Is Starting Your Own Business Risky?

image of tightrope walker

Starting a business is risky. Horribly, terrifyingly risky.

Nearly all new businesses fail — that’s the official statistic, right? Some say 4 out of 5, some say as many as 95%.

Successful entrepreneurs have a different kind of DNA from the rest of us. Ice water runs through their veins. They thrive on risk. The more insane the odds, the better they like it.

For those of us who have families, or who just don’t feel like living on ramen for the next four years, we’re probably better off keeping the day job.

Do you believe any of those?

Because I call B.S. on all of them.

Life is risky

Day jobs are very risky. You’re making a bet that your company is well-run enough to survive the economy’s twists and turns, and that they’re always going to want to keep you around. Either of those can change in a heartbeat, and you’re left without a safety net.

Crossing the street is risky. Using an ATM is risky. Having kids is almost unbearably risky.

Almost 100 people in the U.S. are killed by lightning and bees every year. Going outside: super risky.

You can cut down a lot of risk by getting a job at the post office and spending all of your non-work hours in front of your television. And if that sounds like your idea of a life well-lived, you should go do that.

For the rest of us, let’s talk about intelligent risk

Michael Ellsberg, in his terrific new book The Education of Millionaires, devotes a juicy section to the myth of the extreme riskiness of starting a business … or at least, to the perception of extreme risk.

Most people, when they think of the idea of starting a business, see it as an incredibly risky proposition, one that entails not just egg-in-the-face, but total ruin. They are nearly hysterical about the risks they could incur if they left their safe, boring jobs.

Ellsberg goes on to say that,

Most of the self-educated people featured in [his] book took pains to make sure that their “downside was not so exposed,” to use the parlance of investing: they made sure that a failed business would not mean total ruin; it would just mean a few scrapes, a few good lessons learned, and up they are again at a new one. No biggie.

About those statistics

The scary statistics about new business failure get quoted all the time. If you mention at Thanksgiving that you’re thinking about starting a business, your Aunt Mary will definitely dredge them up.

But gross statistics compiled by government agencies can’t give you the picture of what those “failures” look like.

They don’t tell you how many were experiments. They don’t tell you what the “failures” taught the business owners. They don’t tell you how many of those businesses changed into something else — something more fun or more profitable. They don’t tell you how motivated the owners were. They don’t tell you what the owners went on to do next.

Now don’t get me wrong, lots of new businesses don’t make it. Many of them start out with fatally high overhead — rent and employees are expensive. If you’re a restaurant, a dry cleaner, or a fitness club, you don’t have a lot of choice on those.

For a high-overhead business, marketing is a necessity, not a luxury. You don’t have the time to wait around for word of mouth. If you don’t get enough customers through your doors before you run out of cash, you lose.

Unfortunately, a lot of those bricks-and-mortar business owners have never educated themselves about marketing or sales. They “don’t have time” to read and implement a free course like Internet Marketing for Smart People, or a few Dan Kennedy books.

The greatest risk to any business is that no customers will show up

The problem isn’t that business is inherently risky. The problem is the mentality that customers are going to drop out of the sky just because you’re so cool.

Maybe marketing feels weird. Maybe selling feels impossible. (Trust me, I have been there.)

Maybe you’re making excuses for not pushing out of your comfort zone, by telling yourself that great products don’t need to be marketed and sold — they just sell themselves.

If you’ve ever thought this, make a note of what I like to call Sonia’s Law:

Sonia’s Law: Nothing Sells Itself.

Great products and services deserve great marketing, so they’ll find the audiences they can help. Your brilliant business idea is only as good as your ability to sell it.

You can choose to get over it

Believing that marketing and selling are for “other people” is a little bit like hanging on to the idea that the earth is flat.

It’s an idea. (A wrong idea.) You can decide to get over it.

And when you do that, you can manage your risk to a degree that you never thought possible.

You can learn something about copywriting and the techniques of direct response. This is simply the art of taking effective salesmanship (in text, video, or audio) and getting it to a larger audience. It’s going out and asking for the sale, instead of hoping it shows up somehow.

I don’t care if you use your copywriting skills online, in TV or radio ads, in flyers, by direct mail, or by carving your message into the moon.

You can also learn how to use content marketing to make selling a lot easier, by showing potential customers how much they would enjoy your product or service. By showing you aren’t a sleaze. And by using creativity and talent to attract attention to your business, instead of paying tons of money for advertising.

You may never become a ninja

Not everyone who studies copywriting and content marketing gets good at it.

But if you even become marginally competent, you’ll be ahead of 90% of your competitors. You don’t have to be faster than the bear — you just have to be better than the other guy.

And by making a serious study of marketing (which, by the way, starts with the art of creating products that customers truly want to buy), you’ll learn what really good sales and marketing look like. And that means that if you choose to, you can hire or partner with people who are truly masters.

So how do you get started?

First, I’m never going to tell you to “leap and the net will appear.” That’s just not smart.

Don’t quit your day job or radically restructure 100% of your business because you have a “passion” for a certain approach or topic.

Self-help gurus will tell you to follow your dreams, and I think that’s excellent advice. But follow them the smart way.

  1. Start with prototypes. Create small “minimum viable products” that respond to urgent customer needs. Don’t create products and services just because you think they’re cool — make sure customers think they’re cool, too.
  2. Study the art of content marketing. Create content your potential customers will love — content that gets the attention of your ideal customer and doesn’t let go.
  3. Study the science of copywriting. Giving serious thought to product benefits, the language of your market, and clear calls to action doesn’t just make you a better marketer, it makes you a smarter business owner.
  4. Do more of what works well, and less of what doesn’t work. This means you have to pay careful attention and have some simple measuring tools in place.

And there’s nothing wrong with using a framework. Some people like to reinvent every wheel from scratch, but most of us do well by modeling what’s worked in the past.

That’s actually why we created Teaching Sells. To create a framework of proven business models and techniques for one of our favorite businesses for the 21st century — the online education business.

(One of the reasons we like it? It manages your risk by keeping overhead low and making sure you have an audience of buyers before you create anything.)

We’ll be re-launching the course in a few weeks, so if you want to find out more about it and how it works, drop your email address here. We’ll send you some high-quality articles and other goodies to get your juices flowing, and all the details so you can decide if Teaching Sells will be a good fit or not.

How about you?

How have you managed risk — or the fear of risk — in your business? What helps you get more customers in the door?

Let us know in the comments.

About the Author: Sonia Simone is CMO of Copyblogger Media and co-creator of Teaching Sells.

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Comments

  1. Wow, Sonia, really great post – and very timely.

    The thing that I think is missing from those stats about business failure is that they’re about *business* failure, rather than about *entrepreneurial* failure – and most entrepreneurs start multiple businesses over their careers.

    So yes, while the odds of any specific business being successful aren’t great (all things being equal, which they never are – more on this in a moment), the odds of an entrepreneur being successful, when they work at it, pivot, try new things and develop new skills on an ongoing basis – those odds are pretty good.

    And yeah, the other thing is that all things are never equal, and a lot of the businesses tracked by those statistics are of a bigger scale than the businesses that people like us start – they involve government registration, and forms, and infrastructure, and overhead… and all of that translates to a lot more initial investment, and therefor risk.

    For us, we can just hit the ground running with a new idea, and if it doesn’t work out, the only sunk cost is our time and maybe a couple thousand dollars. And that isn’t even lost, because we take the learning, experience, and relationships, and pivot in a new direction.

    That’s why the online world can be – in some ways – such a great “sandbox” for entrepreneurs. They can try new things, develop the skills, and make really good money doing it before they ever venture into something that has the risks associated with the famous statistics.

    Anyway, I’m rambling a bit, but all to say that I really enjoyed the post, and thought it was very apropos. :)

    • Excellent insight, you hit the nail on the head with people mistaking a single business failure with a entrepreneur’s failure.

      With aid of the internet nowadays, and the focus on bootstrapping and staying lean, most businesses are going to cost less investment (especially web businesses with tasks that can be outsourced) and therefore they aren’t an “all or nothing” gamble like buying a brick-and-mortar property for a new business might feel like.

      I also completely agree about the web being a great sandbox, and it’s also a great place to build a following as you work out a businesses, I think Copyblogger can attest to that as it was building a great community before it started selling it’s widgets.

    • Great point Danny! Thanks for writing that.

    • Super point! The failure of a business is not the failure of a human.

      • When did failure become such a negative? We can learn so little if we do nothing. We only learn when we go out and make things happen.
        The key though Sonia is that nothing sells itself. If you fail to ask for the order, then nothing will happen.
        Having worked with new business start ups for 20 years, one lesson I teach people is to work on mindset. And one of the greatest mindset tools is getting your attitude right about money and also about sharing the value of what you have to offer.

  2. One of the best ways to manage risk is to limit your financial exposure. Stay away from starting businesses that require office leases, brick and mortar buildings, expensive equipment, etc.

    There is so much opportunity online where you can get started for almost nothing. If you fail, big deal, you learn and start again.

    Thanks for writing this Sonia!

  3. I’m still trying to get comfortable with using other people’s frameworks. It’s better than reinventing a wheel, yes, but the rebel in me wants to reinvent everything.

    It’s hard for me to understand how risky that really is.

    • Hashim, I know where you’re coming from because I’m the same. I’ve always got to rewrite the pattern my own way.

      But it’s still been helpful for me to have a pattern as my starting point.

  4. Starting a business can be like hitting the tables in Vegas in more than one sense, but the most important is – don’t bet anything you can’t afford to lose! If the business you want to start is going to take so much money and entail so much risk that your family will be out on the street if you’re not turning a profit in 6 months – you’re not ready! Either find another type of business to start, try doing it on the side, or save enough money to live on while you find out if you can make money with your new venture!

  5. “The problem is the mentality that customers are going to drop out of the sky just because you’re so cool. ”

    Which too common of a mentality! It doesn’t matter how “cool” you are if no one knows about you. Businesses don’t have the luxury of twiddling their thumbs until customers show up, especially in today’s economy. If you want to succeed you have to hustle.

  6. Very timely article Sonia, as I’m currently preparing to make the leap back to self-employment in January (I failed miserably the first time I tried…). To be sure I don’t totally screw over me and my husband, I’m:

    *Building up a client base now so that the transition is easier. It’s a lot of work to balance that with my full time job, but it also means I won’t be totally jumping into nothingness.

    *Paying down our credit card debt. Having that out of the way will give me more financial freedom and mean that I need to make even less to live on.

    *Investing in social networks so that I don’t struggle with being all on my own after leaving the “water cooler gossip”.

    *Carefully analyzing different insurance/investment options to be sure that we don’t lose all the advantages of working for a traditional employer.

    Yeah, it’s a lot, but I’m also hoping it’ll pay off in terms of limiting the risk of failure with my business.

    • Way to go, Sarah. :) Pick up Michael’s book, it will be a huge help.

      And remember, you didn’t fail … that particular execution did. That idea just didn’t work in that implementation.

  7. Superb article Sonia.

    I believe a lot of it also has to do with attitude.

    If a person does not believe in their own product or business, if they cannot even convince themselves this is the best idea ever, then poor attitude can lead to failure.

    Confidence in your strategy, knowledge, and understanding of a business sometimes shines brighter than a headline. If people can see that, I believe they are more willing to trust you and/or believe in you.

    Same goes for bloggers. If you don’t have a good attitude towards your blog post, and fail to understand the field or lack knowledge, then the writing cannot be delivered as intended.

    Going with my gut feeling has usually lead me to success, and if not success, a great lesson learned.

    People also need to differentiate Facts vs Emotions.

    What are the facts? And are your emotions getting in the way of making a conscious decision? Sometimes a business plan may sound so great, but getting the facts straight is definitely an important factor that many should consider. Emotions are ephemeral, facts are blatant.

  8. Terrific article Sonia. It’s like we’re all still back at junior high, too afraid to be the first one out on the dance floor.

  9. You hit a lot of great points in this article, Sonia. Most importantly, the high rate of business failure incorporates any filing for an LLC that was never used, and shell businesses that are only used for paperwork juggling.

    A more accurate statistic would be, ‘How many people do I know personally that started a business? How many failed, and how many succeeded? Anybody asking this question will inevitably think of a few successful business owners they know.

    Instead of fretting over these imaginary failed businesses, aspiring entrepreneurs should take successful businesspeople out to lunch, to find out first hand what it’s really like to be in business for yourself. Statistics just don’t tell the entire story.

  10. Re: “You may never become a ninja.”

    Three words for you: Beverly Hills Ninja. It’s possible ;-)

    But it all seriousness, to answer your questions: “How have you managed risk — or the fear of risk — in your business? What helps you get more customers in the door?”

    It took waking up and admitting to myself, my ideas are good enough, and taking the leap to see how the market would respond. Admitting that it’s ok to fail. If you do, get up and move onto the next thing (but learn from your mistakes).

    Right now, my subscription service is doing well. It answers a customer need. So I’m in the process of refining it. The process, the content, the delivery. I want to create an experience that makes people look forward to it every Monday. And one that makes them talk about it with others.

  11. Thank you for always giving the audience applicable and powerful insight Sonia.

  12. I read the first three paragraphs and thought, “what is Sonia talking about?” Well played, Sonia, well played.

  13. I love owning my own business – it has been one of the most rewarding experiences in my life. For me it’s parallel to raising a child or nurturing a garden as it allows me to put my creative signature on everything I do. You’re right on target about the mentality of business owners – we see it all as an experiment – an opportunity. Failure is yet another opportunity. Financially, my business didn’t cost much to start although I didn’t expect the health insurance challenge to be so big. In my state (PA) everyone is underwritten which means don’t get sick or your bill goes up up up. In addition, small business owners are not allowed to participate in group insurance despite group memberships like chambers etc.. I have to admit, this is the one factor which is a little scary. Back on topic, I agree new business owners need to make a commitment to content marketing – it costs only their time and the results are permanent.

  14. Very timely, Sonia. I took the jump on August 1 of this year when I started Waldow Social. The timing was right. Owning my own business has been a long time in the making, but I’ve been “planning” for it for years.

    I love the section above that talks about risk. You’re exactly right – we (humans) engage is risky behaviors all the time. I think part of the fear of going out on your own is that you will fail. But … failure is also relative. Part of it depends on your perspective. I won’t drop a link in here, but I just published a post today on SocialButterflyGuy about Choices and Consequences. It very much relates to the core of this post.

    Thanks so much for sharing this with us. See you in LA for BlogWorld!

  15. Sonia, you’re so damn sensible. (Pink hair and all.) I’m with you on so-called setbacks and failures being more like mini-instructionals or stages for a businessperson in finding their path. Slow leaks and even flat tires can be patched and re-pumped. Or you can sell the dang car and get another.

    Over the years, my freelancing business has meandered on both soggy trails and smooth highways, and there have been many changes of shoes. But continuing to walk has been key.

  16. Sonia,

    Damn straight! I LOVE this post, its what I work with clients on all day long…

    Let’s also not forget that the risk of staying in a dead end job just because “that is what you do” is also pretty GREAT! It eeks into every corner of your existence and results in a life half lived…now that’s what I call risk.

  17. Sonia,

    You made some excellent points. Thank you for sharing this.

    I am an entrepreneur and it has taken me a few years to realize that not everyone is such a risk-junkie as I am. I especially like what you wrote about the “minimal visibility” approach. Very helpful to newbies.

    Yes, I have had day jobs, but I always have something cooking on the back burner. It reminds me that I am alive.

    -Deborah

  18. Sonia

    Great post – I really believe that anyone considering their own business should do it. The barrier to entry has never been so low in the history of man.

    And whilst I’ve never been on Teaching Sells – the one time I was thinking of enrolling I spent my education money for that year on a Sean D’Souza Course instead! – I can absolutely tell everyone that it is possible to create a thriving business teaching. My bass guitar site (yep, the one that Seth mentioned in the podcast) is set to break the six figure mark this year. One day I’ll post the full story of the bass guitar site on my One Spoon site – that story is still 6-9months or so away from being published for various reasons.

    What really helped me succeed was that I was literally in a shit or bust position – it was make the bass guitar site successful financially, or go bankrupt. There was no alternative – not a course of action I’d recommend for anyone, but very good at forcing focus and clarity on what were the important business elements that needed to be in place. And helped create a solid foundation!

    So if you’re thinking about your own online business, get the education you need and make it happen. I’m a pretty normal guy, if I can make it happen so can you!

    Paul

  19. A couple of years ago I tried to nail down ANY reasonable statistic about the % of businesses that “failed” in the first year, five years, etc. None of them held water. Most started with businesses “registered” a lot of which never did any business! Failed usually meant it was no longer registered, meaning it could have been bought, or the owner retired, neither of which are failures.

    When I see business owners who really get going they are ones who have insight on their market, and their abilities that no one else can have. From their point of view, with their knowledge and experience, it’s not risky. Yes there are lots of things they don’t know, that they need to learn, but the “risk” is in staying still.

  20. Sounds like a fabulous seminar. That’s why you’re my favorite site. I just wrote a tweet telling everyone in my world to go check it out. Your outline and analysis of having your own business is so on the money.

    John Howlett
    Avizagroup.com

  21. Sonia,

    I’m in a somewhat odd phase of trying to chose from going unemployed to fully self employed or getting a job and working on the side. The latter was my situation for the last 2 years and it worked out nicely. When I did get laid off the one thing that gave me leverage was the fact that I was religious about a rainy day fund that would allow me to take some risks if did end up in the situation I’m in. As far as failure I’m reminded of a quote from Zig Ziglar that “Failure is an event not a person.”

  22. I am anxious to know how the story ends.

  23. I love the phrase you mentioned:

    “But if you even become marginally competent, you’ll be ahead of 90% of your competitors. You don’t have to be faster than the bear — you just have to be better than the other guy.”

    After running my web design business for the last 12 years I’ve done well even though I don’t consider myself an expert in the field….yet.

    • Yeah, we all think we have to get something perfect. Successful business owners all know there’s no such thing. There are only works in progress and projects we’ve left behind. :)

  24. Nice post Sonia….as always:)
    Business ownership is tough, partly because most small business owners are good technicians, not good business owners.
    The E Myth is a must have book for people to start thinking in terms of systems. The other must have book is Duct Tape Marketing, because it’s focused specifically on creating a marketing system designed for small businesses.
    I’m a little biased because I became a. Duct Tape Marketing Consultant this year, mainly because of the simple, effective, and affordable system they created. It’s awesome stuff, check it out.
    Keep up the great work,
    AJ

  25. Great info & insight Sonia (as always!) If you’re starting a business/service after ‘loosing everything’, you really have nothing to lose and all to gain (as been in my case). In life, we are always being presented with lessons & opportunities to learn and grow. By attaching labels to these opportunities (‘failure/success’, ‘good/bad’), we essentially deprive ourselves from insight, learning and growth. Thank you for providing us readers with perpetually compelling wisdom. Karen

  26. The statement “But if you even become marginally competent, you’ll be ahead of 90% of your competitors” gave me the courage to jump 100% into online marketing for my business. I first heard it from Thies or Rhodes (can’t remember) on the Stomping the Search Engines course where they said the same thing … if you do only a few of these [SEO] techniques marginally well, you’ll be way ahead of the pack. I told myself, I can do some of this stuff marginally well.

    Sonia, this statement is incredibly important for a new entrepreneur. The overwhelming belief is everyone else and all competitors are perfect. But, I believed when told I just had to do some of the stuff somewhat decently and it would work. You and they were right.

    My offline business took off using content marketing and SEO (they really are one and the same in many respects). I’ve yet to do any of it perfectly, but I do enough of it sufficiently well that it works. Now of course, I’m a believer in just doing it, tweak as needed and keep at it. Content marketing is awesome for businesses and I believe it will remain an effective marketing method.

    Now not only have I had the opportunity to build up my own business, I get to help other businesses which is gratifying beyond words.

  27. Great article, very realistic. I agree that many people react in horror when you say you’re an entrepreneur, and as a concept it still has a lot of bad press. However, I love the control you have over your own situation. If you work harder you get rewards, and the freedom is something most 9-5 jobs don’t offer.

  28. Yes, business is risky. However, most of the new entrepreneurs failed is because of lacking of planning and knowledge. We need to know how to manage a business and have a good plan on it. Learn from the successful businessmen will be one of the best choices to reduce the risk of business.

  29. I recognize that many people react in horror when you say you are an entrepreneur and as a concept has a lot of bad press.

  30. Great article ! I’ve started my own business as well and it is very risky yes ! However its worth it.

  31. It’s very true, exchanging your time for cash is a really bad idea, it’s like modern day slave trade. However deciding to start a business and one that will stand strong despite all is even riskier, just like the 80/20 principle would suggest.

    Actually something I have always wondered… what is the turning point for most successful people?At what point did they decide to turn their lives around?Thing is,when we see a successful person no one remembers the journey they took to get where they are. It a matter of asking the right question and answers will follow.

    “Find successful people and interview them about what made them turn their lives around, then share this with others in form of a book, pod cast, anything just share”.

    thanks Sonia for your inspiring post, I just found a new assignment for myself…scary but heck what do I have to lose.

    Smiles

    Veeh

  32. I think it definitely depends on how you see things. I choose to look at it that whilst I’m self employed I have dozens of employers, so if something goes wrong with one of them then I will still be OK, the rest are still there. On the other hand, if I was employed then I’d be relying on one employer for security all the time. If something goes wrong with them, I’m stuffed. Since it’s not likely I’m going to lose all of my clients all at once, I prefer to think that self employment is far less risky!

  33. Absolutely bang-on-the-point!
    A lot of start-ups never understand how to manage resources. But, i guess even an entrepeneur with a zero-background, can learn on his feet. This, as long as his long-time vision is clear, and he understands that the cause is worth the risk. Because, at the end of the day, even the so-called “owner” is but a worker for the biz. Maybe, its hardest.
    So, if the person can stop equating his personal gain-loss with that of the company, that’s a huge step forward. Then, he will be willing to take the risk.

    By the way, loved those tips on content marketing. And, i guess, it’s time i picked up a Dan Kennedy.

  34. I really enjoyed your post and had to laugh about working at the post office and coming home to watch television. This is exactly what my sister does and criticizes me for running my own business. I never said anything about her choice, but it’s just not for me. She is always talking about the risk I’m taking but it’s what I prefer to do for a living. Risk is involved just walking out your door, as you said – it’s all about doing what you want.

  35. I can’t even begin to tell you how much I love this post, Sonia! I think I might have to quote “Sonia’s Law” with all of my clients. :)

    This message is particularly fitting right now since my husband just hung out his own shingle for his law firm last week. Thankfully, he’s married to a marketer who can help him hit the ground running. Otherwise, I’m afraid he would be in the “build-it-and-they-will-come” camp. You’re right – so many people don’t think they need marketing. Or, they think they can’t afford it.

    I don’t think new businesses can afford NOT to market themselves. Yes, you have to be smart about where you spend your money. But, if you don’t invest any time or money into marketing, how exactly do you expect people to know your new little business exists?