How To Start a Business as a Risk-Averse Person
Entrepreneurs are always described as risk-takers. When you start a business, people often describe it as "brave" or "gutsy". You're told to "take a leap of faith". If this excites you, this article isn't for you. But, if it fills you with dread, read on.
For as long as I can remember, I've always been interested in entrepreneurship. But for 24 years, I stayed away from launching anything of my own because I thought you had to be a risk-taker, and I am anything but that. Yet, here I am, a successful entrepreneur of a 4-year-old company. How did that happen?
Background
The trauma of growing up in poverty stays with you forever. I worked my ass off to get out of that life, and there's no way I would ever risk going back. I've been told I was born 80 years old. Always mature, always serious.
I went into software engineering because I had a natural talent for it and knew it would provide a solid income without forcing me to go into loads of debt from endless schooling. So at 17, I joined the industry. That worked for a while, but my drive for autonomy and creating things I found meaningful kept knocking on my door.
At 24, I finally asked, "Is the gambler's approach the only way to go about entrepreneurship?". I questioned the stereotypes and found an alternative approach that allowed me to become an entrepreneur without being a risk-taker.
My business recently celebrated its 4-year birthday. Here's how I embraced my risk-averse side to create a successful, sustainable business:
1. Start your business on the side
If you're risk-averse, you've probably spent a lot of time building a safe, reliable career. While the thought of more meaning and autonomy might be appealing, it's not attractive enough to throw everything away. So start slow.
Start your new business on the side of what's safe and comfortable. Take it slow too. Your goal should be to experiment with what you like to do and what might turn into something big. Your first idea probably isn't your best idea. By starting a side business, you have the flexibility to experiment and start over when things aren't working.
When I started my company, Remote Work Prep, in 2018, I was a full-time Head of Product and Operations for a tech company. Even when my company exploded when the pandemic started in 2020, I still ran it as a side business. I ran it on the side for three years until I officially went full-time (when my side business profits exceeded my tech exec income).
Not relying on the side income allowed me to say no to everything that would make more money but leave me unhappy. As a result, I was able to slowly pivot and sculpt with zero financial pressure until I created my dream job.
2. Start service-based
In the traditional gambler approach to entrepreneurship, you jump into building a product, raise ridiculous amounts of funding, and aim to be a unicorn. Many fail on this journey because they jump in without understanding their end customer.
Going for a product before truly understanding your customer and their pain points is the shiny and easy approach, but it's too risky if you're like me. Instead, I recommend starting with a service-based approach. Use your existing skills to work with your target customers directly. This puts you in the trenches to see pain points firsthand and helps you grow personal relationships with potential end customers. Service offerings tend to be pretty lucrative as well, with low expenses, which makes your company profitable from day 1.
I initially thought about starting a product but first offered fractional Head of Remote services instead. Working directly with multiple remote companies made me realize the last thing they needed was another tool. What they really needed was content, training, and community, so I pivoted and went that route instead.
Without this experience, I would have most likely poured a ton of time and money into a tool no one needed. And if a tool ever does end up being what they need, I've already created the foundation of attention and network necessary to make a product successful.
3. Get your affairs in order before quitting
I can't speak for other countries, but in the United States, it's incredibly annoying to be an entrepreneur and do things like buy a house or car. I have an 800+ credit score and run a stable 6-figure business, but financial services see me as a much more risky borrower than if I was in a W2 role making far less.
I had heard horror stories about this from fellow entrepreneurs, so before quitting my full-time job, I set up life insurance and bought a house. We ended up with lower rates, and closing was quick and simple. I'm lucky my husband's stable big-tech job covers my health insurance, so I didn't have to worry about that. I do wish that I had taken care of disability insurance back then too, and it remains on my to-do list.
If you're close to turning your side business into your full-time thing, I highly recommend setting yourself up with these things prior to quitting.
4. Slow transition out
People usually think of quitting as an abrupt thing. But it doesn't have to be that way. If you want to leave on good terms, leave the door open for future opportunities, or you're interested in a more calm, stable switch, a slow transition might be just for you.
When my side business became too much to juggle with my full-time job, I switched my job to a 3.5-day workweek. I did a half-day on Wednesdays and took Fridays off. I negotiated this shift during a yearly review and was able to do this schedule change while keeping the same pay (instead of getting a raise). This gave me more time to spend on my side business without any financial change.
This solution worked for a while. Then, about six months later, I was reaching the point of officially wanting to go full-time. I was about to run the first cohort of my Mastering Remote Leadership course and knew I needed extra time. So I went to my boss planning to put in my notice, and instead, he offered me a 2-month entrepreneurial leave.
Basically, I'd go on leave for two months, but the position would be waiting for me after that time. This significantly decreased the risk for me because I had time to give my all to my live course while not limiting my future options. Because what if I hated teaching? What if I got bored and didn't like running my business full-time? Instead of having no plan b, I had a safe option to fall back to.
I ended up loving being full-time with my business. At the end of the 2-months, I didn't go back but instead converted my employer to be my client. Over a year later, I'm still extremely happy with my slow transition out and highly recommend this route to anyone who wants to safely make the switch.
5. Put 50% of your business income aside
This is something I did from the very beginning. Any income that came into my business, I immediately put 50% in a saving account for taxes. Then, after I run taxes in January/February, I treat the remaining amount as my tax return, and this is what I use as the budget for business expenses for the rest of the year. I pay for all tools, courses, admin fees, etc., from this account. This method requires you to be scrappy in the first year but pays off every year after.
This is how I've been able to have a profitable business from day 1. All of my expenses are effectively paid for a year in advance. I end up saving money too, because I can pay upfront for yearly subscriptions at a discount instead of having to choose monthly. It's also helpful because I've never been left in the red or scrambling at tax time. On the contrary, I actually look forward to tax time because it refreshes my business budget.
6. Diversify your options
In a standard 9-5, you had one source of income. Becoming an entrepreneur actually decreases your risk by allowing you to diversify your income and opportunities. This is your time to stack the deck in your favor.
Before leaving my 9-5, I decreased my risk by building a Twitter audience, joining communities of fellow entrepreneurs, and increasing my network. If everything went wrong, I had a safety net waiting filled with job options.
After leaving my 9-5, I continued this while also diversifying income sources. Through offering fractional Head of Remote services, my income instantly switched from being tied to one company to being distributed across many. Along with that, I also offered products and courses. Sharing free content increases my reach and brings new opportunities directly to my inbox, so I expanded from Twitter and added a newsletter.
Another way I decrease my risk is by taking on side roles that will allow me to learn from people I admire. As an example, I recently took on a part-time COO role with a major creator. They get the benefit of an ops expert handling the tasks they don't like so they can focus on creating. At the same time, I get the benefit of learning from a creator several steps ahead of me. Win-win.
Yes, things will go wrong. But it's highly unlikely that everything will go wrong everywhere at once. During this economic downturn, I've actually felt safer as an entrepreneur than I did as an employee.
I wish I had known of a risk-averse approach when I first started this journey. Hopefully, sharing my story gives others like me a blueprint for creating a sustainable business in a risk-free way. I'm writing this for the secret entrepreneur who has imposter syndrome because they don't fit the risk-taker stereotypes. So here's your permission to embrace both the risk-averse and builder parts of your personality. You're an entrepreneur because you create valuable things for the world - not because you risk it all.
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