I got a message from a friend a few days ago linking to an article about some guy who’s my age and has a net worth of $20M thanks to a business he started at 20. Her comment: “I thought you’d like this, it’s so inspirational!”
Well forgive me for being a Debbie Downer, but I’m not inspired. Reading about the success of someone who managed to build up a highly profitable business at a young age, with no description of how he did it, is not helpful to me, or quite frankly, to anyone.
For starters, without any information on how he built up his company and accumulated his wealth, it’s just a human interest story. It does not offer any advice for someone looking to start a business, and it doesn’t offer any advice on how to save and invest your money to amass such a fortune. It’s essentially saying “hey look, this guy earned boatloads of money by starting his own business, isn’t that interesting?” Interesting? Perhaps. Inspiring? Not to me.
Second, even if the article did explain how he built up his business and what choices he made along the way that helped him accumulate so much money, it doesn’t change the fact that you can be incredibly smart, work as hard as you possibly can, make all the right choices, and still fail to generate that kind of wealth. Inspirational to know that it can be done? Okay, sure. Likely that the average person is going to be able to replicate his results? Definitely not.
I’m sure I lost some entrepreneurial folks with that last paragraph, and that’s where the topic of this post comes into play. Some people are inspired by stories of average Joes who work really hard building their own businesses and creating their own success. If you have the desire to start your own business, it’s nice to know that in this country, the rags-to-riches story is possible, albeit it rare. If you have a great idea that will add value to people’s lives and you work really, really hard building a business, you have a chance of extreme success.
The problem is, most people are not going to ever start their own business. They will continue to work as employees for someone else, dreaming of the day they could start their own mythical company and rake in millions. Some of them don’t have the courage to leave their day job. Others don’t have a viable business idea. Others have no knowledge of how to launch or run a business. For them, calling a story about a guy who accumulated $20M by the age of 27 inspiring is akin to calling a story about someone winning the lottery inspiring.
And then there are the people who will be inspired by these types of stories to go out and start their own business, but who fail to realize the amount of knowledge and hard work required to make a business successful because these stories so often gloss over that part. 50% of small businesses fail within the first five years, and the number one cause is lack of experience. But even if you do manage to stay afloat, 93.1% of small businesses have annual revenues less than $250,000. Hardly the type of profit that’s going to net you $20M in seven years.
I don’t intend to chide people who are truly inspired to become entrepreneurs. If you have the drive within you and find inspiration in stories of others who share your drive and used it to create great wealth, by all means, be inspired. However, the vast majority of people do not have the necessary drive or skill set to build their own business from the ground up, and I worry that these types of stories lure them away from the tried and true wealth building strategies with the idea that they can get rich quick by simply starting a business.
The take home message that I’m afraid is being conveyed through these types of success stories is this: “you don’t need to worry about saving money right now, because you can just start a business and become a multimillionaire in a few short years.” It allows people to think that all they need is that one great idea and then they’ll become rich, so why worry about saving money today?
So what do I find inspiring? Stories about people earning middle class salaries who learn to live beneath their means, who save and invest a portion of their paycheck each month, and accumulate a sizeable net worth by a relatively young age. It’s inspiring because it works for everyone. Most people aren’t going to be able to start a business and become multimillionaires in a few short years, even with all the hard work in the world. But most people can save money right now from their current paycheck and start building their wealth.
As for my friend, I do worry that she is so caught up in the dream of starting a successful business that she isn’t doing enough to make the most of her current situation. Perhaps some day she will start her own business, but she has been talking about it for years and hasn’t taken any action. Some people dream about winning the lottery to escape their current financial situation, others dream about starting a business that experiences overnight success. But if you don’t take any action to make your business dream a reality, it’s no different than dreaming about hitting the jackpot. We all would do better to focus on the changes we can make today to improve our financial health.
And you can still start a business too, by the way.