The 5 Signs of an Unskilled Entrepreneur

In my early twenties, I was simultaneously going to college and running a business I’d started called Pufferfish Software that made apps for autistic children. As part of the local startup community, I found myself at a lot of local pitch contests and networking events, listening to people struggle to find funding for their startup.

While it can be hard to predict which entrepreneurs will succeed over the long run and which will fail, it was always easy to tell which ones weren’t going to succeed anytime soon. Everyone who isn’t going to succeed anytime soon always makes the same mistakes:

1. They think good CEOs are ones who own expensive suits, expensive business cards, and spend a lot of time in executive meetings.

I don’t know what it is about new entrepreneurs, but they all seem to think the first things you do when you start a company are, in order:

1. Order business cards
2. Quit your job
3. Put together a pitch deck
4. Go to networking events and look for investors

When this plan doesn’t work — either because they fail to find investors or because they run through all their investment money without a viable product — they double down! They network more aggressively, look for “mentorship” and “investment” more aggressively, so on and so forth.

Over the better part of a decade, the most successful entrepreneurs I met were not people who did this. They were people who did the opposite. You almost never saw them at networking events, they barely ever solicited outside funding, and you barely even knew what their company did until their product ended up on the news at five. Their secret to success wasn’t enough money in seed funding or the right mentor, it was a willingness to do the work.

This picture of entrepreneurship is fundamentally at odds with the glamorous, jeans-and-tee-shirt utopia promoted in pop-culture entrepreneurship. Pop culture tells us entrepreneurship looks like this:

It really looks like this:

Being a CEO isn’t about being the cool guy at the head of the meeting in the trendy downtown offices. Being a CEO is about being the guy who works the longest hours and takes his paycheck the last because he cares about the company the most.

2. They think it’s a good idea to pay enormous sums of money for legal and financial expertise.

I’ve been to more than my fair share of weekend-long startup boot camps, and I’ve met a lot of people at these boot camps. A lot of them paid vast sums of money for administrative services, failed to find any customers to purchase the product they paid so much to build, and then found themselves in a real pickle.

A lot of these people seemed really successful and important from the outside, but their confessions at startup boot camps revealed this was all for naught.

Yes, there are a handful of small businesses that need expensive legal and financial expertise. Anyone with a fiduciary duty or who has to protect patient privacy can benefit from specialized legal expertise. But if you make less than $100,000 a year in gross revenue and you do not operate in some kind of special line of business like the above, you do not need specialized legal or financial expertise.

My writing business does around $30,000 of gross revenue a year, and I have exactly one specialized business fee: I pay an accountant around $300 a year to file both my personal and business taxes. Even that is spending a bit much, as I could easily spend a few hours learning how to use Turbotax’s small business offerings, but she helps me answer specific tax benefit questions I wouldn’t have even known to ask.

My rule of thumb is to hold off on paying for expensive legal fees until you are seeing at least a few thousand dollars of revenue per month. When your business is smaller than that, there’s no point protecting it for the same reason small-time musicians don’t hire bodyguards — you don’t need to protect against a risk that doesn’t yet exist.

That being said, you should incorporate your business. It costs less than $100 to do yourself online with your local state department. But unless your business is especially legally complex or liable to run afoul of state or federal law, you should probably skip out on all the other legal crap until you’re seeing real revenue.¹

3. They think their company is a socially good company just because everyone says it is

I read a story about a startup called PlayPumps that wanted to make clean water available to rural African villages. Their product was a playground spinner that, when spun, utilized kinetic motion to draw water up from a well. The simple act of children playing would simultaneously make clean water available for their hardworking parents.

The world celebrated! PlayPumps received all kinds of awards (and tax breaks) for doing social good. President Obama invited the founder to the White House. They set about installing these playground spinners everywhere they could.

They were utter failures.

Because they were a point of access for clean water, they quickly became a source of work. Parents sent their children out to “play” on the PlayPump to fetch water, turning playing into a chore. Or, worse, local mothers would spin the pumps themselves, turning them into glorified wells. Using the wells became women’s work. Locals reported being humiliated or embarrassed by the prospect of having to play with children’s equipment to get water. To top it all off, a PlayPump is easily ten times as expensive as a traditional well.

When I was active in my city’s startup scene, I often saw companies that fell into the same trap. They touted their products as world-changing innovations, but I wondered whose world they changed other than that of privileged white people.

On the other hand, I saw loads of for-profit companies doing good! If you’re surprised, don’t be. Imagine a for-profit company that donates a well to a rural community in Africa every time someone makes a purchase upward of $100,000. Depending on the size of the company, that’s a lot of rural wells really fast. They would be doing more good for those communities than PlayPump did, but they certainly wouldn’t get any awards from President Obama.

When you’re working on your own business, don’t be lured in by praise from others about how socially conscious or morally good your company is. Ask your customers if your product is the best solution for them. If your product isn’t giving your customers the best you can give them, you aren’t doing all the good you can or should do.

4. They lose sight of the fact that they’re running a business, not a charity

One of the most common mistakes I see entrepreneurs make is that once they get their financial feet under them, they start thinking they have to spend their hard-earned revenue on all kinds of things they don’t, like:

1. Keeping around an employee who doesn’t contribute much value because “he’s been here a while and we owe him.”
2. Giving customers and clients support that extends way beyond the scope of the Service Level Agreement, even to the point of making the customer/client a net loss, because “they’ve been with us for a while.”
3. Continuing to pay a vendor with substandard performance because “we’ve always been with them.”

The most common example I’ve seen of this is the example of the employee who’s been around a while. They joined the company at the beginning and stuck around when times were tough, but now the company’s reached a new level of revenue and performance requiring more sophisticated workers and that employee isn’t up to the job anymore. Instead of giving this employee the opportunity to level up their skills or sending them home with a generous severance package, the founder decides to subsidize them with a generous paycheck they don’t earn because “They stuck with us back then.”

Most people recognize that in dating, you sometimes outgrow a partner and must go your separate ways. That happens in business, too. Partners, employees, and clients that were a good fit early on become not such a great fit as the company matures. You don’t owe it to your college boyfriend to marry him just because you dated him in college, and you don’t owe it to your founding employees and clients to keep them on board forever because they joined up at the beginning. All you owe them is a decent and respectful goodbye.

5. They forget there’s a reason most people aren’t entrepreneurs

I think the reason most startups fail is not that their product sucks, or the market isn’t right, or the funding isn’t there, but simply because the founder did not understand what being an entrepreneur is actually like.

Being an entrepreneur is amazing, but being an entrepreneur also sucks.

You’re the last one to stop working. You’re the last one to take a paycheck. When there’s a problem, it’s always your fault. Everyone is always criticizing your decisions — especially when they don’t have all the relevant information, and especially when you can’t say anything in response. Everyone always thinks they could do it better than you, but very rarely do they help you. Employees get to go home when work is done and take vacations, but not you. You have to work until the work is done, especially in the beginning, no matter what else is going on in your life, or there will be no more company anymore. Period. The market doesn’t care about the Christmas holidays.

If you stick with it, things get better after a while. Your revenue stabilizes and you get to start taking vacations. But those first few years suck, hard. It’s eating dirt, every day. What’s worse is that no one realizes you’re eating dirt every day. You say “entrepreneur,” they hear “rich and privileged,” and they feel entitled to lob criticism or “advice” your way whenever they want. Then they get to go home, and you have to keep working.

There’s a reason most people aren’t entrepreneurs. It sucks.

You have to keep this in mind on the hard days. When it seems like every one of your employees and partners has nothing but criticism for you, every one of your customers is about to leave, and everyone thinks all the problems are your fault, you have to remember that the cost of all the upsides of entrepreneurship is that sometimes you have no choice but to eat dirt and smile like you mean it.

If you can’t do this, entrepreneurship isn’t for you.

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1: I see people put disclaimers like “this is not legal advice” on articles sometimes, so I guess I should say it too — this is not formal advice from any kind of credentialed professional. I’m just an entrepreneur sharing their experience.