This graduation season got me to thinking: what advice would I give a young person just starting out today? To me, the answer is obvious: Start your own business.
I graduated from college in 1999, a generation ago. The world was far less troubled. I graduated into a world that was mostly peaceful. The US economy was roaring at 5% growth; the stock market was breaking records. People generally trusted our civic institutions and believed most of what they read in the paper. Our national debt was "only" $5 trillion and we had budget surpluses. People actually discussed paying off the debt in full. College graduates had wonderful career choices with large, successful companies, especially on Wall Street. The post-communist world still loved America; people were optimistic; the future looked bright. The book Dow 36,000 predicted the stock market would triple in value in the next few years. People took it seriously.
Today’s college graduates, born in 1995 or 1996, remember none of the 1990s good times. The past two decades have seen a litany of failures by our political, financial, and media elite. When the country needed unity, Bush v. Gore revealed the Supreme Court to be a nakedly partisan institution. A year was wasted on Bill Clinton’s sex life while Osama Bin Laden plotted the 9/11 terrorist attacks that changed America forever and for the worse. The disastrous Iraq War followed, adding $3 trillion to the debt in a debacle that continues to haunt us. Reckless regulatory and banking practices led to the 2008 financial crisis, which saw the banks receive huge bailouts while everyone else suffered through nearly a decade of anemic economic recovery. Disgracefully, at least 34 members of Congress cashed in by trading on insider information just days before the crash. Today’s graduates are painfully aware that the last two decades have seen vast increases in college tuition, which is often spent unwisely. Instead of buying a first home and starting a family, debt-strapped grads carry six-figure student loans and move home after college.
Liberals distrust big business and conservatives distrust big government. Two decades of experience have taught me this truth: they're both right.
Don’t trust any of them.
Trust yourself, invest in yourself, depend on yourself. As a technology lawyer and entrepreneur, I am privileged to work with smart young people striving to make their mark on the world. My advice? Commit yourself to starting your own business by the age of 35. Millions have done it and so can you.
Why Start Your Own Business?
What would you say was the most important invention of the last 150 years?
Whatever your answer, chances are good that an American entrepreneur invented it. We invented electricity, the automobile, the assembly line, radio, television, carbon dating, the microwave oven, the assembly line, GPS, chemotherapy, the polio vaccine, cell phones, email, the internet, the zipper, chocolate chip cookies and rock & roll.
America’s story is a story of a creative and practical self-starters finding ingenious ways to improve the lives of their fellow man. The average American leads a longer, healthier, more comfortable life than royalty a century ago. That is the legacy of generation after generation of American entrepreneurs. It is a noble and honorable legacy.
Becoming an entrepreneur creates a healthy and productive mentality. The entrepreneur earns his daily bread by creating value for others, which leads the entrepreneur to wake up every morning asking: how can I be most helpful to others? That mindset fosters good mental routines, which lead to good habits, which in turn lead to success and satisfaction. Entrepreneurs tend to become good citizens who are invested in their communities and have the resources and personal qualities to be community leaders.
Entrepreneurs tend to socialize with other entrepreneurs. If you have dinner with a bunch of W-2 employees, the conversation gravitates toward complaints about work (I’m not paid enough; my boss is an idiot; my job is pointless, etc.). It can be a toxic mindset. However, if you have dinner with a group of entrepreneurs, the discussion ends with “how can we work together to create even more value?” I know this to be true because, every month or so, I host an event for my entrepreneur clients. I’ve seen it happen over and over. If you want to get the best out of yourself, adopt the entrepreneur mindset and become friends with entrepreneurs. It is said, “tell me who your friends are, and I will tell you who you are.” You will not find a better, more honest, more industrious segment of America than its innovators and entrepreneurs.
If you can successfully start your own business, you will gain self-confidence that will supercharge your career. Think about it. An employee lives in fear of being fired, passed over or demoted. As an employee, your livelihood depends on factors outside of your control. You are always vulnerable, and so long as you’re an employee, you toil in service of your boss's dream, not your own. By contrast, if you know how to compete in the free market, you quickly develop a sense that if you lost everything, you could get it all back in 2 years. That self-confidence creates a willingness to take risks, which is the only way to succeed. Bet on yourself once and you’ll probably do it again.
Running your own business will force you to become vastly better at your craft, whatever that is. When you start out, you’ll do jobs that are too small for more established businesses. Over time, happy customers will give you more and better business. You will be able to hire a few employees. With hard work, your cash flow will become more reliable. By the age of 35, you will have gained mastery of your craft. Even in competitive markets, there is plenty of money for those who get the job done right, on time, and on budget. Ask anyone who has ever hired a building contractor or a car mechanic.
Lastly, being an entrepreneur gives you the means and opportunity to pursue non-profit endeavors. A thriving business is a natural platform for other pursuits, and it is a great way to learn to relate to customers from all walks of life. As your business matures, you will gain a clearer understanding of how the world works in reality (not just in theory). You can’t change the world without understanding it. A thriving business is a wonderful platform for charitable or activist projects.
How to Start Your Own Business
If someone told me in 1999 to go start a business, I would have had no clue where to begin. You might as well have told me to build a rocket ship. Unless you have a technology that absolutely cannot wait, I don't suggest starting a business right out of college. It will probably fail and you will get discouraged.
Instead, I advise that college graduates spend a decade preparing themselves and their skills. That sounds like an eternity. It’s not. What follows is not a goal but a system - a 10-13 year blueprint for a prosperous and satisfying life.
1) Get a job doing something.
No matter what degree you earned, your first job is likely to involve fetching coffee. Be proud to fetch coffee. Remember, when you’re rich and prosperous, you will wear your lowly beginnings as a badge of honor. It will also help you empathize with your employees when you are the boss.
Remember, 17% of Americans aged 16-29 are neither employed nor in school. Before political correctness took hold, we called these people bums. Don’t be a bum. Your first step is to gain employment. If you have to flip burgers, flip burgers. Everybody starts somewhere.
2) Get business cards, thank you cards, and stamps.
Invest a little bit of money in business cards and thank you cards. Keep the thank you cards on your desk. Whenever someone does something nice for you, make a point to send a personalized thank you note. It takes 5 minutes, and it engenders more goodwill than you would imagine. Put a dozen business cards in your wallet or bag. Start acting like an entrepreneur.
3) Collect mentors.
About 15 million Americans are self-employed. Successful entrepreneurs are everywhere. Start meeting them. Ask them to lunch. Here’s a secret: successful entrepreneurs love to tell war stories and share advice. What if you don't know any entrepreneurs? That's okay - go online, find owners of local businesses, and email them. Attach this essay, tell them you're pursuing the American Dream of starting your own business, and ask if they would let you buy them lunch. They will say yes and probably insist on paying.
For a year, make a goal of having lunch or drinks with one entrepreneur a week. Just one a week. That’s 52 lunches in a year. That’s 52 potential mentors. Keep doing it for 10 years, and you will have a network of 520 potential referral sources. Empires have been built on less.
4) Share your dream.
If you have committed to starting your own business by 35, tell everyone. There is power in the mere act of saying, "I am going to start a business." If you say it enough, you will start to believe it. Others will believe it. People will then expect it from you, and there are few human urges more powerful than the desire not to disappoint others.
If you create the expectation that you will start a business at 35 among your family and friends, it will be hard to chicken out. At the same time, people will start to think of you when they read articles about entrepreneurism. People will root for you. People will help you.
5) Keep your overhead low.
If you want to start a business, you will need to save your money. When you finally quit your job and start your business, you’re going to want as long a “runway” as possible. I always recommend enough money so that you can go without revenue for 6 months, covering startup costs, your personal monthly expenses, and business fixed costs. This is dollars and cents; do some math:
War Chest = ((M + B) x 6) + S
M = your monthly living expenses; S = your business startup cost; B = your monthly business burn rate.
If your business costs $40,000 to start and $7,000 per month to operate, and your monthly living expense is $3,000 per month, you need $100,000 minimum. You can save that in a decade if you are focused and disciplined.
Suppose you get a job paying $60,000 per year. If you can put away $500 per month at 4% interest, it will take you 13 years to fill your $100,000 war chest. However, if you can cut your expenses (or increase your earnings) and save $1,000 per month, your war chest will be full in just 7 years. Think of it. Saving an extra $20 per day buys you freedom six years early.
The lower your personal overhead, the more you can save. The more you save, the sooner you can stop being an employee and start building your business.
6) Marry the right person.
When deciding who to marry, understand that not every potential spouse is going to be comfortable with the risks inherent in being an entrepreneur. Nor is every spouse willing to accept the hardships that come with running your own business.
This is a hard fact of life, but if you marry someone who does not have the personality to deal with the entrepreneur’s life, you will probably never be an entrepreneur. If you’re really committed, you’ll do what I did and marry a fellow small business owner!
7) Move where the action is.
Over time, you will gain a clearer sense of what kind of business you want to start. When you do, you must get into the middle of the action. If you want to start a tech company, you better go to Silicon Valley, New York, Boston, or Seattle. If you want to make movies, move to Hollywood. If you want to be in commercial fishing, move to Alaska. If you want to drill for oil, move to Texas.
Some of these places are very expensive. Be prepared to live like a dog for a while. Pick your favorite flavor of Top Ramen and go to Sam's Club. Remember, these sacrifices are future war stories. Most successful entrepreneurs live on noodles at one point or another. It’s a badge of honor. Find friends who are doing the same thing and it won’t seem so bad.
8) Educate yourself on business basics.
You probably graduated from college knowing nothing about how to run a business. You can fix that. Spend time mastering Quickbooks. Make a dummy account and start playing with it. Take a class on bookkeeping. Learn the difference between a balance sheet and a profit and loss statement. Learn what estimated taxes are. Learn the difference between GAAP accounting and tax accounting. Learn the difference between cash basis and accrual basis. Learn the difference between debt and equity. Learn what a SEP IRA is.
9) Make professional allies.
Before you launch your business, you want some key allies who you can call upon for help. You are going to need a bookkeeper, an accountant, a lawyer, and a banker. Depending on the business, you will need other service providers.
If you know a lawyer who just started her own law firm, or an accountant, or a banker – make friends with her. Do as many favors as you can. I have seen businesses fail because the owner was too cheap to hire a lawyer. Remember, hiring a lawyer to draft documents is cheap. Hiring me to defend a lawsuit because you screwed up your formation documents is very expensive. If you have lawyer friends who you can call upon for help, it can make all the difference.
10) Keep the faith.
If you pursue the entrepreneur’s life, there will be times you want to quit. You will imagine how nice it must be to just show up to work, leave at 5pm, and never worry about making payroll. Your friends at big companies may make a lot more money for a while. They will drive expensive cars, and you might be driving a $3,000 used Ford Escort (my first car).
Remind yourself of the price tag. To get that BMW, your friends, in a very real sense, have forfeited the American Dream and consigned themselves to the employee mindset. Being an entrepreneur means delaying gratification.
Your most productive years will be between the ages of 40 and 60. That's when you get rich. Until then, make career decisions based on what you can learn and who you will meet – not how much you make. Your goal is not a posh apartment. Your goal is not short-term income maximization. Rather, your goal is to have a war chest by age 35 so you can start your business.
11) Be open to opportunities.
If you are an entrepreneurial recent college grad, don’t get too hung up on exactly what business you will start in 10 or 15 years. The world is changing quickly. It is entirely possible that the business you will eventually start does not exist yet as an industry. A friend and client of mine, Amit Khera, runs Oak Digital Agency, a great digital marketing firm. Eighteen years ago, that industry didn't exist. The point is, keep an open mind. Remember, when technology opens a new market, nobody knows anything. That is a great opportunity.
I have personally started four businesses – two technology companies, a real estate company, and a law firm. One of my companies began because I wanted to learn to play guitar. I began studying guitar with Matthew Grossman, who is a genius in addition to being a world-class musician. Now, together, we own a technology company that uses artificial intelligence to analyze speech patterns. Five years ago, I could not have dreamed that I would start such a business.
Remember, you’re not learning how to start a specific business – you’re developing habits and systems that will allow you to thrive in any business you want to pursue. Once you're in the entrepreneur mindset, you start seeing opportunities everywhere. And then it becomes fun.
12) Your last job is learning your craft from the best.
Once you know the business you want to start, your next and last job should be with the biggest, most successful company in your industry. If you want to open a restaurant, you should find a job at a five-star restaurant. If you want to open an accounting firm, work at the best accounting firm in your town.
In addition to honing your skills, working at the industry-leading company will teach you what the best customers expect in terms of service. On the other hand, every big company has waste, inefficiency and bloat. You will start to identify ways to run the business more efficiently on a smaller scale. Write those insights down. They are gold.
Pro tip: before you sign the employment agreement for your last job, make sure your lawyer reviews it. Many employers like to include covenants not to compete. Since your objective is to leave and compete, you need be very careful what you sign.
13) To partner or not to partner.
Once your war chest is full and you understand your craft, your industry, and the fundamentals of business, you are ready to go out on your own. Decide if you're going it alone or taking on a partner. It may seem counter-intuitive, but starting with a partner is usually a mistake.
The point of a partner is not to keep you company, to commiserate with you, or to mind the store while you sleep (that's what friends, spouses, and employees are for). Rather, a partner should excel at aspects of the business where you have proven deficient.
When you are starting out, you won't really know what parts of the business will prove most challenging. If you try to guess, you will probably guess wrong. I recommend waiting 6 months or a year and figuring out where your "pain points" are. Then, you can decide whether the solution is to improve your skills, or perhaps you should hire someone to handle that function for you.
Take for example my law firm. Initially, I did everything - marketing, client relations, bookkeeping, banking and, when time permitted, actual lawyering. The part of the job I hated was bookkeeping. So I hired a bookkeeper. The part of the job I was worst at involved drafting settlement agreements, which is tedious and requires patience that I do not possess. So I partnered with Tom Sima, the smartest corporate lawyer I've ever met.
14) Plan your launch carefully.
Starting a business takes time. Before you actually quit your job, you should go into overdrive with pre-marketing. Have lunch with everyone in your industry. Work on your mailing list. Buy the software you will need and master it. Do everything you can before actually opening your doors. Once you launch, it is all a blur.
15) Mentor others.
Entrepreneurs are the economic engine of our country and the glue that holds together civil society. We invest in our communities and employ a third of the US workforce. We have the hard-earned privilege of forging our own destiny and pursuing goals and objectives that we choose. It is a blessing I wish every American enjoyed. Now more than ever, we need entrepreneurs and risk takers.
If you follow steps 1-14 faithfully, you will succeed. When you do, make sure you pass on your wisdom to the next generation of entrepreneurs. Few things provide as much satisfaction as helping a young person realize the American Dream.
We live in tumultuous times. And yet, through our country's history, when we have run into trouble, the American innovator has always been a big part of the solution. So it is today. To the Class of 2017, we desperately need your energy, your ambition, your creativity and your courage. The American Dream is alive and well. We are living in a technology renaissance. There is no better place on Earth to start a business, and no better time in history to succeed. You can do it!