Startup activity increases, but potential pitfalls loom
Having a bad day at the office isn’t reason enough to chuck that job and start your own business, although it might be a reason to start thinking about entrepreneurship. Be aware, however, that starting a business is one thing; making money as an entrepreneur is another.
“It’s important to understand the potential pitfalls,” says Charles Wentworth, a partner at The Law Office of Lofgren & Wentworth P.C., Glen Ellyn. “Attorneys think about worst case scenarios. We try to have realistic conversations about what it takes to start a business.”
Pitfalls or not, Wentworth is among those sensing an increase in startup activity. Two others who spend time with entrepreneurial hopefuls, Bob Podgorski and Tom Cassell, are having similar experiences.
New entrepreneurs increasingly have decided “There is no more risk going into their own businesses than working for an employer,” says Podgorski, principal of RPP Enterprises, a career programming consultancy in Hoffman Estates and a longtime mover behind the Saint Hubert Job and Networking Ministry.
“People are weighing the risks and deciding it’s better on the entrepreneurial side.”
The risks may seem less when you’re thinking about starting your own business, but “startups need help in several ways,” says Cassell, director of the Illinois Small Business Development Center at Harper College offices in Schaumburg. “You have to do more with less,” which Cassell notes can be an issue for entrepreneurs leaving big companies with big budgets. “You’re on your own financially.”
Financial issues are likely to be the startup entrepreneur’s biggest concern, says Podgorski. “It typically takes several months, maybe a year” before the financial picture begins to brighten, he says.
Although funding a startup with retirement plan money is tempting, “Don’t cash out your retirement,” Cassell warns. “You may be convinced your business will succeed,” he says, but most don’t — and retirement funds lost in a startup are lost forever.
Finances certainly matter, but there are other concerns as well. Being an entrepreneur “means learning how to do things on your own,” Wentworth says. “Know who to talk to when you need help.”
The reality is that virtually every startup needs help at some time. Cassell suggests connecting with “a neighbor who owns a business; the SBDCs and SCORE; and personal connections you’ve made in business.
“Problem solving — you need an ability to stick to it — and getting over the personal issues of cold-call selling” often are startup stumbling blocks, he says.
Wentworth suggests that looking at the end of the business early on is a good idea, especially if you start up with a partner or co-shareholders. “The best time to talk about breaking up a business is at the start, when everyone is happy,” Wentworth says.
“It’s sort of a prenuptial agreement. If one of you is the worker bee and the other is the rainmaker, how do you value each of those different contributions in a breakup?
“Who gets the trademark or the domain name?”
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