Nick Hughes is the CEO and co-founder of Seconds, a mobile commerce platform that provides text messaging and mobile payments for local commerce. In his spare time, he inspires entrepreneurs to build meaningful and enduring companies through his writing. Follow him on Twitter@jnickhughes.So, you want to start a company? That’s a very exciting decision. But first, you must cover all your bases.
For instance, generate a clear and simple idea, then determine what industry or market you plan to target, what type of corporate organization you’ll implement and where your business will be located.
Each is an important decision, but the main consideration when starting a company is how to manage risk. Risk is the heart of entrepreneurship — defined as “the pursuit of opportunity without regard to resources currently controlled.” Risk is the sole determinant whether you will succeed or fail.
Billionaire Sir Richard Branson follows a principle called “protecting the downside,” which means that by looking at any situation and determining all options before making a decision, one can identify the worst case scenario and work backwards from there to find the optimal route forward. Protecting the downside is all about identifying and understanding risk.
Here are five risky steps that will actually help protect the downside of a new company and, counterintuitively, set you up for success.
1. Quit Your Job
Conventional wisdom suggests, “Don’t quit your day job” while you start your new venture; only jump over when it shows promise. Unfortunately, this decision can be a recipe for disaster. You will be double-minded, your current efforts at your job will suffer, your family time will suffer, and your product will suffer. Plus, investors will not be impressed with a lack of time commitment. And most likely, you will fail.
Sit down and ask yourself which path you really want to take. Do you really want to leave your current job and start something new? Or do you like the security of your job and a stable paycheck? Although risky, committing to one path will greatly increase your odds of success.
In the summer of 1994, Jeff Bezos quit his job as a vice president of the financial services firm D.E. Shaw. He and his wife moved to Seattle to take advantage of the explosive growth of the Internet and to launch Amazon. When the site first launched in 1995, everyone at the company worked until two or three in the morning, kneeling on a concrete floor to pack, address and ship books. He was all in on his new dream.
Would Amazon have survived and become what it is today if Bezos had chosen to stay at his job and work part time on his side project? I don’t think so. He’s no Steve Jobs, but Amazon is looking to become the next Apple, so I think he made the right decision.
2. Don’t Follow The Crowd
Oddly enough, once most entrepreneurs abandon a “normal life” and set out on their own paths, they then look at what others are doing in the industry and opt to imitate instead of originate.