How to decide if you should start a company

Do you want to know how to tell if you have a business idea that will succeed? You know what? I don’t know how you know that. And if I did, I’d be a venture capitalist, right? But I do know how you can tell if you have a business idea that is worth reorganizing your life to try.

Who knows if you have a good idea?? No one. Actually, in some cases some people can tell you for sure that your idea definitely sucks, but no one can tell you for sure that your idea is good. And, if nothing else, any for-sure good idea is already being pursued by ten people, or ten million, depending on how big the market is. Which makes it, again, not a for-sure good idea because maybe you won’t do it best.

So if you want to know if your idea is one that you should actually try, don’t spend time figuring out if your company will be the next Web 2.0 darling. Instead, figure out if it’s going to give you a life you want. The best way to figure this out is to look at how other entrepreneurs are living their life.

I did not do this. I purposely ignored what the lives of other entrepreneurs look like, because a gazillion studies show that entrepreneurs work longer hours than everyone else. And they are under more stress than other people.

I ignored this research because I told myself that a startup would be a good thing for my kids. I told myself that my blog was growing too fast and I couldn’t keep up, and if I spun part of it off into a startup then I would have people helping me. I am a great delegator. I imagined the list of things I could delegate to the slew of people who would go into business with me.

It is not uncommon for people founding startups to lie to themselves about how much work it will be. It’s similar to having a baby. Everyone tells you the baby will take over your whole life. Daniel Gilbert even tells you that kids will not make you any happier than you already are. You go ahead with it anyway. You tell yourself that the kid-time-crunch will not happen to you. You are the exception. Other people are incompetent time manager and you ‘re not. But if we didn’t lie to ourselves, who would have kids?

So, anyway, denial goes very far in both the birth of a child and the birth of a company. Which means it is should not be surprising to you that I have done things like let my son dump boxes of cereal all over the house so that I could be on a conference call, or that I hid in the broom closet at swimming lessons so I could do a radio interview with no background noise. (Please, don’t send me emails telling me I am a negligent parent. Negligent is relative. And why are you reading this column instead of playing Candy Land, huh? )

When you imagine your life doing your startup, do you imagine laying in bed at night worrying about money? Because no matter how great your idea is, you will worry about money at the beginning, in that terrible time between when you quit what you had been doing and you start drawing a salary form the startup. And you know what is worse than one person stressing about money? The two or three people who do the startup with you, all stressing about money together. At some point during the early time, it’s not even about the idea any more; it’s about just getting through the early, tough part.

Now, go back to your idea. Go back to the question of is it a good enough idea to try? Entrepreneurship is not about one, static idea that you implement. It’s about an idea that you go with, and mutate, and act on because you want to do a company so much that you are willing to delude yourself into thinking that maybe it won’t be so hard.

Are you there, to that point? Then you have an idea that’s good enough for starting a company.

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19 comments on “How to decide if you should start a company
  1. Scott says:

    Wow, great post. I have been in a two man company and am now in a big company longing to go back out on the limb. After your post I remember how accurate your analysis is. Sometimes I forget…but today i am remebering. We’ll see if this time i’m the exception ;-) NOT

  2. Alice Bachini-Smith says:

    Love this post. I’m just staring my tiny little artisan food company, and I thought because I wasn’t earning money before anyway due to full-time parenting, it would be almost worry-free as long as the start-up costs were zero. Which of course, they’re not. I just try not to think about it too much, then wake up in the night worrying instead. But I think worrying is OK as long as it doesn’t stop you doing what you need to do. Doing this is more like having another baby than going out and getting another job. Maybe it will let me sleep through the night eventually…

    Anyway, I agree with you about the denial. Ignoring things that aren’t the main point and might get in the way, sometimes, is a skill.

  3. Anna says:

    So…you alluded to your startup not being as exciting or successful as you had expected. What’s the update on that anyway?

    * * * * * *

    Just because it’s stressful, doesn’t mean it’s not exciting. In fact, it might be exciting because it’s stressful :)
    Launching very soon. Stay tuned….

    –Penelope

  4. Matt Bingham says:

    It takes a lot of guts to up and quit and start up a company. Not only do you have to believe in the idea, you have to sell the idea to people that will be doing it with you. I guess that would be my definition of a good idea. If you can convince friends/colleagues to quit there job and focus on your idea, it may not be that bad of an idea. Passion, Right?

  5. Jim Eiden says:

    Sometimes stupidest ideas are the best and make the most money. I come up with these crazy ideas all the time.

    Think about it. Would a Venture Capitalist really have funded the Pet Rock? But it made millions.

    Do it in a smart way. Start the company on the side while you still have a full time position. Build up the company until you get to the point where you have to make that leap.

  6. Andrea C>> Become a consultant blog says:

    As someone who has only recently started outsourcing work (and letting go) — but is seeing great results — I’d love to hear what things you’re delegating.

  7. Colin Kingsbury says:

    VCs are not the philosopher’s stone of entrepreneurialism. They will be the first to tell you that there are enormous swathes of potentially-solid business ideas they would never come anywhere near.

    First, they need to be capable of very high levels of sustained growth (think 100%+ annually for 5 years). Second, they are going to look for businesses that can be sold at a high multiple of existing revenues, think 5-10x, more being better. Basically, they want companies that they can pump full of prozac and crystal meth and steroids and see which companies thrive like Keith Richards in an environment toxic to mere mortals.

    These rule out the vast majority of otherwise-successful businesses started in the US every year.

  8. deb says:

    i am absolutely at this point. without a doubt. in fact, just this week i was thinking this might all go smoothly and be easy. and then i remembered that in a couple of weeks, the steady paycheck goes. i remembered that in the middle of the night….while i was worrying.
    ;-)

    all the best!
    deb

  9. Melissa Chang says:

    I love this post, and this quote is my favorite: “Instead, figure out if its going to give you a life you want. The best way to figure this out is to look at how other entrepreneurs are living their life. I did not do this.”

    Hilarious.

    I actually have been writing a series of blog posts about start-ups based on my experience, my husband’s experience (yes, we both started companies; no, not together; yes, we’re still married so far) and the book Founders at Work. Since you’re avoiding reading about the lives of other entrepreneurs, you may want to skip this book, but it was helpful to me. I found it to be really encouraging, not so much because it showed me this great lifestyle that I will have with my start-up, but that it showed me that I will pretty much have to go through hell to get the business to work. There’s something reassuring (to me) in knowing that other people have struggled through things like this, too, and came out alive (if only barely) on the other side.

  10. jim says:

    Hey Penelope,
    What happened to all of the bashing that you and the two Ryans used to impart around the “slow and non-agile corporate environment” and all the advice arond “don’t overplan things like the boomers do”. How long have you been planning this startup? Maybe the real world works a little differently than you thought?

  11. Dave says:

    One of the factors I found while studying the weak returns of VC funds was an overwillingness to fund second-timers with “a track record”, and not enough investments in first-time entrepreneurs. Second timers’ returns are far worse, even when they’ve started successful companies in the past.

    Larry Ellison, Bill Gates, Michael Dell, Gordon Moore – all one hit wonders.

  12. Kosta Kontos says:

    You don’t even need a great idea. Find something that is already being done that you could see yourself doing (and enjoying it).

    Then just do it better.

  13. Steve Errey says:

    A good idea is one part of it; a part that a lot of people get stuck on because they’re worried about whether their idea is ‘good enough’ or not. Another key point that people often don’t pay any attention to is whether the idea matters to you or not.

    I could come up with an idea about hairnets for pets (cough, just an example), which might be a good idea or it might not, but if it isn’t personally relevant and doesn’t matter to me then I’m not going to be prepared to do what’s necessary.

  14. Gigi says:

    I am on the edge of starting a company.

    This is why: I’m just moved to Australia for love and now I’m having trouble finding the kind of work I want to do.

    It occurred to me that previously in life when I couldn’t find stuff to be interested in I would start a club or redesign my major….and the path was never easy but it was always worth it…so starting a company is a bit like that – making your own work.

    I hope that is how it is anyway.

    P.S. Love your blog – it has all the answers no one can ever tell you! I wish I had read your “don’t disclose what you made at your last job during a job interview” before my interview last week. Grr.

  15. Alanna says:

    My parents started a specialty food company, and it failed and left them with a lot of debt. It was hard for all of us to live through. I think when you’re making a decision to start something you need to think through how you’d handle failure. If the thought is unbearable, don’t take the leap.

  16. Mark says:

    Ideas are helpful, but they are a dime-a-dozen. Most ideas have been thought of before. What really matters is execution. Most people can come up with ideas. Few can successfully execute those ideas to make a business successful. Do you have the requisite skills? Can you plan, budget, implement, market, sell, handle the administrative tasks, customer support, do your own IT? etc etc? Do you have a plan for all aspects of the business?

    Ideas are easy. Implementing those ideas isn’t so hard. It’s doing all the rest of the stuff that makes it into a successful business that is so hard. Some of it is really tedious. Some of it will suck a lot of time away from the “fun” part of the business that you started the business for in the first place. Be prepared.

  17. Juliet Jones says:

    Having had a baby and started my own company, although not at the same time (thank God), I agree with the denial factor. If you knew how it really was, you probably wouldn’t do it.

    But there are other sources of information out there to help give you confidence that your idea, as it changes and grows, will have a good foundation under it – your management. Doing high-quality self-assessments to learn about your personality is a start; you can learn about your strengths and weaknesses so that you can compensate for them. Secondly, talking to others with similar challenges is another key to success.

    When I opened my business, I talked to people in similar businesses (but not competitors) for advice – not about my idea, but about how I would market it, how I would handle cash flow, etc. For example, relying on credit cards at first was scary, but necessary. Colleagues told me to use it wisely, but get over the fear of using credit this way. And they were right. It does take money to make money.

    Juliet Jones

  18. George Van Antwerp says:

    As always, a great post. I can relate. I had a great corporate job and came up with a good idea that I tried to sell internally. I was pretty risk adverse with 2 little kids so I wrote the business plan on the weekends and sent it to 10 CXO level people in and out of the industry.

    I said that if any one of them could find a fatal flaw in the logic than I would keep my job. No one did, and I had VCs start calling me.

    I knew it would be hard, but glossed over some of the risks. I didn’t want to do it simply for the lifestyle change, but I wanted to build the next big company.

    Needless to say, the concept ran into some regulatory hurdles in healthcare and funding took longer than I was willing to wait. It was a massive stress to take on and cost a lot of money. On the positive side, I learned a lot (a second MBA) and made a lot of good contacts.

    I summarized my lessons learned from this on my blog at http://patientadvocate.wordpress.com/lessons-learned/.

  19. Laughmore says:

    Very helpful, for the idea Genie. I need to see if the idea fits my LIFE and then go do it.
    Thanks Laughmore!

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