A reader emailed to ask whether I thought his idea for a startup was a good one. I told him that’s an impossible question to answer since success invariably depends more on founder — his or her skills, experience, drive, persistence, etc. — than the actual idea.
He also wanted to know whether he should quit his day job and dive in.
Sure, it sounds romantic to go all in. To throw caution to the wind. To leap from the highest cliff and build wings on the way down. To show just how committed you are — and how much you believe — by not having a plan B.
That’s what successful entrepreneurs do, right?
A 2013 study of over 5,000 entrepreneurs over a 15-year period published in Academy of Management Journal found that the startups of people who kept their day jobs — the researchers call it “hybrid entrepreneurship” — were 33 percent less likely to fail than those who quit their day jobs.
Why? A big reason is risk.
Or more to the point, risk mitigation. By reducing the overall risk, hybrid entrepreneurs gave themselves time and space to experiment. To test. To learn. To develop and refine and iterate.
“All-in” entrepreneurs, unless they have considerable capital, don’t enjoy that space and time. Most need to fund their businesses (and put food on the table) through revenues. The pressure is on, almost immediately — and the risk of failure is much more imminent. As the researchers write, “the survival advantage is driven by a learning effect that takes place during hybrid entrepreneurship.”
Which is a fancy way of saying that since no idea, or its execution, is ever perfect, the more time you can give yourself to adapt, evolve, develop a great product or service, the better.
Ask yourself two questions.
So instead of asking someone like me, ask yourself two questions:
- Am I willing to spend nights and weekends working on my business?
- Am I willing to take calculated risks?
If either answer is no, then don’t start a business. If you aren’t willing to devote your “spare” time to starting a business, that’s a sign you shouldn’t start that business in a first place.
So is seeing risk as an essential element in entrepreneurial success. Most successful entrepreneurs excel at risk mitigation, or taking calculated risks. Keeping your day job limits financial risk. Spanx founder Sara Blakely waited years before she finally went all-in.
Backup can also plans mitigate risk. Richard Branson decided to lease Virgin Airline’s first plane from Boeing so he could return it in case the venture didn’t work out.
Starting small also mitigates risk. Bert and John Jacobs sold t-shirts out of a van for five years before Life Is Good took off. They “made something, and sold it,” and learned what customers wanted.
Almost every business venture requires spending money before making money. (And if money isn’t required, time certainly is, and time is opportunity cost.)
A huge percentage of startups fail because they run out of money; even if yours doesn’t, chronic money problems can lead to making poor long-term decisions.
Keeping your day job allows you to reinvest whatever profits your startup makes back into the business. Buying supplies. Buying equipment. Advertising. Hiring freelancers.
Doing all the things only money can buy.
Money you have since you have a full-time job to pay the bills.
Sure, that means working every day at your day job, and every night and weekend on your startup.
Because if you aren’t willing to work incredibly hard and make a few sacrifices, your new business will fail.
Whether you go all in or not.