Steve C Click here to learn how to start your own online store
In theory, it shouldn’t have required much courage at all for us to start an online business. Opening a business, especially on the web, is about as cheap and easy as it gets.
All it takes is 10 bucks for a domain name and as little as 5 bucks a month for some web hosting to throw up a website. There are already a plethora of open source web packages already written and presented nicely for you to use and everything is extremely well documented.
There is almost zero financial risk involved, so why was it so hard for us to start? Personally, I think my wife and I needed some time to gather the necessary emotional courage to begin. Starting a business of any kind requires a tremendous amount of time and effort, and to devote a large portion of your time to any endeavor and have the possibility of having it eventually fail can be pretty daunting.
Taking risks is extremely easy for some people. Some people are just fine living month to month, racking up huge amounts of credit card debt, taking out second mortgages on the house and soliciting their friends to bootstrap their company. If one company fails, they go ahead and start another one.
On the other end of the spectrum, there are people who would never start their own business, rely solely on a job for their primary source of income, keep all of their cash in CDs and checking accounts and never invest a dime in anything.
My wife and I fall somewhere in between. Personality wise, we are fairly conservative people. We are financially stable, would never risk a large portion of our money on a single venture or investment and certainly would never monetarily overextend ourselves. We definitely don’t come across as the entrepreneurial type. Even though we’ve always been intrigued by entrepreneurship and have always talked about starting something together, we never felt the urgency to pull the trigger until a series of events pushed us to finally go for it. Some of these events, which I will describe below, were gradual whereas certain things just slapped us right across the face.
My Wife Wanted to Quit Her Job (Slap in the face!)
When I first met my wife, she laid down the terms up front that she was going to be a housewife and quit her job as soon as we had our first child. While I full on believe in the philosophy of having a parent stay at home with the child, in the back of my mind I was always worried about the financial strain this would cause us because we’d be living on a single income. Our situation was further exacerbated by the fact that we both live in Silicon Valley where things are ridiculously expensive.
If you want a reasonably sized house in a good school district over here, you have to pay about 1.2 million dollars. To add a little more reality to the numbers, lets say you put down 25% cash and take out a 900k loan at 6%. This would amount to around $5400 a month just for the mortgage in addition to $1500 a month for property tax. In addition to just housing costs, you have to consider that you’ll need to start saving for your childs education in 18 years. For my child, it’s estimated that tuition at Stanford(hope she can get in) will cost about 150k a year. If you factor in all of your living costs, the numbers can get downright frightening. It was clear that we needed other sources of income besides my single salary.
Because spending time with the family also became our top priority, we also wanted to maximize our time spent together. How does starting your own business allow you to spend more time with the family? At first glance, this seems counterintuitive. You might think that starting a new venture would take away time from the family and require a much larger time investment than a regular salaried job. In reality however, our business has allowed my wife to stay at home full time with our child. The business has also allowed us to decouple our time to create a much more flexible environment in which we can dictate our own schedule.
We Were Getting Killed On Taxes
Prior to starting our business, I used to just sit back and watch Uncle Sam ream us every April 15th. Every year since I could remember, we would have to write 5 figure checks of our hard earned money to the government at the end of the year.
I used to look at my paystub and wonder why this mysterious FICA, social security and CA person was taking over 31 percent of my paycheck away right off the bat. We were getting robbed!
Starting a business has allowed us to pay for many of our items tax free so effectively we save around 31% on many of the things that we would be buying anyways. There are many other ways that our business has saved us money which I will thoroughly enumerate in a future post.
We Needed Financial Security
My wife and I used to always discuss how much money we’d have to keep around in case one or both of us lost our jobs. We worry much less now since we now have multiple sources of income thanks to our business. Now that we have some experience under our belt, our plan is to start many businesses over time to diversify our income
stream. Why shouldn’t the same principles of trading stocks apply to real life as well? Diversification is the key.
What is completely ironic is that I used to think that having a steady job was the most secure position to be in. Now that I’ve seen the rise and fall of several economic cycles do I now believe that not to be the case. Just recently, my wife’s former company announced massive layoffs in her group. Months ago, everything was peachy. One thing I’ve learned is that situations within companies can change quickly and drastically. Even if you are very senior in your company, all it takes is a management shift and you could be out on the street.
We Wanted a Flexible Work Schedule
One of the bad things about having a job is that you have to be physically present in order to make money. In most cases, a job requires you to be present at fixed hours during the day and you usually have to work 5 or more days in the week. This was a bit too inflexible for us.
The great thing about having a business, at least in our case, is that we can make money 24 hours a day. We don’t have to be physically present to take orders or accept money since a computer takes care of everything for us. Sure, there’s a lot work involved in maintaining the business but we can choose to do everything on our own time.
I Wanted to Call the Shots For a Change
Ok, this bullet point is somewhat of a misnomer since I still don’t call the shots in the household, my wife does… However, I’m still second in command which yields me a lot of authority and decision making prowess despite requiring approval from the first in command.
I’m very happy at my current job, but there are times when I disagree with some of the decisions management makes. Unfortunately, in many cases, I have little or no say in the matter. Its nice to be able to come home and be in control of fully functional money making business and to know that you started it from the ground up.
I Wanted To Reap The Profits
I used to dedicate my life to work and was the epitome of an ideal employee. I would work nights and weekends to see a project through and I would sacrifice a lot of my free time in doing so. My main problem was that ever since I was kid, I’d been conditioned by my teachers and peers to follow a single monotonous path. I would graduate from college, get a steady job at a stable company, work my hardest for a steady salary, build up my 401k and retire at age 65.
So its not surprising that I have in fact followed this exact path. Over the years though I’ve become increasingly frustrated. In all of my years of dedication with the companies I have worked for, not once have I ever been sufficiently rewarded for my efforts. I’m not talking about raises and bonuses. What I’m referring to is a direct percentage share of the revenue and profits as a result of my work.
I’d work my butt off and invent something really innovative only to have my company own all of the intellectual property. Sure, I get paid my steady salary with a few bonuses and raises sprinkled in there, but I never get to reap the full benefits of my invention. Even though I might have made my company hundreds of thousands or even millions of dollars over time, I’d never see even a single cent of this upside.
Its extremely satisfying to be able to take all of the profit in its entirety from a business that you personally own.
Gathering the Courage
Looking back, starting our own business was one of the best decisions we ever made. If you ask my wife, she’ll insist that the root cause of our success was due to her desire to quit her job. Though I will not publicly refute the validity of that statement, there is something to be said about forcing yourself or putting yourself in a situation that makes you take action. Recently, a close friend of mine took the plunge and quit his job to start a business from scratch. Seeing as his life is now sink or swim, I’m sure that he’ll find a way to be successful. Either that, or he may end up staying on our living room couch:) In any case, I admire his decision because it took major guts.
For most people, a hybrid approach is probably more palatable. If you are married, have you or your spouse quit his/her job and focus on a business plan exclusively. That way you at least have one income to rely on should things go south. If you’re single, you’ve got nothing to lose anyways.
The best thing is that once you overcome that fear, you will never regret it. Going out on your own will open up your mind and allow you to recognize other money making opportunities when they arise. Once you see these opportunities, you will then have the ability to act on them quickly and decisively. The important lesson that my wife and I learned was to stop thinking and start implementing.
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Category: Personal Finance