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Alok's Posts / Startup

Entrepreneurship, at what cost?

I’ve been contemplating this question for a long time:

While we all celebrate entrepreneurship (I blog on the basis of that merit), do we also look at its financial cost, consequences and most importantly LOSS of earnings for a person who jumps from a job to starting up (an activity which has a proven 98% failure rate)?

This question is also relevant in a Brave New World called India where GDP is the only one thing growing at a solid pace in the world and whose economy is always going to be offering a large quantity of quality employment.

Check out the table below. It compares (my projection) of conservative salary growths of graduates based on their skills and education as they grind through their professional life in India till age 40. This chart excludes government jobs and the ‘here today, gone tomorrow’ tech startups which throw money and unfortunately vanish. I am also not considering exceptional people (the ones you read about who get 1 crore starting salary on graduation day). This is a ‘yeah – I am in this chart/my peers are earning something like this’ kind of representation.

WHY?

To question if entrepreneurship with a 98% failure is worth it, considering an alternate outcome that looks like this? This is also to provoke those people whom I meet who have started up (some for 3-6 years) and have never paid themselves salaries or their market worth.

What is the reason you would forsake hard cold money for something called entrepreneurship? I want to hear it from you!

 

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8 Comments

  1.  Everyone has that entrepreneur itch, some try to squeeze the opportunity by risking things/temporary benefits like paycheck. And some like me would mostly blame it on commitments & peruse passion as a moonlighting gig 😕

    I guess its simple as “fortune favors the brave”, I guess that’s the entrepreneurship 101 in B schools. I’m sure a bigger fortune is around the corner in Indian mobile game industry 🙂

    Cheers, Cartic 

  2. Been running a service based design and technology team for last 5 years now (after working for 5 years) and have just about reached a stage where I probably make as much money as my friends in hot jobs. There is no exit for me as it is a services company (lifestyle business) so ruling out a big payday. 

    I ask myself these questions often and below is how I justify it to myself

    – My personal strengths make me better suited for small teams and setups as against large companies (where the big money is). So I would be playing to my weaknesses if I continued to work in large companies. I would lag behind in my career vis a vis my peers and be disappointed. So job in a large company is not really an option. 

    – Building assets. While a business/enterprise/venture keeps sucking all the money you generate and hence leaving you with little disposable income (opposite of salaried folks), you are building assets (team, client list, hardware) that over time starts delivering a lot of cash. It gets easier and easier to make money with time in a venture. Not to mention you have find couple of ancillary ideas that generate some cash flows as well. So hopefully in another 5 years I will beat by a big margin the 15% annual compounded growth of salaried folks. 

    – I like the feeling of being in control. I choose everything about my life like which city (I chose Goa to bootstrap 4 years ago) to the kind of culture and workplace I want to work in. I also like the feeling of hope. Hope is pretty powerful and a personal enterprise feeds you lots of hope and you see opportunity everywhere. Control and hope work great for certain type of individuals. Works great for me. 

    – Tax savings. Yup lots of legit ways to save tax in a business. 

  3. Along with monetary benefits, there is also the satisfaction of making a positive impact by your work. This is possible when you are working on your startups with your team. We spent more than 1/3 of our work life at our jobs and if we are not using this to improve things around us, we won’t be able to look back with satisfaction after 30-40 years.  

    Along with satisfaction of your work, if you are able to build a right team and are solving a genuine problem, money will follow after some time. 

  4. I never planned it this way but things worked out in a way that I ended doing one job, and then one start-up and then repeat. I have done it 3 times. 1 start-up tanked and I burnt a lot of money, 2 worked okay okay; jobs kept getting better at each iteration.  

    I think if a start-up isn’t working absolutely / or you have hit it out of the park, it is easy to decide. Unfortunately, most start-ups operate in the space in between. You go up to the point of despair and just about when you are ready to hang boots, you get one more client / deal that keeps you going till the next cycle of super-optimism to despair. Sadly, there is no dearth of literature about ‘keep trying / try till you succeed’ so you somehow convince yourself that you are doing something grander than mere mortals doing the job, and before you know you have spent 4-5 years and also fed yourself lies like ‘I can’t really work for anyone any more’. 

    One thing that I found common to both the old successful businessmen as well start-up guys who made it successfully is their ability to ruthlessly see (and keep reevaluating) the matrix of risk that they are taking  + size of potential reward + probability of both and taking decision from that. They are passionate about what they do but they are always keeping an eye on money. This is needed if you have started-up to create a profit generating business at some point. If you are doing something for the love of creating only, research is probably a better suited field.

    Remember, at the end, a job that pays 1L per month, is roughly equivalent to running a business with about 1.5 Crore turnover (minus all the hassle) and that is the cold reality (with TDS, S Tax, Income Tax, Defaulting / non-paying customers etc).

    It is business / dhanda at the end, and not some lab project with an endless supply of grant.   

  5. Alok the answer to your question is profound ‘YES’…..

    Reasons can be divided into 3 aspects viz; emotional, spiritual and rational

    Emotional: You are your own boss and being responsible for others and the idea of supporting other livelihood is profound and humbling…

    Spiritual: When a person is working with complete freedom he /she is performing to his/her best ability… You are doing your best but also realizing that you will be wrong at different stages of this journey making himself/herself a better person. The person realizing this would eventually reach the success or rather will experience the rich joys of journey (he does not want to reach the destination)

    Rational: Instead of 2% entrepreneurs (stringent) let us go by 80/20 rule for discussion purpose. Only 20 entrepreneurs will be successful entrepreneurs out of 100. Out of 20 entrepreneurs only 4 will be successful. Now compare these 4 people with 80 non-entrepreneurs (excluding 16 from 20 entrepreneurs who are fighters) doing their jobs. At the end of the journey out of 80 jobbers,16 would be successful CEOs or other such executives (again 80/20 rule) drawing huge salaries and out of 16 top honchos, 3-4 would be frustrated lots….(ask them for reasons). In contrast, out of successful 4 entrepreneurs, may be 1 would be a serial entrepreneur and other 3 will be having a business employing all non-entrepreneurs in their firm.

    Yes it is definitely worth it…… and any cost.

  6. The only reason to justify above calculations is “the hope of achieving your Dreams someday”

  7. This is an entrepreneur’s POV: 

    1. The Keeda crawls unto you sometimes when your savings rate is high because of your lifestyle, size of family,earning members and number of dependents. You have once in a lifetime cash balance which can take care of next 2-3 years maintenance.

    2. Personal Job satisfaction and immediate family’s perception. If your brother or near cousin or family friend are entrepreneurs the peer pressure gets on to you. You want to prove yourself?

    3. You find your employer is not justified in making such a lot of money and it’s easy to start on your own more when you are also in same profession as your boss. Lawyer, CA, Doctors, Labs etc..

    4. And also sometimes when Luck strikes you hard. Like a part time or weekend job or  a friendly help to NRI cousin, a diversion but leaves the Keeda behind.

    5. God only Knows.

  8. Money had a huge role to play in most of my early career decisions. Before I quit my job I was fortunate to have one of the best “careers” with one of the best firms, in one of the most sought after countries —  I realized that I had lot of money in the bank, but still wasn’t happy. I don’t have that money now, but I’m very happy.

    Entrepreneur or not — “One day you’ll leave this world behind, so live a life you will remember”  

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