurial dad. As for me, I hope to minimize most of these problems and maintain a balanced lifestyle as I continue my own entrepreneurial dream.
photo credit: flickr calsevan
Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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Thanks for sharing this. I hadn’t really thought of my own entrepreneurship journey and how it may affect my kids and their choices (we do think of the financial part, ALL the time).
I’m lucky to have a partner that provides healthcare. Without it, doing something on my own would be a complete non starter with kids in the house.
Your dad sound AMAZING!!! Good for him! What an incredibly inspiring guy! My new hero 🙂
Hello and thank you for having a site which goes with my thinking..
I have been a brick and mortar type entrepreneur most of my adult life and now at a retirement age, find myself bored.
Hence I am turning to the internet and beginning a blog on entrepreneurship, self employment and being in business.
I found your blog and after reading your content, wanted to just say thanks.
You have given me encouragement to continue..
Tom
I couldn’t agree more. I feel like I am spending all of my time on my business, it seems like there is always something to do.
Mr. LH is a true entrepreneur like Tony. He had a kite rental business as a kid and many others side jobs. He’s constantly thinking about starting something new (he’s had a graphic and web design business for many years) but the downsides are definitely true. Thankfully, I’ve had a fairly stable income for many years that has helped support the slower months of his business ideas. It’s fun to think about beginning something new in the future (restaurant or bar, perhaps. Mr. LH is a great cook) but I think I might be getting to set in my ways for a risky move. 😉
Interesting article but I don’t necessarily agree with everything. There are cases when you actually don’t need a lot of money to start your own business and you can do it without loans. It all depends on your ability to minimize your expenses. Everybody can make money with money. Really smart people make money from nothing.
I’m not super keen on being an entrepreneur. I worry a lot about things like financial stability, health costs, home costs, etc etc. I worry a lot in general actually! 🙂 I wouldn’t be keen on risking my money on a project unless I knew I could try using all or almost-all cash.
Brian and I have talked about owning a small shop one day in the future, but it’s not something we’d do until we were very financially solid.
These are some downsides, but I’d gladly trade them for the upsides and freedom of working for myself.
It took me too long to figure that one out for myself. I should have left the corporate world much earlier.
I’ve only once flirted with a “regular job” and it turned out to be the worst 2.25 years of my life.
I just don’t fit into any corporate pigeon-holes, nor do I work well with others! Such is the life of the artist I suppose.
Thankfully I live in Canada where I do not have to choose to be without health-coverage.
That’s a great comment! I know a few people like you and they are doing all right. Healthcare is a tough one.
i think that if i ever stepped out on my own, my business would consume my life entirely and eat virtually all of my free time… if i had staked my entire family’s future on the success of a business, than i really wouldn’t let failure be an option.
accepting that as reality, i really don’t want that to happen. i value my free time, and will give up dreams of entrepreneurship as a trade off..
It’s tough with 3 kids. My dad didn’t have much time for us when we were young. When we got a bit older we spend a lot of time helping out at his businesses. It’s a different lifestyle than most normal people.
I suppose if you have to spend ALL your time on your business then you are doing something wrong. In plain words, your productivity sucks!
I strongly agree though that entrepreneurship is not for risk-averse people. If you go off on your own you need to draw satisfaction from the lifestyle choice. If you do it for money or fame, you will probably fail. Society is not set up to naturally reward misfits.
I’m sure many entrepreneurs would disagree with you. There are just too many things to do and when you’re starting out, you don’t want to hire someone to help.
I am keeping my day/night job but I am trying to figure out something that I can do for myself without jeopardizing the steady income I need to survive. My job pays enough for me to survive but I am struggling to become debt free and prosper. I need to make more money.
Your dad sounds like a real character. Did any of the businesses live long and prosper?
Good luck! His electronic store was successful for a few years. The restaurant was doing well for about 10 years. I think he got bored after a while and want to move on.
I ran my first business at age 17 while in high school!
The time aspect is a killer. I recently had an opportunity to take over a carpet cleaning business. I crunched the numbers and the income potential was there, but I’m fairly certain that employees would be very unrealiable and I have zero time to clean carpets during the day. I just couldn’t see it working while I had a day job.
There’s also the emotional toll of seeing other people (ie employees) not care as much about the business and your success as you do. That may be quite a frustrating experience which could ruin relationships with the key people you depend on for your success pretty quickly.
The employees part is tough. It’s hard to find the right people that will make your business a success.
I am actually at the point where I am getting ready to move myself to some part time work and do some part time entrepreneurial stuff as well. I found it’s hard to balance the two but it can pay off if you are willing to invest the time and energy into it.
Good luck! Do you find that the entrepreneur part is taking more time than the regular part time work?
It is not all bad! Successful people make it look easy because they are good at it. I think it gets down to what you like to do. If you like what you are doing, you generally become good at it. The rest is easy.
My quote i made up today.
Some people own their own businesses, sell them and retire. Then they sit back and enjoy the fruits of their labor.
My quote..
Some people have an entire fruit bowl to enjoy, and some people just have one grape!
It’s a good thing I like grapes.
I cracked a woman up with that, she said she was gonna remember that one.
On a side note… We have had a new director for six or so months, one guy had to go on mental health leave, and he is now quitting, one left the department, and I am leaving to go to another department as well. I worked there for over five years, and I have never seen one woman cause so much trouble in a workplace.
Sorry to hear that. It’s not any fun working for someone who is causing havoc.
Side question : I’m curious if you have a reference for the statement : “According to the Census Bureau, only about 50% of new businesses survive over 5 years.”
I found reference to the topic of business failures on Census.gov where they say :
https://ask.census.gov/faq.php?id=5000&faqId=955
“The Census Bureau does not have statistics on business failure rates. ”
I’ve also seen people say that 90% of businesses fail in the 1st year and I could not nail down any real source on that.
Actual verified sources and legitimate numbers on this topic seem hard to find.
Here is a spreadsheet from the Bureau of Labor.
http://www.bls.gov/bdm/entrepreneurship/bdm_chart3.htm
I’m not sure what they include here, but the survival rate doesn’t look that bad to me.
Nice find, thanks.
One point is that buried in the details they define a ‘death’ of a business as the point that the business stops employing people. But that doesn’t tell us *why* the business stopped and its not necessarily due to a failure. Hard to say what % of businesses stop due to outright failure and what portion stop due to other reasons.
You’re right. Being an entrepreneur often involves twice as much sacrifice as you bargained for with half the results. Success rarely comes by happenstance. It’s usually the result of an intentional focus on one or two things that separate you from the crowd, and from an ability to inspire customer loyalty over and above the average. Oh, and it doesn’t hurt if you’re a natural salesman. 🙂 Introverts seem to always have a harder time building a business, and I suspect it’s because they tend to focus on the “non-people” aspects of the business…
It’s tough to be an introvert. 🙂 I think you’re right about that. Extroverts are much more suited to networking and marketing themselves.
If I had to pick one thing off that list, it would be the potential cost of healthcare. With the way it’s going up and not really knowing what the effects of Obamacare will have on future costs, this is a huge unknown. It’s pretty much the variable that has led me to accept the fact that I’ll be working right up until the age at which I’m eligible for Medicare, whatever that happens to be when I get to that age (I know it won’t be 65)
Being an entrepreneur is most definitely not for me. I’m way too risk averse to pour so much money into a business that has a high chance of failure. It could be fun to start up a small side business that doesn’t require much capital though, like tutoring, teaching classes, being a pet sitter, etc.
I like the small side business too. It’s much less capital intensive, but the reward is also smaller.
There are a lot of downsides to being a full time entrepreneur and if you feel that you’re not ready for it, then you can slowly work on it while you still have a full-time job or even a part time job in a company.
That’s a good way of easing into it.
The insurance part kind of scares me. Luckily, if I do ever decide to go the self employment route, I could sign up under W’s insurance once we get married.
Many young self employed people go without insurance. It’s not too bad when you’re young, but as you get older, it won’t work. We’ll see what happens in 2014 when Obamacare kicks in.
I don’t see self employment as being a good fit for me. I could master the day to day tasks of most jobs pretty well. But marketing myself and my business, bringing in customers, and taking the appropriate risks to grow the business from a small shop to something major involve skills that I don’t have or more risk that I am willing to take.
That’s perfectly valid. It’s already difficult to run a small shop and taking it to the next level is tough.