A lot of people believe that entrepreneurs are big risk-takers. On the contrary, though, many of the entrepreneurs I’ve met are extremely risk-averse.
Startups are typically high-risk, high-reward businesses. You need to bring something new to the market and find customers.
Quitting your job and jumping into entrepreneurship is not the only way to go about it. If I could go back and do some things differently, these are things that I would keep in mind.
Have 6–12 months of savings
Unlike freelancing, for example, startups require building a new product and then finding a market for it. If you succeed, then there’s a chance that you will succeed significantly. But let’s face it, the odds are not on your side because 9 out of 10 startups fail.
When you first start, you have no idea how long it’s going to take for the company to start making money. To survive during that time, you will need to have at least 6 to 12 months of savings put aside. This will buy you enough time to experiment with multiple ideas.
Have a backup plan
If your company is doing well and you see it has a chance to succeed, it’s one of the worst feelings to abandon it because of financial stress or other difficulties.
In case something like this happens, it pays off to have a backup plan. This backup plan may not be the ideal living situation for you, but it allows you to build your company with less financial stress.
There are many entrepreneurs who have been through tough situations. A noteworthy example is Travis Kalanick, who used to sleep in his parents’ house and survive on ramen while building his first company Red Swoosh.
Have income streams outside of your startup
Being able to earn money if and when you need it can be a gamechanger in terms of financial security. Since last March, I picked up freelancing, and each time I needed money, I found projects to work on and got paid.
This would have been important in the past, as it could have prevented me from being broke. Working for a full weekend to earn some money is much better for your mental health than being broke.
As a startup founder, it’s hard to pause and work on something else. But being broke and in constant financial stress is not particularly helping your startup.
