Last week, I shared an underground approach to turning ideas into products and revenue called licensing. It’s a great way to bring ideas to life without all the risk.
But there’s an even bigger question that’s rarely explored in a meaningful way.
It’s one that most people dance around, maybe spend a few minutes on, but often don’t know how to get a meaningful answer, and sometimes don’t want a meaningful answer because it will point them away from a desired fantasy.
Which is a shame, because both the question and your answer are mission critical to your success in business.
So, today, we’re circling back to the bigger question:
Do I really have any business being an entrepreneur?
For an intelligent framework to help answer that question, we’re turning to Carol Roth. Carol has been advising companies of all sizes for more than 16 years, both strategically and in the context of mergers and acquisitions, a/k/a, buying, selling and smushing. You may have seen her on MSNBC and she’s also the author of the book The Entrepreneur Equation. Translation, she knows her stuff.
Over the last few years, she’s become, well, let’s just say “bothered” at all the ra-ra around entrepreneurship and the lack of guidance around what it really is to be an entrepreneur, how it affects your life and whether you have any business exploring the path.
So, I invited her to have a deeper discussion on the topic. This post also introduces what will become a new regular series here on the blog, in-depth topic-specific video interviews, bundled with audio mp3 and full transcripts for reading and reference (see below).
Carol’s new book, The Entrepreneur’s Equation, is a deep dive into the why behind your decision to start a company. It’s filled with wisdom about what it’s really like to run your own business, how it changes your life, what the true needs and demands are and what the big questions and considerations are. It asks if you are ready, willing and well equipped to handle these things and embrace the quest.
It is not in any way anti-entrepreneurship, but rather realistic-entrepreneurship oriented.
Jonathan Hey guys, Jonathan Fields here today with a friend of mine and an insanely brilliant woman. Carol Roth is a business strategist a business strategist and new author of the book “The Entrepreneurial Equation.” And at last count when I checked on Amazon it was number one on freaking Amazon for like 2 days. Congratulations
Carol Roth Thank you Jonathan, a huge surprise [laughing]
Jonathan Yeah yeah yeah. So Carol and I have been friends for a while now, and we drift back and forth about all things business and is one of the smartest insanely bright creative people that I know. And so we want to talk a little bit about a whole bunch of stuff circling about entrepreneurship, when to engage in this crazy manic world of business building. But we were just talking couple of seconds before we jumped on, and she was sharing a call about — just a quick story about someone who called her and asked her about something. And I thought it would be kind of a cool story to start out with so share that again
Carol Yes. So the woman called me, and she had an opportunity to do a radio show, and she was really excited. Some big muckety-muck called her and wanted to do this radio show with her. She said, “Do you think I should do it?” And I said, “I have no idea, is it consistent with your goals? What is that you want to be doing?” And she said, “Oh I don’t know.” I said, “How do I know that this fits on the path or the right step on the path if you don’t know where it is that you want to get at the end of the day?” And she is like, “Yeah, I should probably think about that, huh?” [Laughing] And I said, “Yeah, you probably should.”
So it’s one of those things, you know, like so much of entrepreneurship, Jonathan, that you get this sexy opportunity. And it sounds amazing and great, but doing a radio show is really hard work. So the question is: Even when you have the sexy thing in front of you, is it the right avenue for you, and is it consistent with your goals? And is it gonna get you there more quickly, faster better, cheaper, smarter than anything else that you could possibly do?
Jonathan Yeah and its like total shiny object syndrome. And I suffered – I’m raising my hand right here. I suffered from it as much as the next person. There have been so many times where opportunities are presented to me. I’m like, “That sounds cool.” And then I take a step back, and I’m like, “Am I genuinely interested in doing any of the work that’s really involved in that? And does this actually fit into like the rest of what I am here to do in any meaningful way?” I’m like, “No, but it still sounds cool.” [Laughing]
Carol Oh it’s so true. I’m a deal junkie. I mean I come from a M&A at a corporate finance backer where everything is all about doing the deal, and so I just love that. That is like crack-cocaine to me. So for me its not even so much about not wanting to do the work because I am ok with doing the work, but it’s do I have the time; what’s the opportunity cost; what else am I giving up, and does it make any sense given everything else that I have going on and given the big goal that I have set for myself at the end of the day? And that’s where somebody usually smacks me and says, “You know Carol, let’s rein in the ADD a little bit here.” [Laughing]
Jonathan Right. So okay – so that’s when somebody reaches out and smacks you. It seems like this book that you put out there for the world is kind of like your smack to the world.
Carol [Laughing] I call it tough love Jonathan. I’ll tell you if you’re being a total idiot, and then I’ll give you a hug afterwards. So we’ve got the tough, and then we’ve got the love. We kind of put it all in one big package together [Laughing]
Jonathan Yeah and I kind of want to talk about the message and some of the stuff that you are talking about also. But before that just for a second, I’m an author; you’re an author now, why? You’ve got this like tremendous career; you’re doing deals; you’re building companies; you’re advising people. Why? Like why do you turn and create a book? What does this do for you?
Carol Well it’s interesting because the actual first piece of it wasn’t intentional at all; it was born entirely out of frustration. I love to write. I write prolifically for blogs and what-not but never really imagined doing something long form. I am not a person that had “be an author” on the bucket list or anything like that. I just really got pissed off frankly, and I was mad at the failure rate of businesses and the amount of glamorization that was going on in the media and saying, “You too, if you follow these 7 easy steps will all of a sudden become a millionaire overnight.”
And I was like, “That’s totally not true.” Well somebody’s got to be saying that that’s not true and giving people a framework because not only is it not true but we all have different definitions of what success is. So how could there possibly be one path if the end game is so different for all of us. And when I did my research, it wasn’t out there. So I just kind of starting vomiting on the paper, and said, “Oh okay, you know. I have a book should I pursue this as a book?” And as I took a step back to look at my strategy and what it was that I wanted to accomplish with my own business, I realized that having a book would be very complimentary to not only what it is I am creating but also an effective way for me to spread that message. Because that message could have been done in other ways.
I could have created videos. I could have broken up into blog posts. I could have done an ebook. There were a lot of different things that I could have done and having a published book was what I decided at that point was most consistent with my goals.
Jonathan Yeah and it makes so much sense. And so let’s come back to what you were saying though; that you were looking around, and you were saying, “Okay everyone is out there saying everyone on the planet has got to start a business.” That’s funny ‘cause I wrote a business which wasn’t like overtly about entrepreneurship, but fundamentally it was. It was saying like, “Before you walk away explore the world of entrepreneurship.” And its funny because when I was writing, the push was like create a formula that’s universal for everybody to do it. And I pushed back, like, there is no formula.
There are things to think about, and there are ideas and different paths to explore. But what I loved is that what I didn’t focus a lot on when I was writing and what– like you said, very few people focus on, “Is this right for you in the first place? It sounds really cool, but do you actually have any idea what the life of an entrepreneur is like?” Because its insane, I love it; you love it, but it is insane.
Carol Yeah and it is sort of this love-hate, and I think you need to be either chemically imbalanced or slightly crazy and insane yourself in order to enjoy it. Right? You have to be, as I would like to say, someone who is comfortable with being uncomfortable. And there are times in my life and in certain scenarios where I’m not comfortable with being uncomfortable. Risk is different in different scenarios. I am not a bodily-harm risk person, so you will never catch me jumping out of a plane. But there are other areas where I am more comfortable and taking mitigated risks.
Risks that make sense that I have done everything possible to stack the odds, as much as I can, knowing that some part is still out of my control. So I think you really have to have that within you; somebody that is comfortable with being uncomfortable. It’s not the kind of risk you want to take on if you want the expected, if you like being familiar to comfortable, totally cool. No judgment. But you need to make sure that that’s right for you. And so when everybody talks about these able businesses, remarkable and viable and scalable, it needs to be suitable. That’s the key one that everybody misses.
Jonathan Yeah and that’s huge. So talk to me more about suitability, and what’s involved with suitability. One of the things you just threw out is you need to be comfortable with being uncomfortable.
Jonathan Talk to me about some of the other things that would be involved in like figuring out suitability.
Carol Yeah it think that one of the things in suitability is really about timing. Just because something isn’t right for you right now, doesn’t mean its not gonna be right for you ever. And I think entrepreneurs have this ultimate feat that if I don’t get this idea, this brilliant idea that nobody’s ever thought of to market right now, someone’s going to steal it. And the reality as we all know is that we have pretty everything we want or need, and your brilliant idea is going to be executed by a bunch of other people.
So if it’s something that is going to go away in a couple of years, that is a fad not a trend or a business, and you probably want to stay away from it anyway unless you have this ground breaking technology, like shoes that can fly. [Laughing]
So you really want to look at timing. You want to look at your finances. One of the things that is really in the [0:08:22][Inaudible] today, Jonathan, is let’s start a business for a hundred dollars because technology – the barriers come down so much, you can start a business for a hundred bucks. Well great, but then you still have to run it, and you still have to earn a living. [Laughing] So those are the kinds of things that everyone doesn’t tell you about.
So yes it may cost very little to get started, but to get it to the point where there is a really solid foundation takes a really long time, often a couple of years. And so you need to really be able to invest in the business to come to that point, and then again, be able to live whatever lifestyle it is you want to live in the meantime. And some people don’t want to make those sacrifices upfront.
Carol So it makes sense – it’s prudent to really evaluate things like your finances to make sure that the timing is right for you.
Jonathan So a lot of this also sounds like – there is one side to the equation which is hey, really understand the business that you are thinking about is going to demand from you over — not just upfront but over time. But the other part which is probably bigger is who the hell are you, and what do you want out of life? Which is a really difficult question for a lot of people to answer, but a lot of people will still make these major commitments without understanding, sort of like, the fundamentals.
Carol And that’s why it’s so important to test things out and to do a limited budget and to fail fast it, and really kind of dip your toe into the water and really see if it is meant for you. I am sharing a story for the first time ever here that nobody knows.
Jonathan Ooh, we’re breaking it. Woo hoo. [Laughing]
Carol Yeah, we have got the exclusive scoop here which Jonathan Fields.
Jonathan We need some sort of ticker across the bottom now.
Jonathan Breaking story, Carol Roth.
Carol So before I kind of went on the path that I am on today and kind of came up with my goals, I was testing out a lot of things because I was at a point in my life where I was fairly depressed. I called myself the “successful underachiever” because outwardly I looked really successful, but on the inside it just didn’t feel like I was giving my all towards anything. And so I tested out a bunch of things. I actually went pretty far down the path of starting a toy company with some people which nobody knows, but now you do.
And I tested it out, and as we kind of — again spending nights and weekends working as a group on and taking it, you know, along the way, and as it kind of went along the way, I went, “Yeah, no, I don’t really want to be doing this every day for the rest of my life. And this isn’t something that you know — there is an opportunity here, but its not big enough for the risk that I am taking on, and it’s just not something where my skills are gonna shine the most.” So I ended saying no and then refocusing back on the advisory business which is, you know, what I have been doing for 16 years. But it was really good for me to get to know myself and in a very low risk way test it out before I went out to raise a million dollars for this really cool new toy company. I do walk the talk and perhaps the book is somewhat a self therapy.
Jonathan I think every book and author probably fits some form of self therapy. I mean its like who is that famous person that says, “I never know exactly what I think until I see what I’ve written about it”?. Some famous person, but anyway — but what is fascinating about the toy story is that — the one big thing is a focus on what you are not doing by keeping yourself in this particular — I mean one is do actually want this particular endeavor?.But the other is, what am I not doing with all the time that I am investing right now in this current endeavor and could that thing that I am not doing be much more of my thing?
Carol Yes, and it was. And that was the big issue, the opportunity cost. What else could I be spending my money, my time, and my effort on doing, and is this really the opportunity I want to hang my hat on? And it wasn’t at the end of the day.
Jonathan And that’s a tough decision for a lot of people to make, I think, especially when you are in it. I mean how do you — like what was — when you look at the moment where you said – okay you’re hanging out; you’ve got a team of people; you’re starting this company, and you get humming along. I’m guessing that other people who are on this team were like, “Yeah, lets go. Rock on.”
Carol Oh totally. [Laughing]
Jonathan And then at some point you’re saying, “Hmm, no.” Was there – was it a combination of just things adding up and adding up and adding up that sort of brought you to the, you know like, hold the phone moment or was it just sort of like a moment in time that said, “This isn’t right.”
Carol Yeah I don’t think it was one moment. I am not a moment in time kind of gal. I’m sort of a overtime kind of gal, and so I think that as I kind of went into it, I just kind of kept asking myself the questions. Is this really a big enough opportunity? Is this something that I can imagine myself doing every day? Is this really the best use of the skills that I bring to the table? Is this really remarkable? Is it solving a big enough need? I just kept asking myself over and over again, and sometimes you ask yourself and you make a decision, and it just doesn’t sit right. And you keep asking and you keep making the same decision, and finally you make the opposite decision. And then it’s like, “Oh wait. That’s the right one. That fits right.” And so I think that happens.
That happened to me in college when I was supposed to study abroad. And it was couple of weeks before I was supposed to leave for Rome, and my mom had this horrible dream about me driving off a cliff and begged me not to go. And I was like, “Mom, that is completely foolish.” So I kept going, “I’m gonna go.” And then it’s like it just never felt — I kept going, “I’m gonna go. I’m gonna go. I’m gonna go.” And then finally I am not going and then it was, “Ahh ok. That’s the right decision.” So sometimes its just, you know, you keep going, you keep going – it’s not sitting right. You just keep pushing the same question.
Jonathan Yeah but that’s such a big point too though because you and I are both data-driven to a large extent. Like we want to devour as much information as humanly possible to understand the market, the opportunity, everything. Right?
Jonathan But in the end — I think it’s also really important to take a step back, and say like, “What’s my gut telling me?” I don’t know about you, but I react physically to commitments and to things that are unfolding. Like I know I will have the physical sensation when something is right and when something is wrong. And I think most people do, but they ignore that. And I think It’s an important data point to sort of fold into the other data.
Carol It is, and it’s a very hard one for people like us because we are so head driven and head strong. Sometimes it’s very challenging even if you feel it, to be in tune with that. And I think that’s one of the challenges that I have had that I’ve really been working on. I definitely haven’t perfected it but it’s — it’s when my gut is speaking up, to really try and pay more attention to it because I eventually end up falling back on it, but sometimes it takes a really long time or I end up doing a couple of foolish things in the meantime, that had I paid attention to the physical reaction I was having in the first place, I probably would have made a better decision up front.
Jonathan Yeah. So tell me more about what are the – we’ve talked about a bunch of stuff that’s in the books and also about your journey too. Because like you said, there’s a lot of it that’s drawn out your personal journey. What do you think are the one or two giant mistakes that people make when going from complete lack of entrepreneurship skills into actually saying I am gonna go start a company?
Carol I think the biggest mistake is just not understanding what they are in for. There are so many myths about business; that you get to be your own boss; you get to do more of what you love, and it’s easy and that ideas have value. And just this whole sort of culture that we live in about the American dream that I don’t really think people have a good sense of what’s going on, and a lot of times they go with a very me-centric focus. I am doing this because I am looking to fulfill something in my life or because I am bored or I have this passion or this idea, and they forget about the customer-centric side.
And business really is about servicing customer need. And so when you have this kind of wrong foundation or wrong mindset going in, it’s very, very difficult to be successful because you’re building it on sort of an almost false assumption. Right? [Laughing] Garbage in, garbage out.
Carol So I think that’s a really big mistake. And then I think for a lot of entrepreneurs it’s really not thinking big enough. This has been an issue for me that I finally got to the point where I was like, “This is ridiculous. For the amount of time and effort that I am putting towards this, I could been doing something that was touching more people, making more impact and employing more people, having an effect on the economy.” Doing all these other things that really didn’t require that much more of an investment other than just a mind shift investment.
And so for me I think it really is — going back to what we talked about earlier, that opportunity costs. Is this a big enough opportunity to justify the risks that you are taking on? Because there are all kinds of risks; of your time, your money, your attention, other things that you can be doing, your family that may not get prioritized and what not, and so is this really the payoff that makes sense? And I used the example in the book “Lets make a deal”. But you are sitting there with the two curtains, and you’ve got $50.000 in one curtain and nothing. And it’s do you trade $49,000 for the chance at $50,000?
And nobody would do that on a game show or else they should go to gamblers anonymous, but they do that all the time in life. So it’s not just about financials, it’s about quality of life rewards too. But the question is – is what you’re trading — does it make sense given what’s behind the curtain? And a lot of times if you actually spent five seconds to think about that, you’d realize that’s a stupid trade, like, “I am not making that trade. I’m going to wait until we get a really big curtain. If it’s a really big curtain may be I will make the trade, but right now that trade doesn’t make any sense to me.”
Jonathan Yeah its interesting. But I think one of the big challenges with that is that — and it’s funny because this ties in so much with the – but there are risks that you can quantify, and there are risks that are necessarily uncertain. And try as you may, you can try and put number to them, but you just don’t know. And those are I think some of the hardest things to deal with because, like, how do you estimate how big could this get? How do you decide, like, how big is this? If you are doing something especially that’s brand new,, it’s like, how do you know is this a big enough game? It could be a zillion times bigger than you thought it would be or it could be like a fraction of what you thought it would be. And you can have all the data in the world, but it’s still not enough to actually tell you. So there’s still this, like, you have to decide based on imperfect information. And that’s so hard for people to do.
Carol Ok so my investment banking spreadsheet background comes out here. That’s when you do sensitivity analysis, right. That’s when you go high, medium, low scenarios. What if the thing happens, and then you kind of just balance it. Yeah, it isn’t perfect, but at least you have some semblance of a — like the lowest scenario, I would never do this.If it’s the medium scenario, I would probably not do it. And the big scenario, I would — well there is still too much risk on the downside. But if it’s like — yeah even if the low thing hits, its still pretty good and the upside is huge. Again, it’s a bit of an art, not a science. But sometimes you do need to look at it under a couple of different microscopes
Jonathan Yeah and that’s actually a great thing, and I would always do that actually when I was sort of like doing performance for a business too. I would have the different scenarios because you’ve got to know. You’ve got to assume if this is like the absolute the bottom of my assumptions versus the stratosphere.
Carol Right and at the bottom you are gonna overestimate by a factor of 3 anyway.
Jonathan Of course. Well it depends on how badly you really want to do it.
Carol Exactly. [Laughing]
Jonathan You have to come up with the funny numbers. Let’s wrap this up. Share one, like, just giant — I mean you shared a lot of really good stuff also. One big thing that people could do positively – that could really like — one really strong entrepreneurial force magnifier that most people miss.
Carol Entrepreneurial force magnifier. I think it goes back to setting the goal, and then breaking it down into smaller goals that — to the point that you can actually control it. You know when I wanted to be on television, I worked backwards and said, “If I wanted to have my own show, how could I do that? Well, I need to be on national TV. Okay. Well I would need to be on local to get national. To be local I have to be in front of a camera. Ok I can control being in front of a camera.” And I got the damn camera out, and I started filming myself. And it was really, really painful because I am not technologically inclined. And so not only did I have to figure out the actual taping but then I had to figure out the editing, and certainly not a good use of time overall, but a good starting point to test it out.
And once I realized that that was working, then finally off loaded that to someone else when I was comfortable in saying, “Yeah, this is where I want to go.” But I think working backwards to the point that you can actually control it and not being so cavalier to think that you could go right to national television — I get people who contact me all the time saying, “Oh, you’ve been on MSNBC. Will you refer me?” And I’m like, you know, “Where is your TV reel?” They’re like, “Oh, I’ve never done television.” It’s like, “Well don’t you think maybe you should do something first before you go knocking on MSNBC’s door?” And I think people just aren’t really willing, a lot of times, to put in the hard work and realizing it is — it is hard work. There is no overnight success here just like on the table everyday taking control and just doing it.
So I think that’s the entrepreneurial magnifier, it’s just like rolling up your sleeves and just doing the damn thing.
Jonathan Yeah, I love that, and it’s a great thing to finish on. Roll up the sleeves and do the damn thing. So where can people find you – online? Where can they find your book? Tell them all the stuff.
Carol [Laughing] Okay, so the best place to connect with me is at carolroth.com. If you click on “book,” you get dumped over to the book site where you can download a free chapter. And the book is called “The Entrepreneur Equation” which is now No. 1 best selling Amazon overall book. You can’t take that away from me. And it’s available wherever finer books are sold; Amazon, Burns and Noble, 800C or Reads, you name it. And on Twitter I am @Carol J S Roth which really confuses a lot of people, but that’s just how it is. And yeah, I love to connect with folks. So I’m looking forward to continuing the dialogue here. Appreciate you, Jonathan, in giving me the chance to chat with you. Always a pleasure.
Jonathan Always a pleasure for me too. Thank you so much Carol, be well
Carol Alright you too.
[FTC Disclosure – You should always assume that pretty much every link on this blog is an affiliate link and that if you click it, find something you like and buy it, I’m gonna make some serious money. Now, understand this, I’m not talking chump change, I’m talking huge windfall in commissions, bling up the wazoo and all sorts of other free stuff. I may even be given a mansion and a yacht, though honestly I’d settle most of the time for some organic dark chocolate and clean socks. Oh, and if I mention a book or some other product, just assume I got a review copy of it gratis and that me getting it has completely biased everything I say. Because, books are like a drug to me, put one in my hand and you own me. Ethics be damned! K, you’ve been warned. Huggies and butterflies. ]
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