I’ve received a lot of requests lately to focus more on the money-making aspects of personal finance. “There’s plenty of information out there about how to save money,” people tell me. “Can you tell us how to make money?” This is a worthwhile goal, and so I intend to cover entrepreneurship and income-boosting a little more often.
Entrepreneurship: A primer
To begin, last week Tim Clark at Soul Shelter posted a brief introduction to entrepreneurship. Clark, who teaches business classes at a local university, writes that he is “a firm believer that our fortunes in life are closely bound to entrepreneurship skills, whether we’re self-employed or choose to work for someone else.”
My father always tried to get me to see my life as a business venture. “You are a business,” he told me, “even if you don’t own a business.” It’s only recently that this concept has begun to make sense to me. Now I see how our decisions and actions in even menial jobs affect our future earning power. Now I see my father was right.
Clark believes that too much attention is focused on businesses designed to “scale”, businesses designed to grow large and, possibly, to be sold or to achieve public stock offerings. But Clark thinks there’s a lot of value to be found in “lifestyle businesses”, which account for 90% of the marketplace:
Firms fueled by millions in venture capital are exciting, but they account for fewer than one in 10,000 new businesses. The rest of the world gets by on limited funds—and unlimited energy. Small business, in short, is where the action is.
A lifestyle business is one that allows the owner to call her own shots and to move at her own pace. It’s a business that fits her current way of living rather than dictating how things ought to be done. There’s a stigma attached to lifestyle businesses, but I’m not sure why. For millions of people, these sorts of small ventures are an excellent way to “do what you love”.
The secret to making money online
In a recent talk, David Heinemeier Hansson of 37signals discussed similar themes. Hansson presented at last month’s Startup School, a conference for technology startups. The subject of his 32-minute talk was “The Secret to Making Money Online”.
Though Hansson is specifically addressing software developers, there’s a lot of meat here for anyone who has considered starting a business. (And, I should add, for writers who hope to make a living off their blogs.) His advice is applicable to entrepreneurs in general. If you’re interested, and have thirty free minutes, I recommend watching his talk.
When many people start a business, they treat it like playing the lottery. They want to be the Next Big Thing. They want to create a corporate giant, or to build something they can sell for a billion dollars. “I don’t think that logic is very good,” Hansson says. The odds of creating the next Microsoft or Starbucks are tiny. But the odds of creating a product or service that a few people will like and pay you money for? Those odds aren’t too bad. It’s still difficult to do, but not as difficult as trying to be a billion dollar company.
“I’d encourage a lot more people to take the better odds and the smaller reward,” Hansson says, “and then perhaps worry about the billion dollars next time.” He, too, urges his audience to consider the notion of a lifestyle business.
The secret is to think small. To be successful, you just have to solve a problem a little bit better than the other guys. If you can solve a problem for even a small group of people, you can build a great business.
If I’m going to write more about this subject, I need your help. If you find an interesting article about entrepreneurship or making money, please drop me a line.
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This article is about Entrepreneurship