by Troy R. Underwood, author of “How to Launch Your Side Hustle: Start and Scale a Business with Minimal Capital“
Congratulations. You’ve come up with a brilliant business idea, and you’re ready to get started as a brand-new entrepreneur.
But do you have the grit to persevere? Are you a Necessity Entrepreneur?
Necessity Entrepreneurs Build Exceptional Businesses.
Necessity Entrepreneurs are uniquely equipped to build exceptional businesses and inspire meaningful change in their industries. But, just an importantly, they’re also in business to put food on the table for their families and employees.
Now, this age-old perspective on business may sound like a line from It’s a Wonderful Life, but putting families first has new meaning for modern entrepreneurs. Necessity Entrepreneurs adopt this mindset because it’s mandatory for their circumstances. They aren’t operating on big bankrolls of venture capital (at least initially), and they don’t have trust funds to fall back on if the business fails. If they don’t come through, who will?
Though failure may be the reality for most entrepreneurs, in the mind of a Necessity Entrepreneur, failure is not an option. What others may see as the end of a business or an opportunity, Necessity Entrepreneurs see as challenges or setbacks to overcome. With people counting on them—their families and their employees’ families—they have to carry on.
Think you might fit this definition of entrepreneurial success? Just ask yourself these seven questions:
1. Does your family come first?
Necessity Entrepreneurs don’t pursue business solely for the sake of financial or personal gain. Executing an idea and selling products is a path to providing for people we care about. Along the way, that may mean more financial freedom, fame, and even luxury, but those are pleasant bonuses rather than goals themselves. Our families — and the families of the employees we eventually hire—come first.
I emphasize this because putting family first can sometimes mean making the less profitable choice in the short term. For example, do you fly out to a big industry conference to close some sales, or do you stay home to attend your daughter’s high school graduation? In the short term, skipping the conference may mean losing some deals, but in the long run, you and your business will be more successful.
2. Are you self-funded?
Necessity Entrepreneurs don’t have immediate access to funding or extensive resources. Though the trend in the startup world seems to be relocating to Silicon Valley (a choice that some angel investors and venture capitalists now call mandatory) and knocking on the doors of venture capital, this path doesn’t make sense for all businesses, and it’s not accessible to many entrepreneurs because of their life circumstances. As a result, Necessity Entrepreneurs have to find ways to fund the launch of their businesses on their own.
As a Necessity Entrepreneur, you make do with the resources you have, perhaps charge a few credit cards, and perhaps borrow some money from family and friends. Although any debt is potentially risky, there are smart ways to approach this challenge if you’re an entrepreneur.
3. Are you the boss?
A Necessity Entrepreneur doesn’t answer to a boss. You are the boss. For much of your business’s lifetime, if not all of it, you won’t answer to a board, and you won’t answer to investors. As a self-directed business owner, you have full control over what the business does next as well as how it operates and how it grows. It’s an incredible amount of freedom that can enable a great deal of creativity.
At the same time, being self-directed creates responsibility. When something goes wrong, it’s on your watch, and it’s up to you to lead your team to a solution. You won’t be able to pass blame, and no team from corporate will swoop in to save you. You are the captain of the ship for better and for worse. To succeed under these conditions, you need to be durable, flexible, and willing to problem-solve in trying times.
4. Are you responsible for all deliverables?
Just as you’re solely responsible for the leadership of your business, a Necessity Entrepreneur also bears the responsibility of delivering products, services, and promises made to customers, employees, and family. To fulfill these promises, you have to have the idea, build the product, and take it to market.
The challenges hidden within these steps can be numerous and require a broad set of skills. Programming a piece of software, for example, is different from taking a sales meeting with the CEO of a credit union. Yet, especially in the early stages of your business, you will have to drive the whole of that process.
5. Are you planning for growth?
There is nothing wrong with starting a traditional business, but Necessity Entrepreneurs pursue business ideas that have significant growth potential. In realizing this potential, a Necessity Entrepreneur will have to make critical choices to help the business scale, smoothly and profitably.
From the start, you need to identify an idea with growth potential that ideally lends itself to expansion. Exactly what this looks like will vary by industry, but for software, the opportunity is that once you have built the program, it does not necessarily cost you more to deliver the product to more customers. The software exists, and you add users. Yes, there are scaling costs like customer service and bandwidth, but they are very different from opening a chain of bookstores. As the bookstore CEO, you may see some cost-savings at scale—buying books in bulk, for example — but you are still on the hook for rent per store, employees per store, advertising per store, and so forth.
6. Is your business idea disruptive?
At all points in history, entrepreneurs were typically innovators. They saw the world differently and had ideas for new products, new services, or new business models — and then they built them. In entrepreneurship today, improving the value chain (likely through something at least partially new) is a given.
But it’s important to emphasize: if your business idea is not changing the value chain, if it’s not disrupting how things have been done or the kinds of products your customers have always used, Necessity Entrepreneurship might not be the right model for you.
7. Are you tech-savvy?
Running a competitive business in a modern market, whether that business is entrepreneurial or traditional, requires technology. Customers expect a certain level of sophistication when they interact with a business — like a mobile-friendly website and credit card support, if you’re a retailer — and on the backend, the rise of big data and industry-specific efficiency solutions are changing how business owners, in general, make choices about what to do next.
That doesn’t mean you need to be a software developer or an engineer — though that can be a big advantage, depending on your industry — but you must be comfortable with technology in general. For your business to compete, especially in crowded spaces or against big, established businesses, you need every advantage and boost you can get. Many of those opportunities will come via technology, so being open to technology and willing to try new solutions within your own business will help lead you to success.
To some entrepreneurs, these characteristics can seem like disadvantages. In the eyes of entrepreneurs chasing venture capital funding, how could being self-funded ever look like anything but a handicap?
That’s what makes Necessity Entrepreneurship compelling. Where others might see disadvantages, you see opportunities. Your obstacles are actually your strengths, and if you know how to use them to your advantage, you can succeed where even smart, well-funded entrepreneurs fail.
Troy R. Underwood is an industry disruptor. Part technologist, part economist, and all innovator, he revolutionized the motor vehicle industry with the nation’s first electronic title system for financial institutions, which was later sold for $106 million. His healthcare venture, benefitsCONNECT, innovated healthcare benefits administration and resulted in a highly successful acquisition. His new book is “How to Launch Your Side Hustle: Start and Scale a Business with Minimal Capital“.
