Saturday, December 17, 2011

Consider the transition to Entrepreneur slowly.

Read a while ago that ago that many start-ups are suffering in Singapore. They blow most of their capital to get a basic version 1 of their application only to make about $3,000 a month for a decent application.

I think this presents a great waste to our society. Entrepreneurship pays off only if someone becomes a success, otherwise, we have to account for the many folks who are forced to return to the job market that will probably discriminate against them.

Here's my alternative take on a safer way to become an entrepreneur :

a) Participate in the working world for a short, fixed time, like 5 years.

If you are a fresh graduate and have ambitions to do a start-up, why not bring your technical skills to a good employer and maintain your lifestyle as a start-up founder, another words, live like a poor undergraduate for the next 5 years or so.

b) Save 75% of your income.

Since you have a start-up mindset, why not just aim to save 75% of your income. This money is invested as future capital to generate passive income to live on.

c) Invest in 8-10% income assets

Invest your money at 8-10% yields. In 5 years, you will be able generate enough passive income to completely replace your expenses. In fact, you will have enough passive income equal to 30% of your starting salary even in the most pessimistic case. This will form the baseline for your lifestyle moving forward.

d) Devote your after-office time to build skills for a future start-up

These days, starting a business is very easy. With a developer account for iOS or Google or even in the future Windows apps marketplace, you can launch a free application to get users to pass you feedback to build a paid version of the app and hone your programming skills.

If you perform these 4 steps, you would be able to deal with the worse case scenario on the failure of your start-up as well as take baby steps towards building your company over 5 years.

As you will also accumulate working experience, you avoid the social stigma of being an unemployable start-up founder.

I think there is only one big weakness in this plan.

If you can work, invest and plan to start-up in your spare time, your company will probably want to find ways to keep you working for them for as long as possible. You may find jobs willing to pay you $10k a month at the end of your personal 5 year stint. This will make regular employment far too attractive compared to a start-up lifestyle.

Thus, you need to value your autonomy more than security to make this work.


Ramakrishna said...

Superb, very well written. I echo your thoughts!

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