This year’s graduating college class has the highest student-loan burden ever. Eager graduates will enter a world where inflation is at a two and a half year high and in many industries there are around five candidates for every job opening. What’s a newly minted college grad to do?
Start a business, suggests Susan T. Spencer (pictured), a serial entrepreneur, author of Briefcase Essentials, and former General Manager of the Philadelphia Eagles. Entrepreneurship isn’t for everyone, so here are Spencer’s tips for the class of 2011 — and anyone else considering starting a business.
ISBB: How can someone determine if they’re cut out for starting a business? What traits do they need?
Spencer: They certainly need to have a passion for something and that passion has to be something they believe they can translate into a business. If they’re lukewarm about something it probably won’t work. Most grads have ideas in a particular category or special interest. You need to have the passion first, then you have to have the drive and a tremendous amount of persistence. You get a lot of no’s. You have to have that ability to be resilient and understand that the process is not an easy one.
You advise people to choose a business where they are the only employee. Why?
The reality of business is, the less you spend on other people, the easier it is for you to make money. The reason that that is a criteria for me is if you’re not prepared to do everything from taking out the garbage to collecting bills and chasing people who owe you money, you probably don’t want to be in your own business. If you’re large enough to have somebody else, it’s great for you to know how to do everything. If in fact you do everything, and you’re the only person you’re responsible for, you don’t have to worry about cash flow the same way if you were shelling money out for someone else. Entrepreneurs have to be willing to suffer in terms of the luxuries of life for a short time.
You also recommend choosing a business where the materials are “pay as you go.” Could you give us some examples?
Let’s say you want to start an import business. Do you think you’re going to pay for those items before you sell them? You’re not going to have the money. Try to find a business where the materials you’re going to need are ones where you can work out some business terms. If you had a small business and you were locally buying trinkets, you would need to work out a relationship with somebody and say, “Here’s my business plan, here’s what I want to do, I’d like to have some credit from you for 30 or 60 days. If I call you, will you ship it?” Don’t own it until you’ve sold it. It takes a different way of looking at how you start a business. Make all these arrangements with the cash issues upfront. Don’t borrow money to pay it. It seems so simple for me because I did it the hard way. My first business, where I manufactured tennis clothing, I did it the other way, and I learned. I started a business selling meat online and I made sure my customers were paying me before I had to pay my suppliers.
How can young business owners compete with those who’ve been in business for decades?
The truth of the matter is when you’re young, you’ve got much more creative ideas. You can approach a business in a different way. The reason I was successful in the meat business knowing nothing was because I knew nothing. When you’re young and you don’t know a lot you ask a lot of questions and unearth issues that other people take for granted. They never ask “Could I sell this product online? Could I sell this product in a different way?” Young people bring new ideas and a fresh way of looking at business.
What are your thoughts on grad school or business school?
I never went to grad school. I got a master’s in economics, but that’s not business. I teach MBAs at UNLV. With some entrepreneurs, they need an MBA. They need to have the credibility and the sense of confidence that they don’t have without that degree. They want to go to school and they think that a degree buys that confidence. I don’t think it does, but it’s likely you’ll know more than you did on day one. It depends on the individual. If they can afford to take three years out of their life, I would say sure. A true entrepreneur probably doesn’t need it. What you learn in business school is what the book tells you. Business is dynamic, so you have to go with your gut. A lot of it is finding your own intuitive way and asking a lot of questions.
What are the most common mistakes that young entrepreneurs make and how can they be avoided?
Young entrepreneurs believe that you start with a big organization and you borrow ten to twenty thousand dollars. They have a head technician, a COO, a CFO, and then maybe a CEO. There’s no business yet but they have a lot of people. You don’t need an organization to start a business. You are the organization. All you need is a community of one but that community better have all those qualities we talked about, and you need to have a couple thousand dollars in the bank to use as your base. Family is usually where you get your seed money, but if you borrow money from your family or friends, you better pay them back. If you borrow it, it’s not free. That’ll be the hardest buck you ever borrowed.
Any other tips?
If you have the passion and the desire to own your own company, go sooner rather than later. Once you get into a career and you have a family, it’s much harder to sacrifice. If it’s only you, it’s easier for you to go without. If you have the passion and drive, do it now.