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December 02, 2003
Entrepreneurs and Experience
Posted by Arnold
A reader emailed this query:
Hello, I am a college senior that has heard that work experience is useful and necessary before starting your own company. I am wondering, two things:
1. What is the bare minimum experience necessary to have your own company?
2. Although some things can be learned in the corporate world before starting a company, are there any psychological differences between being a corporate employee and being an entrepreneur?
Are they in any ways psychologically opposite in terms of traits required or involving different risk reward profiles?
My view is that the best experience for starting your own company is starting your own company. A kid who has his or her own newspaper route or lawn mowing service can learn about sales, operations, receivables, key person dependency, capital-labor substitution, etc.
What you learn from working in large organizations is how large organizations behave. This is extremely valuable knowledge if you want to start a business that sells to large organizations. Otherwise, it may not be the most useful.
Psychologically, the differences between working in a large organization and being an entrepreneur are large. You are much more responsible for your own success or failure as an entrepreneur. That can be stressful but also exhilarating.
I don't think that today's college students should think in terms of spending their entire careers working for large organizations. You probably will have to be on your own for at least a portion of your working life. So if you're ready for the entrepreneurial experience now, it's probably a good idea.
My one caution would be to go for a simple, standard business. Rather than trying to be the next Bill Gates or Michael Dell, I would recommend starting a company that uses a proven business model to meet an established need.
My $.02
Comments (7)
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1. Katherine on December 3, 2003 04:33 PM writes...
Well, maybe... Especially in the post-bubble era, funding sources are very skeptical of new college grads with no experience. There's also a lot that most new grads need to learn about the business world, much of which can be learned much more easily when someone else is worrying about keeping the lights on, making payroll, etc. Also, I think the discipline of working for someone else, having to keep regular hours, etc. is valuable.
I'm self-employed now. I wanted to be right after I graduated, but I wasn't ready yet.
Permalink to Comment2. Lee on December 9, 2003 11:59 AM writes...
re: proven business model to meet an established need.
What are we talking about here? Dry cleaning, restaurant, etc.?
As a software developer, I have a lot of ideas, but unfortunately they are related to my current employer's line of business.
I'm stuck.
Permalink to Comment3. Arnold Kling on December 9, 2003 07:53 PM writes...
Dry cleaner or restaurant require too much capital, but you're on the right track.
As a software developer, you can start by trying to go out on your own and do contract consulting work. You might find that the process of networking and selling would give you a leg up in starting a different sort of business.
Permalink to Comment4. Ken Keller on December 9, 2003 09:00 PM writes...
I thought that Bill Gates started a relatively conventional software company. It wasn't until IBM opened the door that things got out of hand.
Permalink to Comment5. Lee on December 10, 2003 09:01 AM writes...
Thanks.
Any book recommendations on developing ideas and then doing the market research to establish the viability of the idea?
Permalink to Comment6. Arnold Kling on December 10, 2003 12:13 PM writes...
In my book (Under the Radar), I have some ideas on the subject. However, I am not in favor of doing market research in the conventional way of surveys or studies.
I favor boots-on-the-ground market research, which means test-selling your product with potential buyers. Find a potential buyer in your market, take him (or her) to lunch, and ask him what his 3 biggest problems are. If your idea is not a solution to one of the three biggest problems, you're in trouble.
Again, I have more to say in the book. But the essence of it is that you should start selling before you even have a product, and you should learn by selling.
Permalink to Comment7. triticale on December 13, 2003 09:46 AM writes...
Actually, Bill Gates wrote his first software product for sale to a computer manufacturer (Altair) and at the time direct software sales to end users was not the common business model.
My view is that the best experience for starting your own company is starting your own company.
I worked for 22 years for a manufacturing firm which had been started by an insurance adjuster because a neighbor of his happened to know of a market for metalworking skills he was using to build a hobby racecar. In that time the workforce grew from 7 people to over 40, sales volume grew 20 fold, and the customer base grew from 10 to 1500. Much of this growth resulted from shifting the product line in response to customer needs.
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