Taking the leap

Nation's Business, March, 1986 by Hy Shwiel

Taking The Leap

David Ogilvy recalls that, during the first 20 years of Ogilvy & Mather's existence, he would wake up every morning with a knot in his stomach and this to himself that this was the day when his business was going to blow away.

By its 20th year the advertising agency had offices in 10 countries and many cities in the United States. At that point, Ogilvy says, he began to convince himself that defection of a single client could no longer put him out of business.

Only then, he says, did the knot in his stomach begin to ease.

That story strikes a responsive chord in anyone who has made the giant leap into starting a business. Having your own business instead of working for someone else is certainly no guarantee that frustrations, insecurities and limitations will suddenly disappear.

Ogilvy's story should sound a warning to those who are thinking of going into business because they "want to do what I please on the job," or are "looking for self-fulfillment."

Those are very popular reasons for embarking on the road to entrepreneurship, but they are, unfortunately, the wrong ones. They are good reasons for finding another job, preferably one that rewards initiative and self-reliance.

Anyone thinking about embarking on a career as an entrepreneur should address two basic questions: Why am I taking this step, and how do I go about it in the most effective way?

The right motive for taking the step is profts. It is as simple as that. The prospect of making money is the ultimate justification for incurring the physical, mental, emotional and financial burdens of starting or acquiring a business.

As owner of a small business, you will live with problems and stress for a long time. So, before going in, you should analyze the costs, determine the trade-offs and decide the price you want to pay in money and other considerations. Then you have to determine whether the rewards justify that investment. On that basis, it would be difficult to measure then return in any way other than profits.

In making the decision to pay the costs involved, you are demonstrating that you have the most elementary thing required to start your own business--guts. It takes other things, too--skills, contacts and resources. But mostly it takes guts, not vague ambitions to "be my own boss" or pursue self-fulfillment.

Once you have shed fallacies about the reasons and qualifications for getting into business, you should also abandon some other myths surrounding entrepreneurship.

When someone tells me of plans to start a can't-fail business based on the better mousetrap theory, my reaction is usually, "Who needs it?" Mousetrap people often see themselves following in the steps of the founders of Apple Computer or other companies that exploded into giants after starting in somebody's garage or basement. The media have discovered entrepreneurship, and they are filled with rags-to-riches stories about people who launch a business one day and are millionaires the next. And lots of people reading those stories ask, "Why not me?"

But would-be entrepreneurs have to remember that, for every Apple Computer-type success, there are 1,000 failures. You don't read much about them.

You also don't hear about the entrepreneurs who do well enough to stay in business but feel they have reached a dead end. Disenchantment and failure do not make good you-can-do-it-too reading.

Rather than trying to convert what you think is a hot idea into an overnight hit, start with a mundane business and build from there. Instead of trying to find a better mousetrap to take to the market, look for a nuts-and-bolts business to buy and to learn from. Then you are not taking a 1,000 to 1 chance.

This approach enables you to get your feet wet, establish the business, built your business relationships and get your employees working as a team. Once profits are flowing, you can begin to think about expanding into more challenging areas.

You must start planning long before the grand opening. Begin by determining the type of business you want to get into, the one that suits you. You have to get close to it, work in that field or an allied one. Get to know people who work in the field as well as bankers, lawyers, accountants and others who provide services to it.

When you are ready to find a business of your own, the real planning begins. You have to talk to business brokers, venture capitalists, lawyers, accountants and investment bankers. And you have to do it full time. If you want to be dealt the good cards, you have to sit down at the table and play.

Then develop and write a formal plan to present to potential investors. Here are some points to keep in mind:

Consider your audience. If you are targeting your plan for a banker as part of a request for financing, he is not interested so much in your upside potential. Whatever profits you make will ultimately end up in his bank, anyway. He is looking at his risk, at collateral, at your ability to repay the loan. If you are writing for a venture capitalist, it is just the opposite. He is looking at profits and upside potential, and not so much at downside risks.