Some people believe that running a business is risky. And if someone tells you to start a business as part of your retirement strategy, it’s probably bad advice. The odds are overwhelming- only 2 out of 10 businesses will survives in the first 3 years. Paul Graham cites 18 mistakes that can crash all your hopes and dreams of starting one:
1. Single Founder
2. Bad Location
3. Marginal Niche
4. Derivative Idea
6. Hiring Bad Programmers
7. Choosing the Wrong Platform
8. Slowness in Launching
9. Launching Too Early
10. Having No Specific User in Mind
11. Raising Too Little Money
12. Spending Too Much
13. Raising Too Much Money
14. Poor Investor Management
15. Sacrificing Users to (Supposed) Profit
16. Not Wanting to Get Your Hands Dirty
17. Fights Between Founders
18. A Half-Hearted Effort
Despite all that, here are 6 reasons why I think starting a business is one of the best retirement ideas:
1) Like any currency denominated investments, a business can also grow and become more valuable.
2) A business can fail. So does your stock and mutual fund investments. However, with your own business, you are in control of the success or failure. As long as you provide what the market wants, your investment in your own business are unlikely to vaporize into thin air.
3) There’s a steep learning curve in managing your own business. No one ever guaranteed you are going to get overnight success from your first business. That’s why, the earlier you start, the better you become. Likewise, no fund managers or stock brokers can guarantee your ROI.
4) Job security is no longer an issue. You can reap the benefits of your own business as long as it is running. If you depends on your employer’s paycheck, it’s going to stop the moment you are dispensable.
5) It has become easier and cheaper to start a venture today. You can always treat your new venture like a hobby because in the beginning, you are not going be very busy. Hence, you can start your own business and still be on the payroll. When it does get busy (which is a good thing), it’s probably a good time to evaluate if your new business is worth 100% of your time.
6) Like Jeff Bezos put it, “We are in it for the long term.” Anything long term is a sound retirement strategy. Building a business is definitely a long term strategy. Forget about the becoming the next Facebook or Instagram. Those are bonus. For the mere mortals like you and me, building a business that replaces your paycheck can be a reality. The value that you build over the years can easily compound in monetary terms.
I am not advocating that you should quit your day-job. You should never do that, especially if your paycheck is the major source of income.