If you’re in your twenties, unmarried and without children, now is the time to start something. Not when you’re thirty-five and need to worry about mortgage payments or saving for junior’s college education. Not after you’ve had ten years of work experience and adapted to a large salary. Today.
Many of my friends tell me their dream is to start a business. Upon graduation, these same friends go to work in a big company. Maybe I shouldn’t be cynical, and these people are really only going to work for a few years, gain some experience, pay off their debt and start that business they’ve dreamed about.
Or, more likely, these people are going to conform and fall into comfortable mediocrity.
Take More Risks in Your Twenties
I’m twenty, unmarried, childless and without a mortgage. There will never be another point in my life where I can take on the risks I can now.
If I start a new business today, what’s the worst that can happen? I could waste five years, fail to get anything going and be forced to look for a job. In that case I’d be an unemployed 25 year-old with unpaid debt. In other words, I’d be like many 25 year-olds.
However, if I start a new business when I’m 40, the risks become more noticeable. I could lose a high paying job. I could fail to provide an income for my family. I could lose my house or life savings if they were invested into the business. Worse, if I had planned to retire at 55, I may not be able to anymore.
I’m not suggesting that people in their thirties and forties shouldn’t become entrepreneurs. However, because of the investment into their current lifestyle, it will be far harder to make the switch.
My goal is to stay unemployed when I graduate. I realize this might be impossible. If I’m not earning enough to pay the bills from a business, I may need to take on temporary work.
I’ve set $20,000 as the minimum income I need to reach to stay gainfully unemployed. That’s less than half the start salary some of my recently graduated friends have been offered. That’s a tradeoff I’m happy to make.
Define Your Poverty Threshold
The minimum income I need is $20,000 per year. I could probably physically survive with less income, but this is the threshold I need to meet an acceptable lifestyle. Twenty thousand dollars per year is my poverty threshold.
Defining a poverty threshold is important because it allows you to make decisions around it. If you don’t know what your minimally acceptable income level is, you won’t make important life decisions.
Would you run a business if you knew the initial income would only be $30,000? What if it were only $15,000? Would you pick your dream job with a salary of $25,000 over a boring job that pays $75,000?
It’s difficult to make trade-offs if you don’t know how much money you actually need. Spending some time thinking of an actual number will help you make decisions when there are forks in the road.
Start Something, Even if it’s Part-Time
Who says a business needs to be a full-time pursuit? If you’re looking at a solo, lifestyle business or freelancing career, that is something you can definitely start as a part-time operation. For most of the year, I run this business part-time.
I strongly recommend part-time projects, because the learning curve can make quitting your job to start something new terrifying. Even if you’re in your twenties, you may not be looking eagerly at the prospect of having zero income while you try to launch a business.
Part-Time Reduces the Burn
Starting a part-time business lowers or eliminates your burn rate. Your burn rate is the amount of money you lose each month trying to get a business started. If you’re working on a business full-time, then your burn rate not only includes the expenses of the business, but your living expenses.
For example, if I require $2000 per month to live and operate my business, and I have $20,000 in available savings and credit, I can last 10 months. However, if I have a part-time job that pays $1500 per month, I can now last 40 months, quadrupling the time I have to make my business a successful enterprise.
The tradeoff, of course, is that by accepting part-time work, you have less time to focus on starting your business. Ultimately, whether you start something full-time or part-time is up to you.
Whether you choose part or full-time isn’t important. What matters is that you start something. If you have the dream of being self-employed, get started when you have the greatest opportunities. Don’t wait until you’re locked down with two kids and a mortgage to start aggressively pursuing your goals.