The Entrepreneur Equation: Evaluating the Realities, Risks, and Rewards of Having Your Own Businessby Published 22 Mar 2011
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It’s time to drop the rose-colored glasses and face the facts: most new businesses fail, with often devastating consequences for the would-be entrepreneur.
The New York Times, Wall Street Journal, and USA TODAY bestseller The Entrepreneur Equation helps you do the math before you set down the entrepreneurial path so that you can answer more than just "Could I be an entrepreneur?" but rather "Should I be an entrepreneur?". By understanding what it takes to build a valuable business as well as how to assess the risks and rewards of business ownership based on your personal circumstances, you can learn how to stack the odds of success in your favor and ultimately decide if business ownership is the best possible path for you, now or ever.
Through illustrative examples and personalized exercises, tell-it-like-it-is Carol Roth helps you create and evaluate your own personal Entrepreneur Equation as you:
-Learn what it takes to be a successful entrepreneur in today's competitive environment.
-Save money, time and effort by avoiding business ownership when the time isn't right for you.
-Identify and evaluate the risks and rewards of a new business based on your goals and circumstances.
-Evaluate whether your dreams are best served by a hobby, job or business.
-Gain the tools that you need to maximize your business success.
The Entrepreneur Equation is essential reading for the aspiring entrepreneur. Before you invest your life savings, invest in this book!
The Entrepreneur Equation: Evaluating the Realities, Risks, and Rewards of Having Your Own Business Reviews
Do not buy the book unless you want an honest opinion. If you want to pursue the life of an entrepreneur and you aren't sure what it will take, this book is an absolute must-read. No doubt about it. Because this is the book where Carol Roth lays it all out there.
I've had the honor of hearing Carol speak at SOBCon 2011 and I can tell you she genuinely cares. But she doesn't want you to waste your time of you truly aren't ready to jump into the entrepreneur life.
This book will explain the difference between a business and jobby, the personality and skill set you'll need as an entrepreneur, and powerful self-assessment questions. It will NOT serve as another step by step how-to guide....there are enough of those out there already.
This book is all about the initial screening process for you as an entrepreneur or thinking to start a business. Carol mentioned all aspects of being entrepreneur, so that you can easily assess yourself as an entrepreneur. She has never shied away from hard facts and uncomfortable realities that you easily ignore or don't straight forward. I would highly recommend this book to not only someone who thinks to have own business, but also someone who thinks to get sick and tired of being a employee. (you would know that how lucky you're in that position!)
I want to quote from the book here "Ideas are not businesses. Good business ideas fail, and bad business ideas succeed. It is all about executing a viable business model. Everyone loves business ideas, but they are worthless (unfortunately) without work behind them."
I borrowed this eBook version from the WI library system to read on entrepreneurship and whether or not this is another goal for me.
My favorite chapter was "entrepreneur: screening process" since it mentioned briefly about law school, which I was also considering but we can be blinded by our passions. "most big risks and financial, emotional, or achievement-oriented rewards have a screening process." It suggests the 5 step screening process: FIRED UP, and professions that you put forth effort, the time, and path worth pursuing is a "good" fit. If you find out about the profession during the screening process, will determine if you want to continue or have a commitment to it.
Next, I took some brief notes on some things; Carol's lingo makes me nod my head and laugh out loud. This is the first time I read a business-related book with profanity, or such vulgar language can be abrasive in some aspects. Chapter 28 discusses about "cash flow" that doesn't flow and be aware of upfront costs to start your own business; competitors and preexisting relationships can play parts in the dynamics of longevity of your business to name a few. We have to evaluate our risks and rewards of being an entrepreneur.
Some equations or business things goes over my head like it did in college! I cannot be a financial advisor, accountant, CPA, or nothing like that--will find a team of workers that are talented and smart in their given-talents if I ever start a business. I see I have been just doing a "jobbie" or "job-business" at this time after reading this book.
Author of "God is in the Equation"
Carol Roth is 100% sure she knows everything there is to know about starting your own business. And she might be right, or close to it. She's also 100% sure that you are an idiot, and she's here to tell you why.
Some of her soliloquies on the superiority of jobs over entrepreneurialism are downright hilarious. Can anyone tell me where these jobs are that give 5% raises every year forever?
She has a lot of good information about businesses and the realities of starting and running one, but it would have been better presented with fewer of her own biases on display (she takes the first three chapters to lecture the reader on why all other entrepreneurialism books are bad and stupid, and why hers is perfect and unique) and a great deal more respect for the reader. Her assumptions of the motivations of small-business owners are so flawed and insulting as to be laughable: Ms. Roth, the vast majority of people starting businesses are women, and many of them are moms; they aren't doing it because they think it's a sure path to fame and fortune. They're doing it because there are no other jobs out there, or they desperately need work that won't either suck all of their income into daycare fees or suck all of their time into commuting, or because the jobs that are out there are poorly paid, tenuous, temporary, and incredibly extraordinarily risky without ANY potential future upside. You are living in a dreamworld.
Should I Be an Entrepreneur?
As counselors, we come upon so many people smitten with the idea of starting a business. After all, the very idea of doing so has tremendous allure, enough to ask oneself, “Could I be an entrepreneur?” More important, though, is the question “Should I be an entrepreneur?” That is the theme of The Entrepreneur Equation, a very highly received book by Carol Roth.
The Assumptions, Myths, and Realities of Entrepreneurship
What are the assumptions, myths, and realities of entrepreneurship? This is Roth’s starting point. Each year, millions of people take a huge financial and emotional risk to invest in a business venture. After all, as the story goes, anyone can start a business at any time…. Does the American Dream not hold promise in an individual’s ability to achieve prosperity? To answer this question, Roth proposes a two-way screening process, one of self-examination, based on one’s period circumstances:
Is entrepreneurship right for you ← → Are you right for entrepreneurship?
Assessing Your Fit with Entrepreneurship
The first step is to understand what a business is and what it means to be an entrepreneur. First, it’s important to know what a business is not. Roth emphasizes that a business cannot depend on a single person or select group of employees. In other words, an entrepreneur cannot do everything him- or herself. A true business creates more than a job for oneself—it creates equity. A single worker is the business; it is difficult to work on the business, because he or she is always working in the business. An entrepreneur takes on multiple functions but does not get to choose which ones to do.
Opening a business to escape control under a boss or a company is a false assumption. A person in business for him- or herself will have to answer to many more people, especially customers. An ego is not an asset; rather, it something that can get in the way.
A business is much more than an idea. Conceiving the idea is a one-time activity, as are conceiving a business model and creating an initial business plan. For those activities, very little work is required, giving many prospective entrepreneurs a false sense of what will actually be involved in creating, building, and maintaining that business, all very challenging tasks that demand a great deal of time. To help one answer the questions “Should I be an entrepreneur?” and engage in that all-important two-way screening process, Roth provides several self-assessment exercises:
• Defining motivations. The object of this exercise is to weigh one popular notions and common misconceptions with the realities, both positive and negative, of owning a business.
• Evaluating control factors. Here, one weighs control over others; a small-business owner may have the title of President, but he or she must answer to employees, lenders and investors, and customers. The owner is at the bottom of the inverted pyramid; as for upward mobility, there is none.
• Examining the “jobbie” and hobby phenomenon. Does an activity net an income that at least meets the federal minimum wage? A hobby is a pleasurable pastime and can fulfill important needs, but it is not necessarily a business.
• Assessing working with others. Which individuals and behaviors cause stress? Is starting a business the only way to eliminate these unpleasant situations?
• Is the timing right? One cannot have two priorities at the same time, of running a business and other pressing responsibilities. However, “not right now” does not mean “never.”
• Accepting the necessity of moving backward to go forward. Anyone starting out in a new area must know every position to learn about the new endeavor.
• Evaluating one’s network. Starting a business is both who one knows and what one knows.
• Assessing one’s financial situation and responsibility. It takes money to make money; one must also be financially responsible and willing to sacrifice.
• Analyzing one’s personality. Running a business requires perseverance and a willingness to commit for the long haul. Says Roth, “Business is a roller coaster, not a merry-go-round.” One of the great paradoxes of entrepreneurship is that an entrepreneur may own a business but has very little control over circumstances.
Assessing the Business’s Fit for You
Even if one’s fit with entrepreneurship is favorable, one must ask whether a particular business makes a good fit at the current time. In creating a sound business plan, one must have a firm understanding of every financial aspect, from costs to profits to the overall marketplace. And then come the hard part, raising capital. Many businesses fail for the sole reason they are undercapitalized. With this, the self-assessment exercises continue:
• Understanding the numbers. This exercise serves to evaluate risk and reward for the entrepreneur and the venture.
• Assessing opportunity. Does the business or what it offers has a competitive advantage?
• Determining whether the business is scalable. Does running the business rely on a single person, or could someone else perform some of the functions?
The Risks and the Rewards
How do the projected earnings between working for a company versus having one’s own business compare over a ten-year span, also taking the risk of losing the initial investment into account? (Roth also covers what one needs to know for buying an existing enterprise or taking over a family business). In addition, as with any investment portfolio, diversification is key. Should the business not work out, an entrepreneur must have other money to fall back on. Most important, doing one’s homework, including an in-depth self-assessment will help minimize that risk.