When you dream of becoming an entrepreneur, what comes to mind?
Building something from nothing? Being your own boss? Earning millions of dollars?
While it’s fun to talk about the end results of entrepreneurship, how do you actually get there? Unsurprisingly, there’s a lot of hard work in between ideation and success.
Is Becoming an Entrepreneur Right for You?
John Bartelme mentors 30 to 40 aspiring entrepreneurs a year through the Chapel Hill Durham, North Carolina, chapter of SCORE, a nationwide business mentoring and education network.
He typically sees two types of would-be entrepreneurs: Those who are blinded by passion and drive, which can lead them to ignore reality and make costly mistakes. And those who have an idea but are so risk-averse that they can’t get the idea off the ground.
Finding the sweet spot between the two is important if you want to become an entrepreneur.
You also need to ask yourself: How many hours of the day are you willing to give to your endeavor?
If you can leave your current work behind and devote 100% of your time to your new idea, great. But chances are, you’ll have to keep working to fund your business and pay the bills. That means balancing at least two jobs and working long, odd hours.
That’s what Randall Thompson did when he founded Dugout Mugs, a company that sells baseball bat drinking mugs and had over $1 million in revenue in 2017. He worked full time as a sales rep and took any odd jobs he could find — such as flipping furniture on OfferUp and dressing up as superheroes at kids birthday parties — to fund his company in the early stages.
So how much can you make as an entrepreneur? If you came here looking for a definitive estimate of an entrepreneur’s salary, we hate to disappoint you. It just doesn’t exist.
Why not? Because entrepreneurship comes in many forms with varying levels of success. Kylie Jenner, Jay-Z and Elon Musk are all entrepreneurs. But so is the jeweler selling handmade earrings on Etsy and the aspiring chef running a catering business on weekends.
How much you earn will depend on your industry, where you’re located and, of course, how successful your business is. Just keep in mind that you may have to go without a paycheck in the beginning when you’re establishing yourself.
How to Become an Entrepreneur: A 6-Step Plan
Ready to dive headfirst into entrepreneurship? We know it’s a daunting undertaking, so we broke it down into a step-by-step guide to get you started.
1. Find an Idea That Fits You… and Your Customers
David Ponraj, founder of entrepreneur community Startup Space, says the first step is identifying a common pain point and developing a solution that creates new value for the consumer.
But the key is to also pick something that you actually have a passion for.
Jillian Brugal, who owns Bru Florida Growler Bar in Odessa, Florida, with her husband, Christian, says the two spent years tossing around business ideas.
“Then finally it was like, well what do we really want to do?” she says. “Instead of trying to find something niche or trendy or wacky, what do we love? Beer.”
It’s also in your best interest to pick something you have some expertise in.
For example, you might make a mean lasagna, but do you know anything about running a brick-and-mortar restaurant or at least have some experience in the food industry? If not, succeeding isn’t impossible — but it’s going to be a lot harder.
Who will your customers be, and why should they care about what you’re offering? You should be able to describe your ideal customer in terms of their demographics, where they’re located and their personalities, interests and values.
“Find someone who will pay you for the specific solution that you’ve developed,” Ponraj said. “If you can find someone who will pay you, you have found the targeted audience for your idea.”
- What is the size of your target market?
- Is your idea, product or business already being offered?
- If so, how saturated is the market?
The Brugals knew they were passionate about beer. But instead of opening a standard watering hole, they took advantage of a changing market: In 2015, Florida passed legislation that allowed bars to fill 64-ounce growlers.
By 2017, Bru Florida was serving up growlers of local beer to customers who would otherwise have had to drive at least a half hour for a similar product.
2. Test the Idea in Your Target Market
Once you’ve settled on an idea, you need to develop an MVP, or minimum viable product, which is the most basic version of what you’ll offer. That way you can get feedback and find ways to improve before you’ve invested significant time, energy and money.
To research the market, check out business journals that focus on your industry. Also, reach out to other people who have launched startups in your target market.
You’ll also want to do a SWOT analysis: Identify the strengths, weaknesses, opportunities and threats for your business.
3. Decide Whether to Bring on a Partner
The early stages of entrepreneurship are like “Black Mirror: Bandersnatch.” Every choice you make now will directly affect your future. Be a solopreneur or find a partner?
As a solopreneur, you’re in control of every aspect of your business. You can make decisions without worrying about conflicting opinions. Just remember, if you’re the only one behind the business, your work-life balance is likely to take a hit.
If you bring on a partner, you’ll relinquish some control, but a partner will bring strengths to the business that are different from yours.
When Thompson was ready to start Dugout Mugs, he had lots of passion for his product, but virtually zero experience launching a business. So he partnered with Kris Dehnert, an experienced entrepreneur who was looking for the right product to invest in. Dehnert now serves as the company’s CEO.
The two bring different skill sets to the table: Thompson brings creativity, while Dehnert is a top-notch networker.
Having a partner also means you’ll have emotional support. If you’ve got someone jumping the same hurdles with you, it might feel a little more surmountable.
“Some days, you feel like you’re on an island,” Dehnert said. “… At least if you’re on an island, you [have] somebody else to stare at the coconuts with. You can figure it out together.”
But with business and emotional support comes some complications, such as misunderstood expectations, conflicting opinions and potential fallout. Work with an attorney to create a partnership agreement if you’re bringing on a co-founder.
If you’re entering a partnership with existing intellectual property — such as your ideas, designs, inventions, artistic works or discoveries — you’ll have to determine how to divide ownership of the intellectual property. Will you own the property, or will it belong to the business entity? If someone leaves the company, who will be able to further develop the intellectual property? Will they need explicit permission to do so?
An attorney can also help you determine how shares of the business are split and division of labor.
4. Create a Business Plan
Start with a simple business plan that fits on a single sheet of paper. It should give you an overview of what you have and what you need.
“A lot of first timers get bogged down in a long business plan and seek outside help, and then it becomes someone else’s plan and not theirs,” Bartelme said.
Eventually, you’ll need to draft a full business plan. There are several reasons to do so, including:
- Initial clarity: Having a plan from the beginning gives you a better structure for building your business and tracking expenses.
- Funding: A well-thought out business plan can help you attract investors or secure a grant.
- Transparency: As the business grows and adds team members, it ensures everyone is on the same page.
- Health check: If you have a plan, you can see when you get off track — and then figure out why and correct course.
Brugal suggests taking a brutally realistic approach when you craft a business plan. She and her husband deliberately overestimated expenses and underestimated revenue for Bru Florida Growler Bar.
“We tried to predict everything that could possibly go wrong with the business, so that if and when it did, it wasn’t a big issue,” she said.
Another technical aspect of becoming an entrepreneur: What kind of business structure are you going to have? The answer will depend in part on whether you’re going the solopreneur route or have a business partner. Here are three common structures.
- Sole proprietorship: When an individual or married couple is in business alone. It’s a straightforward structures with fewer legal requirements and more management flexibility, but you alone are liable for debts and losses.
- Partnership: Two or more individuals contribute funds and labor to the business. It lessens the financial burden, but a formal partnership agreement will need to be drawn up.
- Limited liability company (LLC): Formed by one or more people, an LLC is a business structure that provides some legal separation between the owner(s) and the company. Dividing your business and personal liability can offer protection for entrepreneurs.
You also need to figure out what licenses and permits your business needs. It will depend on the industry you’re entering, but luckily the Small Business Administration has a nifty guide to point you in the right direction.
5. Get Funding
Do you have to be a Daddy Warbucks-esque millionaire to become an entrepreneur and start your own business? Absolutely not.
But if you’re not rolling in dough, where do you even begin getting capital for an entrepreneurial endeavor?
First things first: You can’t start a business expecting all of the money to come from outside sources. Bartelme suggests that entrepreneurs should be prepared to contribute 20% to 30% of what they are asking of others from their own funds.
When it comes time to secure outside help, both for upfront business costs and help along the way, you have several options.
With the bootstrapping method, you start small and spend within your means, funding your endeavor yourself using your savings, credit cards and, hopefully, your profits.
Often touted as a point of pride among entrepreneurship, it’s a simpler way to get going, but obviously emptying your savings is risky.
Friends and Family
You might be fortunate enough to have friends and family willing to help fund your foray into entrepreneurship, providing an easily accessible avenue for financial assistance.
But a warning: Approach this method with the understanding that relationships might fall apart, especially if the business fails.
Small-business grants, whether from the government or a private entity, are basically free money to fund your entrepreneurial dreams. The downside is it’s a highly competitive market, especially for federal grants.
But there’s no harm in applying, so take time crafting your applications. You can also keep an eye out for grants that target a specific industry or group, such as women or veteran-owned businesses.
When you apply for a bank loan, don’t expect to just walk in with your so-called million-dollar idea and walk out with cash in hand. Lenders want reassurance that they’ll be getting their money back.
Be prepared to present a business plan, financial statements, credit history and a legal record.
Like lenders, investors will want proof that their money will create profit, so be prepared to pitch — and hear “no thanks” a lot as well.
If you take on investors to fund your business, be sure to outline whether they will simply provide funds, or if you’re entering a partnership, involving them in operations or giving some measure of control.
Other popular sources for financing a small business include angel investors, venture capital, SBA loans and crowdfunding.
Get a business credit card and keep your personal and business finance books separate right off the bat.
6. Make Networking a Habit
Making yourself known in the community among other entrepreneurs and industry professionals is invaluable.
As you get more comfortable in your industry and build connections, try to organize events every once in a while.
“Beyond attending functions, it’s always a good thing if you can actually become a subject matter expert and present at functions yourself,” Bartelme said. “Take the lead on something, and allow more people to find out who you are and what you do.”
And while you might be tempted to dismiss business cards as a relic of entrepreneurship past, they’re essential for in-person functions. Be honest: How many times has someone told you their name only for you to forget approximately seven seconds later?
That said, you shouldn’t attend every single networking event that crosses your path — chances are that not every single event is actually worth your time.
“Most modern-day entrepreneurs don’t have time to attend a thousand meetups and events to connect with one another and find answers to their questions,” Ponraj said.
Tools and Resources for Entrepreneurs
Whether you’re running a solo operation, working with a partner or overseeing a whole team of employees, there are tools and resources to make your day-to-day life a little easier.
Organizations That Support Entrepreneurs
If you’re hoping to start a business, check out the resources that these four organizations offer.
Small Business Administration
Use the U.S. Small Business Administration’s website to create a business plan, calculate startup costs, find loans, register a business, check licensing requirements, find a mentor and connect with other entrepreneurs.
SCORE provides information for entrepreneurs and has more than 10,000 volunteers and 300 chapters nationwide. Check out the free online education, mentorship and face-to-face networking opportunities.
Chamber of Commerce
A chamber of commerce is a nongovernmental organization formed by business owners who advocate on behalf of the business community.
Joining your local chamber of commerce can provide business support, networking opportunities and credibility in your community. Prices vary depending on the size of your business and your membership level, but expect an average annual fee of $300 to $500.
Small Business Development Center
Run by universities, state economic development agencies and private partners, small business development centers offer free business consulting and low-cost training. Find one near you through America’s SBDC.
Tools for Small-Business Owners
The specific tools you need to get started will vary widely by industry, but these five tools will help practically any entrepreneur build their business and grow their web presence.
Chances are you’ve heard of Gmail, but if you haven’t, welcome to the internet for the first time ever. Jokes aside, Gmail is one of Google’s free tools; others include Drive, Docs, Calendar and Hangouts. If you pay for G Suite, you get all of that good stuff, as well as several other business-grade services, such as a custom business email (email@example.com), shared team calendars, more Cloud storage, two-step authentication and audit reports.
You get a free 14-day trial run, but after that monthly prices range from $5 to $25 per user.
If you want to become an entrepreneur, you’re going to need an online presence — specifically a website. Squarespace offers four plans broken into two categories, websites and online stores, ranging from $12 to $40 per month. But good news: The platform offers a 14-day trial.
All of the plans offer a custom domain name, mobile optimization and 24/7 customer support. You can choose the plan that best suits your business needs, and can always upgrade as your business grows.
Use Google Analytics to track how people are interacting with your site — where they came from, what pages they checked and how long they stuck around. The best part? The basic version is free.
Software like Expensify can simplify expense tracking and reimbursements.
Just snap a photo of a receipt and upload it to the app, which will automatically create an expense report. The individual plan is free; team plans cost $5 to $9 a month per user.
If your business requires a point-of-sale system,consider using Square. There are no monthly fees or minimum monthly charges. You just pay 2.75% per swipe. The payment processing system accepts all major credit cards.
The Best Books for Entrepreneurs
Looking for more reading material to get your entrepreneurial juices flowing? We’ve picked out a few of the best entrepreneur books for inspiration:
- “The Lean Startup” by Eric Ries. This book covers how to continuously question your progress, identify mistakes and correct course.
- “How Successful People Think” by John C. Maxwell. Read up on 11 methods for tapping into your creative potential and thinking more effectively.
- “The $100 Startup” by Chris Guillebeau. The author profiles 50 entrepreneurs who started with something small and built something big.
- “Rise and Grind” by Daymond John and Daniel Paisner. The story of “Shark Tank” investor Daymond John, who went from $40 and multiple jobs to building a billion-dollar brand.
- “Building a StoryBrand” by Donald Miller. The author focuses on methods that will help you tell your story and focus your brand.
Kaitlyn Blount is a former staff writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.