When Mary Kay Ash retired from her job in 1963, she took her life savings, $5,000, and opened her own business. Boy, did it pay off! Mary Kay Cosmetics is now a billion-dollar company.
Or take Hugh Hefner. He financed Playboy with $8,000 in loans from 45 family members, friends, and other investors. Today, he’s a mega-millionaire. (His famous mansion, alone, has been appraised at $45 million.)
Successful entrepreneurs like Ash and Hefner who risked all their money (and sometimes their family’s money) to pursue dreams that others considered foolish get lots of press. And with good reason. Their stories are exciting and inspirational. But they are also misleading.
These risk-taking entrepreneurs are actually the exception. Most business builders succeed by taking a far more conservative approach.
In his book The Leap, Rick Smith uses Bill Gates as an example. Contrary to popular belief, Gates didn’t drop out of Harvard, says Smith. He took a leave of absence — and relied on his parents’ financial support — while he developed his programming skills and made the contacts that led to Microsoft. If it hadn’t worked out, he could have gone back to finish school.
Look at Ben and Jerry. The two budding moguls started by selling their ice cream in a converted Vermont gas station. They had thought about opening a bagel shop. But they decided the equipment would be too expensive. Only after two years in business did they expand into wholesaling their products to local stores.
Google was a side project of two Stanford grad students. Dell Computer was started in a University of Texas dorm room for just $1,000. Apple’s first computers were hand-built in a garage and sold to local computer geeks. Wayne Huizenga started Waste Management with just one garbage truck. And he drove it himself!
Read the biographies of successful people and you will discover the truth. Most of them started small and took modest, calculated risks. They were not reckless and brave, as the business magazines would have you believe.
Yes, starting your own business is the fastest and surest way to grow wealthy. But you don’t have to — in fact, you shouldn’t — risk everything to claim your slice of the entrepreneurial pie.
I have started dozens of multimillion-dollar businesses. But I have never been willing to “bet the farm” on one.
I want all the benefits that come from owning a business. But I refuse to risk my hard-earned money or time on an unproven idea. I want my cake. And I want to eat it too.
That’s why I call myself a “chicken entrepreneur.”
A chicken entrepreneuris somebody who keeps his day job while he gets his ideal career going in the evenings and on weekends. He is an entrepreneur because he is taking the initiative to start his own business. He is chicken because he’s not willing to quit his job and lose the income.
By the way, I can’t claim credit for coining the term “chicken entrepreneur.” I heard it many years ago. I didn’t like it at the time, but I recognized that it applied to me.
Since then, I have done my best to promote the concept in all the business and self-help books I have written. Because there are thousands and thousands of potential chicken entrepreneurs out there — dreaming of quitting their jobs and starting their own businesses, but afraid to do so.
In fact, anybody with modest intelligence and drive can be a chicken entrepreneur. That’s what’s so nice about it. You don’t have to be a wild and crazy risk taker.
Let me tell you about “Alan Silver.” (I profiled him in my book Seven Years to Seven Figures.) Alan has a multimillion-dollar health supplement business. Now in his late fifties, he does what he wants when he wants. He spends much of the winter skiing from his vacation home in Park City, Utah. And when he’s back home in Florida, you can often find him on the golf course after doing a couple of hours of work in the morning.
He started as a chicken entrepreneur.
A friend of his, a newsletter publisher, was starting a publication on natural health. One day he mentioned to Alan, quite casually, that he was looking for someone to sell vitamins to his subscribers.
Alan, who had been selling office supplies for 15 years, stepped up. With his friend’s help and mentorship, he started his own company with a very small initial investment. Mostly, he invested his time and energy.
The going was rough at the beginning. He didn’t know anything about marketing, supplements, or the health industry. But he was willing to learn. Keeping his sales job while working on the new business meant 10-hour days. But it was worth it.
Within six months, this side business had brought in more than $250,000 in sales. Alan reinvested most of the profits back into the business at first. But soon he was making enough to quit selling office supplies. And within a few years, he was bringing in $10 million annually.
The Chicken’s Guide to Start-Ups
As a chicken entrepreneur, you learn about your new business while keeping the safe and steady income of your main job. You start small and build (and invest) gradually. This limits your risk in case your new business fails (as many do).
In exchange for taking less risk, you must work harder. You must be dedicated — willing to come home after a full workday and keep going on your side business.
It takes discipline, tenacity, faith, and a very understanding family. It’s not easy to work all day at the office and then go home at night to work on your own project. The competition for your time can become intense. But if you create a plan and follow it in an orderly fashion, you have a very good chance of eventually succeeding.
Mastering the Essential Skills
To succeed in any business, you must know certain things very well.
- For openers, you must master the fundamentals of direct marketing. Direct marketing is by far the most efficient way to sell products and services profitably.
- You must also learn about marketing via the Internet. It is the easiest and least risky way to enter any market. And it has global reach.
- You must learn about the kinds of products the marketplace desires and which price points are “sweet.”
- You must know how those first sales are made — the specific techniques to employ to generate a sale without spending too much money acquiring the customer.
- You must understand the “back end” of the business, too (how to upgrade a new customer into buying higher-profit-margin products).
Several of these essential skills, I am happy to report, can be acquired before you invest a dime in your new business. You can learn how to become a competent direct marketer by taking ETR’s course on direct marketing on the Internet. And you can start developing these skills immediately.
Learning about the market you intend to enter can be done while you still have your day job. It is relatively easy to take advantage of the Internet or use flea markets to test new product ideas cheaply.
And you can learn the back end of the business by becoming a customer of companies selling products similar to the one you want to sell. Create your back-end strategy by seeing the kind of offers you get from them after you make your first purchase.
Avoiding the Most Common Start-Up Perils
There are several pitfalls in starting any new business. But as a chicken entrepreneur, you can easily avoid them.
The most common is dictating to, rather than listening to, the market. New entrepreneurs often waste precious time and effort hoping to bring something brand-new and exciting to the marketplace. But if the product doesn’t already exist, there is usually a good reason for it. It’s better to start with a better or cheaper version of a product that has proven to be in demand.
The next-biggest mistake new entrepreneurs make is spending too much time and money on non-essentials (like business cards and office furniture). Keep in mind that the fundamental activity of a business is the commercial transaction. Your best chance of success comes when you devote 80 percent of your initial resources to making your first sales.
Master the necessary skills, avoid the pitfalls, and your business will grow.
But don’t quit your job and don’t invest your mother-in-law’s money. Start small and build gradually.
At some point in the future, you may realize that you are making more money from your second income than you are from your first. That’s when you may choose to drop your “day job.”[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]