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Entrepreneurial gut-check time

After the recent deluge of layoffs, the pessimists will find Cheetos and TV Guide, the optimists will find opportunity -- and for many, this opportunity will take the form of a small business. True, it's a tough economic climate for success, but small-business owners are inherently optimistic. After all, even in a solid economy most businesses fail, so you have to be optimistic just to believe that yours will be different.

The good news for those contemplating small business is that if you dump what you loathe and do what you love, you're more likely to end up rich. Because people do what they love with passion, and when you have passion in your work, you do exceptional work. Besides, when it comes to being a great business leader, no one ever got there by complaining about his or her job. It's also fun to be the boss: you pick the flavor in the coffee maker, you pick the location of your office, you pick the employees and you fire the people who bug you.

So it might seem like a no-brainer to you: Your job is shaky or nonexistent and your dream of your own small business beckons. But starting a business is very high risk. So before you toss out that help wanted section, think about whether being the head of the company is worth stomaching the risk.

One way to minimize risks is to honestly evaluate what you really have. Here is a list of the things you must have in order to make the financial risk of a small business a reasonable undertaking.

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1. The seed for a business
A good business requires a good idea (read: marketable) that leverages your talents. Just because you like the idea doesn't mean there are buyers, so do some research. And just because your mom thinks you're talented doesn't mean you are, so find a small business mentor and ask her.

2. The personality of a leader
This means you like people and people like you -- so you can get them to do what you want. You need to be able to make fast, confident decisions and you need to be organized so that people have clear direction from a clear-headed thinker. Remember that when your product launch flops, you are the one who will have to tell everyone why the company is still on the road to success. If you don't have the traits to rally the troops, you need a business partner.

3. Boundless energy
When you own the company, you set the pace, and you set the standards. Remember the day at the office last month when you were upset about your personal life, and tired from the night before and didn't feel like working so you surfed the Internet all day? It was nice -- so relaxing. This will not happen when you own the company. Most small-business owners work 80-hour weeks and wish they needed less sleep.

I had these traits. And I started a business. I raised funding, I hired employees, and believe it or not, the company was a success and I was able to cash out. But my cost was high. I worked almost every waking minute. When cash flow was poor, I worried not only for my own paycheck, but for the paychecks of the employees who were feeding families and fending off creditors. When cash flow was good, deal flow was heavy and my workload doubled when I thought I was already maxed out. While I was negotiating the sale of my shares, my hair started falling out. I didn't even know this happened to women, but apparently it does, usually from stress.

But remember what I said about small-business owners being optimists? Well, I bought some Nioxin to get my hair to grow back, and once I regained my former full mane, I started another business.

It failed. And I lost a lot of the money I took away from the first business. There are a lot of reasons for the failure: Bad timing, bad economy, and maybe, in hindsight, bad idea. But I had good mentors, and they told me how to fail well:

Minimize the risk to your finances
I invested only the money I had to lose. I had no kids, no mortgage and a solid retirement fund. I lost my loot from my first company, but I didn't lose my shirt. Think of starting a business as gambling: When you go to Vegas, you never bet your plane fare home.

Minimize the risk to your career
I maintained contacts who could help me get a job if I needed one. And I enlisted a resume-writing service to help me frame my business flop as a career hop onto the next level of management.

Fail quickly
Most business leaders have failed once or twice in their lives before they hit it big. Think of your failure as a stepping stone and step quickly and assuredly -- if things are going poorly, fail fast with the first idea, learn, and get another idea.

That said, I am not sure I'd start another business now. I have a kid to support now, and I do not have the financial cushion that would enable me to lose a lot of money at another venture. But the thrill of running my own business was unlike anything else I've ever done. The all-consuming nature of the responsibility is something I would not have known I could handle unless I tried. And the knowledge that I built something from nothing is a reward independent of the money.

So for those of you who have the right personality and can stomach the risk, I say bring it on! You will be pleased that you turned economically trying times into an opportunity for fulfillment. And remember, even if you fail, statistically you are most likely to succeed when you are doing something you love.

-- Updated: March 23, 2004

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See Also
Quiz: Are you entrepreneur material?
Kicking the corporate mindset
5 steps to startup success
Financial advice glossary
More advice stories

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