Tuesday, January 18, 2011

For Would-Be Entrepreneurs, A Reality Check

For Would-Be Entrepreneurs, A Reality Check

By Michelle Singletary
Washington Post Staff Writer
Saturday, January 15, 2011; 3:45 PM

How many times have you dreamed of being your own boss?

I've certainly been to my share of finance conferences where business owners make the audience of wannabe entrepreneurs long for the time when they can set their own hours and answer only to themselves. They glorify business ownership, making people restless to become rich.

Oh, there are cautionary tales every once in a while, but generally the view is overly rosy. People are led to believe that if they don't aspire to start their own business, they are either a failure or not living up to their entrepreneurial potential.

But Melinda F. Emerson, who started her own business after a career as a producer with TV networks ABC and NBC, is a small-business cheerleader with less cheer and more reality.

Emerson doesn't push entrepreneurship like someone hawking an invention on a late-night cable program. Instead she's a cautious coach for those who think they want to leave their 9-to-5 jobs and start their own enterprise.

"If you think you work hard now, just wait until you become your own boss. You will come to know what the word 'sacrifice' means," Emerson writes in her book "Become Your Own Boss in 12 Months: A Month-by-Month Guide to a Business That Works" (Adams Media, $14.95).

I like her cautionary advice, and it's why her book is the Color of Money Book Club selection for this month.

When jobs become scarce and layoffs increase, there's often a rise in startups. Nearly 9 percent of job-seekers gaining employment in the second quarter of 2009 did so by starting their own businesses, according to a survey by outplacement and executive coaching firm Challenger, Gray & Christmas.

But as the current economy has gained strength, business startups have declined. Activity dropped significantly in the first half of last year as would-be entrepreneurs found work or were scared off by the still-tenuous economic conditions.

Being wary about starting a business is a good thing, says Emerson, founder and chief executive of Quintessence Multimedia, a full-service production firm.

"Too many entrepreneurs underestimate and romanticize what is required to run a small business," she writes. "Because starting your own business will mean such a radical shift in your lifestyle, you need to think through what this will mean. Only then are you ready to get into the nitty-gritty of your business planning."

Although this book will certainly help people already running a business, it's best for those contemplating starting one. If you have the time - a year she recommends - take it to carefully map out what it will take to make your startup a success.

To help you get started, Emerson lays out a to-do list. In the first month she urges people to develop a life plan. And by that she means spend time figuring out why you want to start a business. Among other things, think about whether you have the energy for such an endeavor. If you're married, is your spouse fully supportive? Calculate how long your household can operate without generating any income.

This first phase isn't the same as a business plan, but rather an examination of how the business will affect your life.

"Everyone has tangible skills," she says, "but not everyone has all the skills needed to run a business."

The best advice Emerson gives is to recommend having little to no debt. She also suggests that you have:

l Six months of emergency savings.

l Twelve months of living expenses (in addition to the emergency savings).

l The first year of operating expenses for your business.

I know. That's tough advice to follow. But she's right. So many small businesses fail because owners overestimate the income their company will generate in the first year.

Through the months, Emerson provides basic advice on developing a business plan, a marketing strategy, hiring financial professionals, and finding financing if you need it.

Emerson's road to entrepreneurship is full of encouragement but also much-needed reality checks.

I'll be hosting a live online chat about Emerson's book at noon Eastern Feb. 3 at washingtonpost.com/discussions. Emerson will join me to take your questions. Every month I randomly select readers who will receive a copy of the featured book, donated by the publisher. For a chance to win a copy of "Become Your Own Boss In 12 Months," e-mail colorofmoney@washpost.com with your name and address.

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