Should You Quit Working Full-Time and Start Your Own Company Instead?
To Be or Not to Be?
by Brian DeChesare (reprinted from Mergers & Inquisitions)
Should You Quit Working Full-Time and Start Your Own Company Instead?
Working full-time sucks.
You network with hundreds of alumni… cold-email people via LinkedIn… write 51 drafts of your resume…
…and then you still have to go through multiple rounds of interviews, case studies, assessment centers, and more.
Here are the exact words one customer used to describe his feelings recently:
“3-4 hours of applying and networking per day is as far as I can push it – I can’t motivate myself to do more because there are fewer postings and alumni to contact every day.
This process is definitely soul-sucking: I did this for my junior internship, my first full-time job, and now I’m doing it again less than 2 years into this role.”
You might have similar thoughts, and then come up with a completely different idea:
Skip it all and start your own company instead.
If you’re putting in killer hours, dealing with psychotic bosses, and not even getting paid that much, why not just work for yourself instead?
Plus, everyone’s doing it these days – how hard could it really be?
Not so fast.
Perhaps finance is not for you, but your “Plan B” should not necessarily be starting your own company.
Despite the vast number of blog posts and books written about startups, several important points are continually glossed over.
Consider this your reality check.
Why Am I Writing About This?
I’m writing this because of 2 big trends I’ve seen in the past 1-2 years:
Trend #1: Quite a few former bankers have been asking me to promote their new products and services… which they launched after they abruptly quit their jobs.
Trend #2: Outside the finance community, startups are the new “in” thing to do. “I have a startup” is the new “I have my own band.”
There are plenty of ways to quantify the second trend (the rise in computer science majors, the growing popularity of CS and startup-related classes at universities, etc.), so feel free to do that on your own time.
What concerns me is that many of these “startup founders” are not serious about it at all.
I’ve seen more and more “groupies” attending events and acting like they’re a combination of Steve Jobs, Mark Zuckerberg, and Bill Gates… because they just launched an app that has a grand total of 2 users.
And, of course, Founder Hounders abound.
My favorite story?
Earlier this year, I met a recent grad from a top business school and explained my company to her.
She told me I needed to be more of a “visionary” and “inspire great action in people,” sent me a link to a TED talk, and talked up her startup… which hadn’t even launched yet.
A few months later, she was accepted into a startup accelerator.
Someone asked her what she would be doing there, and she responded:
“I’m going there to work on my company. But mostly to have fun!!!!!!”
How to Avoid Wasting Your Life on Failed Ventures
If you have an actual good reason to quit your job and/or the recruiting process and start a company, sure, consider it.
From what I have seen, though, most people have no idea of what they’re getting into.
Here are the top 6 fallacies I’ve seen among bankers, former bankers, undergrads, MBAs, and well-paid circus monkeys who are suddenly “inspired” to start their own company:
Fallacy #1: You “Work for Yourself” When You Start a Company
A few years ago, I was in LA visiting a friend who seemed very impressive on paper: undergrad and MBA degrees from top schools and experience in IB, PE, and VC.
Then he made a less-than-impressive comment:
“Sometimes I really envy you, Brian, I just hate working for other people. I want to start my own business and work for myself!”
I almost started rolling around on the ground in a fit of laughter.
You do NOT “work for yourself” when you start a business.
You work for your customers, and instead of reporting to 1 boss you now report to 1,000 bosses.
Instead of having 1 or 2 bad bosses, you might now have 10, or 20, or 200 bad bosses.
And instead of getting ridiculous requests from just a few people, now you’ll get them from the world at large.
If you raise outside funding, you also work for your investors, and they can be even worse bosses than demanding customers.
And if your strategy is to get “acqui-hired,” you are completing an unpaid internship at Google, Facebook, Microsoft, etc. with a low chance of receiving a full-time offer.
So if you want to start a company to “work for yourself,” you better rethink your motivation.
If you think you’re immune to crazy people and unreasonable requests because of the market you’re targeting, your distribution strategy, or your prices, think again.
To your eyes, your co-workers, classmates, friends, and acquaintances may all seem “normal.”
But when they pay you for a product or service, the relationship changes and you see personality traits that were latent before.
Many people are completely fine and stay relatively well-grounded… but the small percentage that do not will keep you up at night.
You’ll see this trend no matter what type of business you start: restaurants/bars, retailers, tutoring services, mobile apps, construction services, and yes, probably even laundromats.
Fallacy #2: A “Strong Work Ethic” is All You Need to Run a Business
Many bankers are drawn toward entrepreneurship under the following logic:
“I work a lot now, and I’m smarter than my bosses. Why should all the benefits of my hard work accrue mostly to them? If I’m working twice as much as a normal person, I might as well start my own company!”
You’ll see disgruntled consultants, lawyers, bankers, and even doctors saying the same thing: forget normal careers and spend the time starting your own firm instead.
They fail to understand that “the hours” are only a small component of what’s required to start and run a business.
More than “tolerating the hours,” you have to be willing to get your hands dirty and assume responsibility for everything that takes place on your watch.
Are you capable of doing EVERYTHING that’s required, from taking out the trash to arranging office furniture to fixing your IT systems to fixing code when your website breaks at 2 AM?
If not, you should rethink your plan… because you will be doing all of that yourself at first.
Even if you have some funding initially, you’ll still be doing a huge number of “random” tasks because of limited manpower.
If you’re starting it with partners, some of your burden will be reduced… but then you run into other challenges, such as dividing up equity or firing a friend who isn’t contributing his fair share.
Most people from top schools and “prestigious” firms are not willing to get their hands dirty by doing this type of work.
As you grow, the challenges evolve.
You won’t be emptying trash baskets or fixing code anymore, but now you’ll be disciplining under-performing employees, putting out fires started by managers, responding to competitors coming into your space, yelling at suppliers for not delivering what they promised, and so on.
Note this passage from Paul Graham’s excellent essay, “Before the Startup”:
“Mark Zuckerberg will never get to bum around a foreign country. He can do other things most people can’t, like charter jets to fly him to foreign countries.
But success has taken a lot of the serendipity out of his life. Facebook is running him as much as he’s running Facebook.”
It doesn’t matter how much you “automate” or “outsource” because ultimately your business is yours, and you are 100% responsible for everything that happens at all levels across all departments – even when those things are completely outside of your control.
Sure, you work a lot in finance… but even as a Managing Director or Partner, it’s not your fault if someone else’s deal or investment falls apart.
Fallacy #3: No Industry Experience? No Idea? Just Start Something! It’s Easy!
A lot of people think “the idea doesn’t matter”: just look at how many search results show up for that term.
In some sense, they’re right: whatever idea you pick will evolve over time.
Sometimes it will turn into something completely different.
And the team and the execution matter more than that initial idea.
BUT… the set of potential ideas on your radar matters a lot.
If you don’t have experience working in a specific industry, you’re unlikely to magically come up with a product or service that solves a problem real people are willing to pay for.
This is why there are so many derivative companies that are amalgamations of existing ideas: Airbnb meets Spotify meets Tumblr!
Sure, sometimes you’ll see genius ideas that aren’t linked to definable problems at all.
But more often than not, you’re better off starting out by working in an industry, seeing what problems exist, and then coming up with ways your new company can solve them.
Even the most famous person in the startup world agrees:
“So if you’re a CS major and you want to start a startup, instead of taking a class on entrepreneurship you’re better off taking a class on, say, genetics.
Or better still, go work for a biotech company. CS majors normally get summer jobs at computer hardware or software companies. But if you want to find startup ideas, you might do better to get a summer job in some unrelated field.”
Don’t confuse your general knowledge of a market with the specific knowledge of what people are willing to pay to solve.
When I started M&I, for example, I began by offering resume editing and mock interviews because I had to learn the real problems that students and professionals were encountering.
Yes, I had worked in investment banking and interviewed tons of people, but I didn’t know enough about how they prepared for interviews to create a useful product.
If I had created a product based only on my general industry knowledge at the time, it would have been a complete failure.
Fallacy #4: You Attended Top Schools or Worked at Prestigious Firms, So You Have What It Takes to Start a Company
When I started this business and told a few students at my illustrious alma mater (ugh, writing that makes me want to shoot myself), do you know what their most common question was?
“Oh, do you need a business license for that type of company?”
Yes, really.
Instead of asking about what actually mattered – customers, products/services, pricing, lead generation, etc. – they wanted to know about the red tape I would have to go through.
This question speaks to the larger problem of working at a Big Company or attending a Prestigious University: you spend an inordinate amount of time on minutiae that make NO difference to winning new clients or servicing existing ones.
Experience in banking or consulting is arguably the worst background for entrepreneurship because the “Revise this presentation 37 times and fix all the font sizes” mentality takes over your brain at the expense of the “Get it done ASAP, get feedback, and iterate” one.
But even outside those industries, you spend a lot of time on useless tasks at Big Companies: sitting in meetings… creating internal presentations… getting clearance to go to the bathroom.
Consider the story of how I launched the first BIWS course in 2009: I put together the content quickly and cut a lot of corners.
I knew that competitors’ products had more content at that time, so I priced it lower than other courses: the goal was to win paying customers, get their feedback, and improve it over time.
I showed it to a former co-worker right before I launched it and he said:
“What?!!! This is so bad. You should have used [real companies / better case studies / more complex models / longer videos / a professional recording studio etc. etc.] and spent at least a year creating this! Anyone who signs up will immediately ask for a refund.”
We ended up with a grand total of 3 refund requests (< 1% of initial customers); most people didn’t care about any of that, given the price.
If I had taken his advice and spent a year polishing it, competitors would have caught up and launched their own video-based courses first.
“Fast plus ‘good enough’” will beat ‘much slower + ‘perfection’” any day of the week.
If you’re coming in with a banking, consulting, or Big Company background, you’ll need to reverse your brainwashing to adopt this mentality.
Fallacy #5: Starting a Company is Just Like Working Any Other Demanding Job
Once again, this is a common line of “banker reasoning”:
“Yes, of course it will be demanding. So what? I already work 70, 80, or 90 hours per week! What’s the difference? At least I’m working for myself now!”
This reasoning is incorrect because it ignores how your mindset toward work changes as a direct result of your own business.
If you have a job – even a demanding and stressful one – you know when you have to go to work, when you can go home (even if it’s 3 AM), and when you have to be “on call.”
Then, you can spend the rest of your time hanging out with friends, doing activities, traveling, etc.
This mindset reverses itself when you have a business.
Instead of planning your free time around your work, you will plan your work around your friends / activities / hobbies.
If you do not have something specific planned on a certain date and time, you will be working on your business – at least if you want to be any good at it.
If you could work 24 hours per day, 7 days per week and not die in the process, it would be in your interest to do so because you are the owner and there is unlimited upside for you.
This is guaranteed to create tension between you and your friends, family, and significant other(s).
They will never “get it” because to them, work is work, and when you leave the office you’re done.
They will misinterpret your behavior and say that “you’re working too much” or “you’re obsessed with making money.”
Neither one is accurate.
You are simply obsessed with making the best possible product/service, because it is an extension of who you are as a person.
If you don’t believe me, or you think I’m just an extreme workaholic / perfectionist (yes, that is true), take a look at Ron Conway’s advice to founders:
“[If you’re] dating someone or married: warn them that they’re not first in line, that you have this vocation, that your duty is to your company. It has to be that fanatical.”
He wasn’t joking, despite the audience reaction.
Fallacy #6: Come On, What’s the Worst That Could Happen? If You Fail, Just Start Over!
You might think that failure is the worst case scenario: you lose time/money, you disappoint your investors and customers, and then you go back and start something new.
Wrong.
The worst case scenario is that you sink a lot of time/money into a venture, but then your growth slows down or you run into other problems and you have no exit options.
One friend, for example, started a company that quickly grew to $50 million in revenue with no outside funding.
He’s commonly viewed as a “guru” in his market and geography.
But when I spoke to him a few months ago, he told me a very different story: he was trapped.
Yes, $50 million is a lot of revenue for a bootstrapped company… but it was also barely profitable.
Growth had been flat in the past year, and there was no way the company could go public or get acquired due to its market and financial profile.
Plus, there were other shareholders so the decision to sell was beyond my friend’s control.
He couldn’t just “take money off the table” and leave because it was a C-corporation and not that profitable to begin with.
And he still had to work relatively long hours: “automation” is nice in theory, but in the real world it may or may not be possible.
So he was stuck.
This happens even with much smaller ventures: for example, a few dozen friends tried to “follow in my footsteps” by starting their own online businesses.
Most of them made some amount of money, and a few even turned the business into a full-time job.
But many of them got “stuck” at a certain level of sales and didn’t see a path to growing or selling the business at a worthwhile price (multiples are low for small businesses).
So they were faced with tough questions:
“Do I continue with a business that has gotten repetitive for me and make, say, $150K to $200K per year?
Or do I quit and go back to a normal job, earn less than that, but have a clearer path to advancement?
Or do I put in even more time and effort into another business that may or may not do better than this one?”
Nope, I don’t have an answer.
No one does.
And that’s the point.
So How Do You Fix All This? What Should You Do?
I’m not saying that you shouldn’t start your own company.
But you need to understand that it’s fundamentally different from working in other demanding, stressful jobs, and that most people gloss over what it really takes to have even a small chance of success.
So here’s what I recommend instead:
Tip #1: If you really are interested in starting your own company, and you’re not just doing it because it’s “the thing to do,” join an existing startup (using our IB to startup guide here) or launch a small project such as digital / physical products or a simple app.
There is no “shame” in joining something that’s already up and running, and in many cases you will learn more and earn more by contributing to an existing venture rather than throwing your own ideas against the wall until something sticks… if something sticks.
After all, “the 100th engineer at Facebook did way better than the vast majority of entrepreneurs in Silicon Valley”.
Tip #2: If you’re being honest and you’re not actually interested in starting your own company, but you simply want better hours and a better lifestyle, join a big tech company.
Some people at the likes of Google, Microsoft, and Facebook do work a lot, but it is also possible to do very little and succeed: I have friends and acquaintances at those companies that do maybe 2 hours of “real work” per day and still earn high ($100K+) salaries.
You’ll never be super-wealthy, but you’ll have a life, you’ll like your co-workers, and you may even get to do interesting work.
It’s tough to get in unless you’ve attended a top university, but that’s no different from banking.
Tip #3: If you’ve considered both those options but you’re still set on starting your own company, ask yourself one simple question:
Could you imagine yourself doing anything else?
If the answer is “yes,” don’t start it.
To make it work, you have to be so committed that your answer is “No, I could never imagine myself doing anything else.”
It’s like the “burn all bridges” concept from Think and Grow Rich: if you still have a bridge – a backup plan – you might be lured away.
So until you’re standing at that bridge with a bucket of gasoline and a torch, you are not ready.
But if you are actually standing there with your torch already lit, get it over with and burn that bridge.
You probably won’t become a billionaire.
Your personal relationships will suffer.
And you might realize that you’re in over your head with no exit options.
But hey, at least you won’t have to go through the recruiting process again.
