Should you get a job right now, or jump into the deep end with your own company? That's today's question from a reader:
"I've gotten a few offers with startups run by very smart and successful people and am torn between working for a bit, learning and making some money vs hustling on the side to bootstrap my company. What do you think are the potential downsides (if any) to trying to hustle my way to bootstrapping my startup? What do you think would be the potential positives of taking a job?"
I've never had a job, so I'm biased. If you can afford it, the skills of working for yourself translate very well into the continued skills of working for yourself. The advantage of a job though, are (1) you get paid to learn the domain knowledge from people who already get it, (2) you get to see well-running policies and structures in practice which can be a huge-time saver later, and of course (3) you're more guaranteed to get enough pay to stabilize or build up a bankroll.
Of course, #2 can be as much of a curse as a blessing, because you can learn "the way things are" and not imagine to do bigger/better later. Most of the times it's more work re-inventing the wheel, but if you're creative you'll frequently improve upon past designs of people.
Biggest concern is of course the cash. If you don't have a significant bankroll (or worse, if you've got debt) you want to remain cashflow-positive by some mix of consulting, contracts, or job or part-time job. I've resolved to pretty much never willingly go cashflow-negative again for the rest of my life, unless struck with a gigantic opportunity. The advantages to ratcheting up your net worth consistently and somewhat conservatively alongside working on high upside (but not exclusively, and not at the expense of positive casghflow)… it's too great to pass up. Protecting your cashflow while working on high upside somewhat pretty much guarantees success, whereas I've done high upside stuff — that's paid off, even!!! -- that hosed my cashflow for a year or two and set me back while ramping back up. Perhaps this limits my upside to some extent, but I don't think so. Running out of cash while turning profits is aggravating as fuck, and I had to abandon some lucrative margins on lucrative stuff for cashflow problems (and this is on stuff that worked!! And had very good two-year returns on investing in my own stuff — hell, most stuff fails so it's even worse for most people!!)
Working for myself generates me a lot of cash these days, so it's a non-issue and non-decision for me. But if you had a small bankroll (or debt), then don't go cashflow negative. Point #1 is basically a wash, because self-employed skills are more valuable than any skills you get by being employed I think except MAYBE domain knowledge, point #2 has pros and cons, so I'd boil it down to point #3 — can you stay cashflow positive on your own? If so, go for it. If not, consider the working route.
Hey, maybe I'm not biased actually. I used to be 100%-all-entrepreneurship-all-the-way. It is a more beefy skillset and forces you to do/learn more. But I'm going to play more conservatively in laying out cash now. I've done a lot of playing around with my cash that led to me to have to cut to the bone later, and endure a large amount of stress whilst in uncertainty. I'll never do it again. My advice: stay cashflow positive unless you've got a significant bankroll AND an incredibly amazing opportunity.
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Great advice, I think too many new entrepreneurs believe they'll be fine without any sort of safety net. I've been there and it isn't fun.
I'm in the middle of learning this the hard way :( I'm now caught in a liquidity trap on a bootstrapped startup. If I don't invest significant time and money it doesn't grow. If it doesn't grow it turns little or no profit. If I stay with my consulting job then I don't have enough time to make it grow. If I leave the consulting job then I don't have enough money to grow the business and take care of my family.
I couldn't agree more with your bottom line. In fact I'd put it in bold underline flashing red - stay cashflow positive unless you are SURE that your bankroll can more than withstand the startup, and the opportunity is demonstrably compelling. That goes double when there's a family involved.
Was having lunch today with a friend of mine who is a fantastically entrepreneurial, smart, skilled, massively hard-working, and has done some amazing things in his life.
But lately, his cash has dried up.
We talked about it, and it turns out he's doing something mentally that I did quite a lot in the past -- often to my detriment.
I was focused on doing "very high value activities" -- by some abstract standard of my own -- and often neglected to get what seemed like small amounts of cash.
My friend is doing the same thing. He's looking for "streams of income"; not "just getting some cash."
No one is going to tell you an easy way to make money
In the beginning days of my gambling thing, it was very easy to make money. The system was basically foolproof and anyone with a credit card could make a good yearly income. I wasn't making money through any sort of skill, I was essentially exploiting a loophole. But here's the thing about loopholes: no one is going to tell you how to do them, especially not someone you don't really know personally. Because if too many people find out about a loophole, it closes. So if you want to make "easy money", you're probably going to have to stumble upon it yourself. If someone IS trying to share a loophole with you (especially aggressively, by email) it's probably a scam like a HYIP or a Forex trading scheme.
Most of the people who were gambling like I was now play poker. You can play poker online or in casinos and make six figures a year. But it's not a loophole, so it's okay to tell everyone. The barrier to entry is a few years of exhaustive practice, thousands of dollars to lose while learning, and the ability to sustain that lifestyle while you struggle to break even.