Should You Become an Entrepreneur?

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Within your first-degree network alone, I suspect you know a large number of people who, at one time or another, have expressed a desire to pursue an entrepreneurial career path. Yet I also suspect that, of those people, only a small percentage of them have actually elected to take the entrepreneurial plunge, leaving those who haven’t done so in a perpetual state of wondering what could have been.

This blog post is aimed towards those readers who may be wrestling with this question themselves. At the risk of disappointing you within the first two paragraphs however, you probably already know that I can’t answer this question directly for you, nor can anybody else. Like most questions of this sort, the answer is almost always “it depends”.

For those considering whether or not to take their career in an entrepreneurial direction, the best I (or anybody else) can do is to walk you through how I made this decision myself at the time that I had to make it. I’ll also attempt to compliment those considerations with some of the lessons and reflections that I’ve garnered in the 10 years since then, which of course benefit from the clarity that only seems to come with hindsight. Though everything below is unlikely to resonate with you and your personal circumstances, I hope at least some of it does.

But First: Let’s Clarify Some Fundamental Misconceptions

The Definition of an Entrepreneur

At the risk of over-generalizing, I would contend that the public’s definition of entrepreneurship is far too narrow, and indeed misguided. Too often, it includes only founders operating high-growth venture-backed start-ups, often operating within the broader technology ecosystem, with world-changing ambitions. Though people who fit this definition are indeed entrepreneurs, they represent only a small subset of the total entrepreneurial ecosystem.

The best definition of entrepreneurship that I’ve ever encountered (as defined by Harvard Business School) is “The relentless pursuit of opportunity without regard to resources currently controlled”. You’ll notice that nowhere within this definition is there mention of funding sources, growth ambitions, industry, company size, or even one’s status as a Founder. Based on this definition, the chef who opens her own restaurant, the author writing her first novel against all odds, and the person operating a consulting business as a sole practitioner are every bit the entrepreneur that those running venture-back startups in Silicon Valley are.

The “Makeup” of an Entrepreneur

Too often, entrepreneurs are mistakenly thought of as extremely risk tolerant (even risk-seeking) cowboys who somehow manage to throw caution to the wind in a way that most of us simply can’t. Again, though this may describe a small subset of entrepreneurs, this over-generalization simply isn’t true in the vast majority of cases. As my mentor once told me, entrepreneurs aren’t risk takers, they’re risk mitigators. This is so because not all risks are created equally – in most cases, people decide to pursue an entrepreneurial endeavor because they see opportunity for an outsized reward relative to the risk that they’re taking in pursuit of that reward.

In my own case, I decided to pursue an entrepreneurial career through purchasing (and subsequently operating) an existing company from its founder, who had been successfully running the business over the course of the preceding 20 years. In contrast to pursuing entrepreneurship as the founder of a new business, pursuing entrepreneurship through acquisition provided me with the opportunity to lead a company that had 20 years of operating history, had already achieved product/market fit, was consistently profitable, and had a stable base of recurring revenue being generated through hundreds of loyal customers. Because I also chose to raise external capital to help me consummate the acquisition, I saw an opportunity to satisfy my entrepreneurial ambitions and to pursue life-changing financial upside without much taking a commensurately large amount of risk. After all, I didn’t have to put down a dime of my own money (which was particularly helpful given that I didn’t have any to speak of at the time), and even if I wasn’t able to create meaningful value within the company, I’d still be earning a market CEO salary for as long as I was leading the company. In my view, therefore, the entrepreneurial risk that I was taking was highly mitigated.

I can’t say this for certain, but I suspect that some people never pursue an entrepreneurial career path simply because they don’t think of themselves as being highly risk tolerant, nor do they see themselves in the same light as the caricature of the entrepreneur that I described above. This is an unfortunate outcome, and one that need not exist if only our collective views about entrepreneurship were shaped more by reality and less by stereotypes.

“Insurance Policies”

Though risk can indeed be mitigated, it can never be eliminated entirely. Like many risks however, insurance policies exist to make entrepreneurial risk more palatable, but for whatever reason most people don’t seem to recognize that they’re already policyholders.

In my own case, when I decided to become an entrepreneur in 2012, I had just finished spending two years (and a few hundred thousand dollars) getting my MBA from one of the world’s best business schools. Instead of viewing my degree as an opportunity to make as much money as possible after graduation, I instead viewed it as the world’s best insurance policy against taking entrepreneurial risk: After all, if this degree didn’t get me a great job after a few years of trying to hack it unsuccessfully as an entrepreneur, what would?

What insurance policy are you sitting on, likely unknowingly? It could be your academic degree(s), your professional experience, your intelligence, your propensity to work hard, or your existing relationships within a given company or industry. Regardless of the form of insurance that you’re holding, you’re almost certainly already in possession of an asset (or a several assets) that can act as a built-in contingency plan should your entrepreneurial endeavor not work out.

Time as an Insurance Policy

Though time is indeed our most precious asset (and as a result we’re all understandably loath to waste any of it), looked at through a long-term lens, it can also act as an insurance policy of sorts: Consider the average person, who is likely to work for 40 years between the (approximate) ages of 20-60 years old. If that person were to take, say, two years to throw caution to the wind and pursue her entrepreneurial dreams, those two years would represent only 5% of her working life. Assuming that she has the opportunity to increase her freedom, independence, autonomy, satisfaction, and fulfillment by far more than 5% as an entrepreneur (likely something closer to 500%), then through the lens of time alone, pursuing your entrepreneurial dreams presents potential upside that is asymmetrically larger than the risk that it requires you to take.

The Regret Minimization Framework

Though there are no shortage of frameworks that one can use when contemplating whether or not to become an entrepreneur, I’ve found the framework of “regret minimization” to be a particularly instructive one. In essence, at the risk of sounding overly profound, this framework asks: “What are you more likely to regret on your deathbed? Trying and failing, or not having tried at all?” Or, as world renowned CEO coach Marshall Goldsmith puts it (much more succinctly and much less morbidly): “Would you rather say “oh well” or “what if?””. Intellectually, I suspect many of us would agree that trying and failing would be the preferable outcome of the two, yet even with that understanding in mind, most people still will simply never try.

I’ll leave it to the Psychologists and Sociologists to explain the myriad reasons why this may be so, but it’s at least possible that one such reason is that we’re all too busy trying to lead the lives that we think we ought to be leading (or, more likely, the lives that others think we ought to be leading), usually based on some aspect of our personalities or backgrounds. For example: An MBA from one of the world’s best business schools may compel the graduate to think (consciously or otherwise) that she ought to pursue the highest paying job available, regardless of where her most genuine interests may reside. That she ought to pursue the more well-beaten path, otherwise why did she bother attending this school in the first place?

In this way, sometimes our biggest blessings (like a great degree from a great school) can simultaneously serve as our biggest curses: They may make us less likely to pursue our genuine interests in favor of pursuing what we think we should be doing.

If this describes you, then (at the risk of continuing along my somewhat morbid line of thinking), it’s instructive to learn from the dying, as the near-term prospect of death seems to provide a clarity that no other circumstances can. In her book, The Top Five Regrets of the Dying, author and palliative care nurse Bronnie Ware said that the most common regret articulated by her patients in the final weeks of their lives was as follows: “I wish I’d had the courage to live a life true to myself, not the life others expected of me”. She went on to say: “This was the most common regret of all. When people realize that their life is almost over and look back clearly on it, it is easy to see how many dreams have gone unfulfilled. Most people had not honored even half of their dreams and had to die knowing that it was due to choices they had made, or not made. Health brings a freedom very few realize until they no longer have it.“

The Best Time to Take Risk is TODAY! (The Second-Best Time is Tomorrow)

Another way to frame this decision is to recognize and acknowledge that, generally speaking, the reasons to not pursue entrepreneurship almost always increase with the passage of time. When I decided to become an entrepreneur in 2012, I had no spouse, no children, no house, no car, and no mortgage (the only thing that I was the proud owner of was student debt). In other words, I quite literally had nothing to lose, which made the decision to become an entrepreneur a rather easy one for me. Fast forward only 10 short years later however, and I now have all of those things (minus the debt), and as a result, I objectively have a lot more to lose now than I did then. The idea that one has more to lose later in their career than at the beginning of it is another reason why many people, particularly those in their 30’s, 40’s and 50’s, never pursue an entrepreneurial career path.

Though I’ll concede that practical realities like the ones I just mentioned do indeed make the decision harder for mid-career professionals, it’s also worth noting that you’ll inevitably have more to lose with every day that passes, and therefore the best time to take entrepreneurial risk is right now. Because we can’t change the past, by definition you will likely never have less to lose than you do today. Almost everybody that I know who has put off entrepreneurship (“I’ll do it after my next promotion/raise”, or “I’ll do it once the kids are a bit older”) still hasn’t taken the plunge. The reason why is because the golden handcuffs have only gotten tighter over time (or the things which they stand to lose, including opportunity cost, have only increased).

If you’re a reader who is relatively early in your career, then you have the unique opportunity to leverage this lesson without going through the pain and regret that often leads to its realization: In my opinion, the earlier you are in your career, the easier it is to take entrepreneurial risk: You have less to lose, have plenty of time to take a more conventional path should it not work out, and are more likely to have the energy and tenacity that those later in their careers often yearn for.

Select Observations Gleaned Over the Past 10 Years

Over the 10 years since I graduated from Harvard Business School, I’ve seen my friends and classmates pursue an endless variety of career paths, though chief among them are roles that I would, for lack of a better phrase, classify as “traditional” jobs (impressive though they may be): These include things like private equity, investment banking, management consulting, hedge funds, and the like. Though most aspiring capitalists would probably happily give a limb in return for the opportunity to land such coveted and high paying jobs, two observations strike me as particularly relevant in the context of the decision that we’ve been discussing thus far:

1. Within any given class at Harvard (mine included), the job turnover rate within the first 2 years after graduation is roughly 50%. This means that, half of the time, the profession that seemed so exciting to students just two short years ago quickly proved itself to be an unfulfilling one.

2. More anecdotally: Of the countless friends and classmates who took much more traditional career paths than I did after graduation, over the past 10 years I can’t begin to tell you how many of them have told me something to the effect of “I wish I had tried something similar to what you tried immediately after graduation”.

Guess how many times I’ve replied by saying that I wish I had become a management consultant, investment banker, or hedge fund manager after graduation? Precisely zero times.

I don’t mention this to suggest that my decision was the “right” one, nor to speak disparagingly about those more traditional career paths, nor to congratulate myself for taking entrepreneurial risk when I did. I simply offer it up as an empirical observation that may be relevant to those currently wrestling with this decision, particularly in the context of the “regret minimization” framework mentioned above.

But…Everything Has a Price

It’s likely apparent to you by now that, all else being equal, I tend to encourage people to pursue their entrepreneurial dreams, so long as they’ve been sufficiently thoughtful and introspective about the decision. With that said however, our discussion would be incomplete without also discussing the price of entrepreneurship. Indeed, nothing in life is free, and the decision to take the entrepreneurial plunge is no exception.

The reality of being an entrepreneur tends to stand in stark contrast to the expectations of most. Though entrepreneurship may indeed present you with the opportunity to realize freedom, independence, autonomy, and several other benefits, it’s critical for you to understand that these benefits have a commensurate price, and one must be thoughtful about their willingness and ability to pay it. This price usually includes some combination of the following:

• Stress, fear, anxiety, uncertainty and loneliness
• Years or decades of significant wealth concentration and illiquidity
• Regular feelings of imposter syndrome
• A significant burden of responsibility, as every family represented by each of your employees is depending on the quality of the decisions that you make
• The feeling of never being able to leave work at the office
• The realization that every problem in the business ultimately tends to be your fault, either directly or indirectly
• Fewer emotional outlets, and the large majority of your friends and family being unable to relate to the problems and opportunities that you face on a near daily basis
• …and the list goes on

Carin-Isabel Knoop, Executive Director in the Global Research Group at Harvard Business School, suggests that aspiring entrepreneurs ask themselves six key questions before deciding to strike out on their own, all of which can be found in her recent article on “The Great Resignation”. In the article, she raises the possibility that the “great resignation” could eventually become “the great boomerang”, in part because those who left traditional jobs in 2020 & 2021 did so with an incomplete understanding of the realities of entrepreneurial life. She mentioned that, based on a March 2022 survey, nearly three-quarters of workers regretted quitting. And some 40% might be on the move again, in part because “many are searching for career opportunities that afford them new experiences or the flexibility to search for what’s missing, instead of engaging in the sometimes-difficult introspection that may be necessary to find it.”

This observation brings to light a very important question that I think all prospective entrepreneurs should carefully consider when contemplating departing from a more “traditional” or “conventional” career path. That is: Are you running towards something? Or are you running away from something? Though this may sound like a simple question at a surface level, upon deep reflection and introspection it tends to be less so. Running towards the entrepreneurial opportunity is very different from running away from your current circumstances. Those whose motivations are rooted in the former tend to be able to successfully withstand the inherent challenges of entrepreneurship described above, whereas those whose motivations are (often unknowingly) rooted in the latter often find that entrepreneurship doesn’t provide them with the satisfaction and fulfillment that they thought it might.

The Opposite Side of Entrepreneurial Risk

If everything indeed has a price, then we must also recognize that there is also a price to not becoming an entrepreneur (likely in favor of one taking a more traditional job). This is an important thing to recognize because in contemplating whether or not to become an entrepreneur, many people (understandably) tend to focus on the risks of doing so, yet they completely ignore the risks of not doing so.

In return for the benefits of taking a more conventional job (compensation, benefits, having “brands” on your resume, and so on), you’re also choosing to pay a price whether you realize it or not. This price could include any of the following:

• Lack of personal control over your career and the people with whom you work
• Years or decades of regret and wondering what could have been
• Little or no opportunity to realize asymmetric financial upside, as most financial rewards come in the form of salary
• Being at the mercy of major strategic, financial, or operational decisions made by other people
• Inflexible work schedules
• The time, effort, commitment, and emotional energy that you ultimately exert on behalf of somebody else (typically the owner or owners of the business in which one works)
• And so on…

In Sum

The decision of whether or not to become an entrepreneur is a deeply personal one, and as a result no objectively correct answer exists to address it. What I’ve tried to communicate above however is that the answer itself will only be as good as the introspection, thought processes, and clarity of insights that led to it in the first place.

Entrepreneurship is generally much less risky than most might think, though it is also significantly less glamorous than its depiction in most forms of media today. Though most people understandably focus on the risk of walking the entrepreneurial path, it’s equally important to acknowledge of risks of not doing so.

Like substantially every decision you’ll make in life, the decision that you make here will involve making trade-offs. If you get nothing else from this article, I hope that you’ll at least explicitly surface and consider what trade-offs you’re willing and unwilling to make, and ensure that your considerations are colored more by reality and less by misconception and stereotype.