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Previously we were discussing, not whether to go into business, but the decision of which method made sense for you. A chicken or egg scenario. Do you start from scratch with just an egg? An idea that has yet to hatch but holds great promise or do you purchase some chickens, a going concern that is producing revenue and , hopefully, income.
Under the egg method you must have time. Time to weather the delays of a startup; the lack of customers, employees, revenues and spendable income. In fact the reality is you will most likely go deeper in the debt hole having no personal income for many months if not years. Do you have that kind of staying power (reserves)? Investors, if you can find any, will not allow you to spend their money on your living cost. So for sake of analysis let’s examine which is better, the chicken or the egg.
Your egg has a cost obviously much less than buying a group of chickens. But it does not produce current income. Let’s say you have spent $50k on your egg (idea) so far. Even when it hatches you’ll have to build up your “coup” of chickens letting other eggs hatch not taking income while this process build. You now have another $200k sunk into your business and / or debt from living expenses.
At $250k you could have bought a chicken farm, a revenue producing enterprise. You’d have debt but also income. You’d be buying a proven business because you did your due diligence and know the stream of revenue the business has been producing. You might have to spend a few dollars for sprucing up the business; perhaps a new marketing campaign but you have INCOME!
But my egg is a fantastic idea. Could be, I hope so. BUT 75% of all new businesses fail by or before year 3 and 85% by year 5. Risky? You bet! Still want to be in business? Good. We’ll discuss alternative ways to make that happen while lowering the risk next.
I love the way my partner, Steve, goes about explaining this.
Chicken or the Egg
So you want to be in business, be an owner, master of your own destiny?
The age old question in the title might be worth thinking about. Should you do a start-up with an egg or should you buy some chickens? A silly analogy? Maybe not.
Many people dream of starting a venture. I’ve helped several hundred wanna- be- entrepreneurs work through this process. Many come in with the egg in hand, delicate, carefully guarded and full of promise. Perhaps they’ve decorated the egg to make it look more attractive and more advanced than other eggs. Convinced that their egg is unique yet they really aren’t quite sure what it will be when it hatches. They rarely consider that it may not hatch at all. After a time of incubation where you’ve kept it warm and looked at it all hours of the night maybe even added a few more colors to it, it hatches.
You have a chick! They are furry, loud and ready to be fed. It was a chicken after all and you are very proud of this new creature, you probably give it a name even though you can’t tell whether it’s male or female (which is very difficult in young chicks). A few days later you realize that you’ll need another egg or have to buy another chicken to mate with yours or your precious egg, after lots of feed and care, will have provided you with 1-chicken dinner and be gone. Your great idea didn’t produce much and you really were never in business.
Of course you are smarter than that so you had several eggs or a partner who also had an egg that was compatible with your egg, Hmm, more about that another time. The point or question is: Did you save time or resources by starting with the egg versus buying some chickens. Both actions will get you to the same place. You thought the egg route would be simpler and cheaper. Let’s explore that.