No spouse, no kids, and no money? It may be the perfect time to start a business.
With little to lose and everything to gain, young entrepreneurs are in the perfect position to take the risks involved with starting a business. But youthful inexperience may seem too big of an obstacle for most. Only one percent of businesses are owned by people under the age of twenty-five, according to the U.S. Census Bureau’s 2002 survey of business owners. Young people starting a business face unique obstacles, but avoiding four common mistakes can improve the chance that living a dream can also start to paying the bills.
1. Not Enough Networking
One of the most profound differences between young professionals and their older counterparts is the lack of networking opportunities. Seasoned entrepreneurs and those fresh from the corporate world have had the time to build up a list of contacts to help with a start-up. Without their own industry experience, young people must rely on the advice of others who have gone before them.
“If you can get mentors to help you then you don’t have to learn everything on your own every time you make decisions,” said Judith Cone of the Kauffman Foundation, which works to encourage entrepreneurship across America and improve education. “Almost every community has support organizations for entrepreneurs.”
Government organizations affiliated with the Small Business Administration (SBA) have offices all over the country, as well as a national network. Peggy Fajohn, lender relations specialist at the Richmond, Va., SBA office, said all programs are open to young entrepreneurs but none are specific to them. Organizations like SCORE, Counselors to America’s Small Business, provide counseling to small business from retired and practicing business owners. The Small Business Development Centers network has in every state. Many, but not all, are located at colleges and universities where they provide counseling and classroom training.
“They are great networking opportunities,” Fajohn said.
Fajohn also mentioned about 100 Women’s Business Centers across the country that provide, among other services, mentor protégé opportunities. But the name shouldn’t fool anyone.
“They also work with men,” she said. “They advertise to women but don’t turn anyone away.”
When Ryan Allis started his company Broadwick Corporation in July 2003, just after his freshman year at University of North Carolina, he was no stranger to the entrepreneurial world. He had started a computer help company when he was 11, a Web site design company at fourteen and a web marking company at sixteen. He knew the value the business community would be to him.
“The willingness of other entrepreneurs to give advice or meet to help you out is really quite surprising,” Allis remembered. “People are willing to help out young people trying to make a positive impact and start a company.”
At Indiana University, entrepreneur hopefuls take advantage of networking opportunities on campus. In February 2006, more than fifty members of the Young Entrepreneurs Association (YEA) pack into an empty classroom of the IU Kelley School of Business. Pizza boxes litter the front tables as students circulate during the allotted half-hour of “networking”. As they balance their food on napkins and gesture with plastic cups the dull roar of conversation fills the room.
IU junior John Evans, an executive board member of YEA, said the club helped him to connect. “I’ve made tons of contacts,” he said. “I’ve met people interested in my ideas and also helped people. It’s a give and take relationship.”
2. Not Prepared for the Work Load
Any business requires incredible amounts of effort so aspiring business owners should make sure the sweat and tears will be worth it in the end. “If you are going to start a business you better love what you are doing,” Cone said. “It is so much work and the pay off is just so far away… it’s not motivating when it’s 3 a.m.… there has to passion there.”
When the grocery store David Schell worked for during his sophomore year at Indiana University was bought out a lot changed, and customers were unhappy. He decided to open a meat and seafood market in the college town Bloomington, Ind., and started laboring on a business plan in 2003.
“I thought it odd Bloomington didn’t have one,” he said. “We filled that void.”
Today, Butchers Block is a reality and a success, but Schell admits he wasn’t prepared for how much of his life would be consumed by his business. He sprawls out as he sits in a folding chair in the corner of his simple back office at 8 a.m. He has already been working for an hour. “I was here until 9 p.m. last night, and I was here again at 7 a.m. this morning,” he said.
The once-white apron hanging on a hook just above his head is worn and covered with brown stains. “I work 80 hours a week,” he said. “I haven’t had a vacation in a year and half. It’s basically your 100-percent time commitment for years and nothing else comes first. You don’t learn that in a classroom or a book.”
3. Lack of Confidence
Many young people feel like they won’t be taken seriously, or are not confident with their own capabilities. However, confidence is extremely important when dealing with investors. If someone can’t believe in himself, no one else will either.
Sherry Hoskinson, director of the entrepreneurship program at University of Arizona, said the key to confidence for entrepreneurs is simply knowledge. “I strongly believe that confidence in the ability to launch something comes from having a really thorough understanding of the idea itself,” she said. “What it is, how it fits into the product and market landscape, who would be interested and who is going to benefit from the product or service being in existence. Then they can go and put together full-scale plans and all the executables.”
Cone said she judged a competition at UNC where the most impressive entrants were barely adults. “They were calm,” she said. “They knew their stuff. They knew financials and how businesses work.”
The eighteen-year-olds in the competition had started a grocery delivery service and even bought a refrigerated truck. “They looked very young but I walked away saying ‘wow’, I’d bet on those guys,” Cone said.
Cone stressed getting someone to bet on a business is about more than just the idea. “Something people maybe don’t know is that investors look at the deal and the market, and if it’s a good deal and a great market and they don’t have confidence in the person they still won’t invest,” she said. “If it is a good person with a mediocre idea, they might still bet on the person.”
4. Afraid to Ask Family and Friends for Help
According to Cone, most businesses, and especially those started by young entrepreneurs, obtain funds first through family and friends. This makes some people uncomfortable, but Cone said it is perfectly normal and corresponds with the majority of business owners’ experiences.
“Everybody goes to friends and family first,” she said. “It’s a rare company that ever goes for big money first.”
Young people may not have a long list of older adults to ask for help, but Cone said a network of friends can be an untapped resource. Sometimes a brilliant group of friends can provide a fresh approach. Cone mentioned the company Spanx, started by Sara Blakely.
“A very young woman had this innovative idea,” she said. “She would always cut up her hosiery to fit her outfit, so she started a product line. She called all her friends and they became her marketing team.” The friends went to stores and flooded them with requests for Spanx hosiery. In a short time Blakely was a huge success by using the resources she already had.
David Weisburg, president of the Indiana University YEA said he started saving when he was twelve-years-old for the business he knew he would one day start. Just a sophomore at IU, Weisburg now owns Indy Tickets, a broker to broker ticket sales company, along with his cousin. Seventy percent of the initial money was supplied by his cousin and himself.
“We started making $1,000 in sales every day, but couldn’t get it for two weeks,” Weisburg said of the beginning days of his company. “My dad had to put up some money.”
Although young entrepreneurs are in many ways at an advantage because of low risks they face compared to their older, more established counterparts, Cone said entrepreneurship definitely isn’t for everyone.
“(The Kauffman Foundation’s) goal isn’t that people necessarily start a business in college,” she said. “Statistically you are better off going into a job and learning about the industry you are interested in … and someone is going to pay you to learn all that.”
However, Cone recognizes some entrepreneurs are driven to owning a business because of the lack of interest or inability to fit inside the corporate box. She said surveys of business owners done by the Kauffman Foundation reveal people want to be in charge of their own destiny and create their own space outside of that box. She cited the founder of the Kinko’s, who was severely dyslexic. “Entrepreneurship was the only thing for him,” she said.
And it could be argued a “safe” corporate job is not fundamentally different from starting a business. “Many industries pay you for forty hours and expect sixty,” Cone said. “The turmoil in the big business world is no safer than going out on your own. Both are bets, you are just betting on yourself rather than a company.”
In the end, that big house and fast car may not be the best measures of success for young business owners.
“Even if you don’t hit it big, if you just make a good replacement salary and it’s more satisfying for you to be calling the shots, then it’s worth it,” she said.