We’ve been led to believe that heroes risk everything for what they want and get it as fast as they can. There’s nothing dramatic about playing it safe and taking your time. But consider this: the odds of a startup succeeding improve by a third when entrepreneurs keep their day jobs.
Grant has made a valiant effort to help dispel the myth that it’s not only brave but necessary for entrepreneurs to burn their boats to succeed. The myth that you have to risk everything has grown so much that people have become afraid of being perceived as weak or cowardly if they play it safe.
But reality has to trump myth. In Live Free or DIY, I also take aim at that myth by breaking down a lot of the numbers that help make the reality clearer. So let’s take a look at the myth and the reality of hedging a bet when it comes to startups.
THE JAWS OF THE MYTH
It is true that building a startup is a tremendously difficult task. It’s time-consuming work that requires a level of commitment few people have. It also is true that focus is the key to excellence and, therefore, critical to the survival of the startup.
These truths often lead entrepreneurs right into the jaws of the myth. Most people think that burning those boats demonstrates their willingness to do whatever it takes to make their brilliant idea a reality — but this is the first step toward mediocrity.
A willingness to work hard certainly is a requirement for any business to succeed, but the DIY mindset that overcomes most CEOs who quit their day jobs often leads their businesses to ruin. CEOs needs to do CEO work and only CEO work. Beyond work, CEOs also must be sure they are managing their lives and not being managed by them. That includes making time to do something as simple as slowing down for a few minutes to take a few deep breaths and relax.
That becomes nearly impossible when taking on every responsibility of a startup after quitting that day job. Time, loyalties, and resources must not be spread thin. There still has to be time to breathe. To not do so is to invite mediocrity into the work you rush through. The marketplace has boundless demand for excellent new products and services, but there is no appetite for mediocrity. That’s why no CEO can afford to succumb to the DIY trap.
There’s a three-word mantra that every CEO can meditate on to keep things in check. It also happens to be the most powerful business model in the world: Do less, better.
Not very dramatic, is it? Doesn’t matter. As Grant has pointed out, entrepreneurial legends Phil Knight, Steve Wozniak, Bill Gates, Larry Page and Sergey Brin have something in common beyond their success: all of them were brave enough to play it safe at first. They all did less, better.
EMBRACE THE REALITY
“Quitting your full-time job to start a company is like proposing marriage on the first date,” Grant wrote in Wired. “For every successful startup with a swashbuckler at the helm, there are many more that fail. The most durable businesses are typically started by people who play it safe.”
That list of durable businesses includes Nike, Apple, Microsoft and Google, if you’re keeping score from above.
In Grant’s book, the diagnosis of the myth is largely psychological. He dives deep into the benefits of a cautious and skeptical analysis of a startup. He concludes that this type of analysis is more commonly found in risk-averse people who would never be so reckless as to quit their day jobs prior to having positive cash flow established in their new enterprises.
I would add to Grant’s excellent research and analysis that there’s also a practical problem that quitting your day job creates. I’ve seen it up close many times when advising startups and small businesses. By playing it safe, you can still generate income at your day job and delegate all the responsibilities that you shouldn’t be doing in the first place to an expert. That person will do it better and faster than you could. Ultimately, that saves money and time. It also allows you to focus on the core of the startup by only doing the work of a CEO.
Once you quit your day job, it’s easy to drown in the daily humdrum tasks that bore you. Worse still, your important ideas for how to improve the business are relegated to a wish list — or, more accurately, a when-I-finally-have-time list. No startup can survive without a focused CEO. The question is always: Which work adds the most value to moving the needle forward on your goals?
But there’s another consideration that’s a little different, and subtler. If you risk everything on your startup, you become obsessed with runway and cash flow. Getting to the break-even point as quickly as possible becomes the all-encompassing obsession. But the strategy that gets you to a break-even point the fastest usually is not the best strategy for the long-term growth of a thriving company. More often than not, slow and steady is the truth inside the cliché. Many VCs know this and have become weary of startup CEOs who are obsessed with runway.
What the CEO of a startup really needs to be obsessed with is time, and knowing what it’s worth even as he or she embraces a slow-and-steady mindset. Being risk-averse and taking your time does not mean there’s time to waste. It’s easy to lose sight of what an hour of time is worth once you quit your day job. By keeping it, lost-opportunity costs will stay in clear view. It also makes it easier and more intuitive to put and hour of your time into your business where you know it is adding more value than your current employer is paying you. If it doesn’t, hire someone else to do that work for you and build more startup capital by staying put at your day job.
This is also how you’ll know when it’s time to burn those boats.
Time is the most valuable start-up capital of every small-business owner who’s bootstrapping. As I’ve outlined in Live Free or DIY, the best way to get a handle on that time is The Golden Formula. By mastering it, you’ll feel more confident about doing things you probably thought you couldn’t afford, such as hiring experts to handle the things that surely would be required of you if you quit your day job.
The Golden Formula is built on three fundamental questions:
- Where am I spending my time?
- What is the cost of my labor?
- How much value am I adding to my business?
The answers will help you know what’s most important so you can make wise decisions about how to spend each hour of each day. It’s time — not money — that ultimately drives the bottom line. And it’s brave, risk-averse entrepreneurs who keep their day jobs that build more successful startups.
Be brave enough to play it safe. Also be brave enough to use some of your time to take a few breaths and do less, better.
If you’d like to dig deeper into The Golden Formula, our whitepaper will help you get started on that process — and it’s free. Download it now.