Owning your own business should never be about buying yourself a job, it should always be about maximising your ROI (return on investment).
ROI is really just a fancy jargon term for making sure you earn more money than the risk you take on.
64.2% of small businesses fail within 10 years. How's that for risk?
It's the reason why restaurants and retail stores are a horrible proposition for most people. The maximum expected income or return will never even closely reflect the amount of risk (overheads, employing people, initial startup costs, sanity)
It's a relative measure and opens up vast avenues when it comes to working out which option to pick when launching a new business. Look at these two examples:
1. Uni student launches an advertising based, content driven web site for under $2000 and starts earning ~$5000 a year. So 250% ROI.
2. Restaurant opens costing just under $250,000 to purchase and launch. What ROI does the owner need to make it a worthwhile proposition? Would it be better to be the uni student? Legitimate questions, and a reason I would never run a restaurant unless it was a hobby, or it was my ultimate passion.
If you're thinking about launching a business, and before you go neck deep in debt, make sure you ask yourself two simple questions (then go and work out the complex calculations!):
1. What's the risk of my failure?
2. So if I succeed, how much do I need to make it worth my risk of failure?
Oh and a third one serious one:
3. Is this a romantic dream, or is this about doing what I love and being able to support my family and my life?
The risk is more than most people probably imagine. It's also a very good reason to hang on to a job, the risk is low, and for many, the ROI is o.k. For businesses, it impacts the way their price and the way they go to market.
I'd love to hear about your experiences with personal ROI!
flickr credit: opacity
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