I think this is the best approach. Say it in the same joking tone of voice you’d use after talking about cool but ridiculous cars with your buddy: “Yeah, when you win the lottery, I’ll help you decide which color the Lamborghini will be”.
Assume it’s just a fun daydream until they really make it clear they’re serious. At that point, well then they’ve asked for serious advice. But until then, no need to kill their fantasy buzz.
Set out a blank set of pro-forma financial statements. Ask them to justify revenue and expenses with third-party references. Then just be supportive.
I’m usually the guy who other people, especially the lovely missus, gently try to tell that their “terrific business ideas” just won’t fly. The phrase “…why don’t you just stand on top of a tall building and toss $50.00 bills into the wind?!” has been used more than once.
A comment I have been known to make is: “Why don’t you just set fire to the money? At least you’d get some heat out of it.”
Well when you consider 95% of all small business fail within the first year it’s not too far a stretch to think even a well thought out idea will fail.
What I would do is encourage the person to persue it as a dedicated hobby. By that I mean instead of a hobby one does for pure fun or in your spare time, one where you specifically dedicate a set amount of time per week to it.
Try to look at it like this. Some of us go to movies once a weeks. What is that like $20 for two people (It’s probably more I haven’t been in years and years). So that is 20 X 52 or $1040, even if someone is doing something that is never gonna fly, if they are gonna enjoy doing it, so what? I myself waste a bunch of money on thing too.
What I’d do is encourage them to do it as a dedicated sideline and amd start small and make a few bucks, set up the budget up, get the costs and try it. Life is too short not to try even if you fail. As long as you are realistic to the amount of money you can lose.
I remember in the early 70s I had an aunt that invested in a fast food place that served, get this MEXICAN food. Oh how we laughed…Too bad for us as she laughed to the bank while we laughed to ourselves.
Many people try lots of different businesses before they win at one. Even if they fail, so long as they can cope with the loss, they’ve learned what NOT to do for the next time.
The thing is even with the Internet there’s a lot of money to be made, but virutally no get rich quick schemes, unless you count cons. But if you’re willing to work, encourage them to go at it realistically.
I’m doing this now, and it’s not pretty. People take their brainchildren seriously, and when you’re trying to talk them out of it, you’re shitting on them. In their minds, they have the details worked out and don’t want to think about what happens when their carefully-considered plans don’t work out.
To some extent, I blame the “if you can dream it, you can do it” books that are out there. They’re long on positive thinking and short on the details of what it means to truly be self-employed.
Carefully-considered plans? How I envy you. Someone close to me repeatedly comes up with ideas for a nice business, but has no follow-through: no knowledge of how to run the business under consideration, or in fact any business at all, and no prospect of buckling down and learning.
This person then suggests that we find someone who can run a generic business, and someone else who knows how to do the thing that will make this business idea unique, and make them partners. That way Person A will run the business/financial part and Person B will provide the talent and we (Group C) will simply leech off of these people because we wrote the original idea on a napkin.
I keep explaining that Persons A and B will immediately notice that we provide no value to the ongoing concern, and will not be inclined to give us large amounts of money just because we have the original napkin in a vault somewhere. And we’re not talking ideas no one has ever head; it’s usually a different flavor of an already existing business.
As an alternative scheme, this person has suggested that I take up the torch and learn how to run a business and take the risks.
I wind up being described as negative for saying anything but “Of course I’ll do it! You just sit back and clutch that napkin and the money will come rolling in!”
It’s very frustrating.
I’ve dealt with one person who somehow was convicned that people “owed it” to her to accept her business. Why, they were so rude when they turned her down!
I got another guy who is sure that taking just a *small loss *on every transaction will eventually pay off and steer him into mega-business! (Real example: Undercuts the “major player” prices for merchandis/supplies. Unfortunatly, thats where he buys his stuff from, with no discount!) Not to mention the high start-up cost for equipment. However, this is only the latest in a long string of financial misadventure for this guy. Good thing he has a real day job.
On the flipside, every now and then, people say I should go into business selling my homebrew beer. Yeah, right! That sounds realistic. I can’t begin to imagine the headache, hassle and financial ruin this would bring. I would sooner use money as ass-wipe. At least it would provide some small return in that capacity.
Sailboat, there was a small amount of sarcasm in my post.
Right now, my mother has it in her head to buy a ranch in central California. Assuming she can buy the ranch in the first place, she plans to grow alfalfa and sell it, thereby creating a cash flow. When I asked her what she intended to do if no one bought the alfalfa, she poo-poo’d me. The thought never crossed her mind that she could get stuck with a crop of alfalfa, and when I asked her about it, she didn’t want to think about it. And now I’m being negative because I dared to question her plans.
Hi Markxxx. I don’t mean to get snippy about your post, which was full of good and relevant comments, but I want to take issue with this one assertion. It’s become a pet peeve of mine over the years.
As I said earlier, I broke away from the 9-to-5 wage slave life, and started my own business. I’ve now been going for ten years. People ask me about this a lot, either because they’ve lost their job, or they hate the job they’ve got. I try to be as encouraging as I can, within reason. My general view is that being self-employed isn’t for everyone, but many, many more people should try it than ever actually do.
Anyway, this ‘95% fail within 12 months’ stat keeps coming up, and I do tend to get a bit annoyed by it. First of all, I don’t know where this figure comes from and I’ve never seen any cite to back it up. It seems to be just one of those urban memes that gets quoted everywhere. But, let’s suppose that it’s a perfectly valid stat. The point I want to make is that it’s not a useful statistic because it doesn’t discriminate. My version goes like this.
If you consider ill-advised business ventures, that people rushed into without due thought or preparation, without having saved up any capital, without any clear idea what they’re doing, with no realistic basis whatsoever for thinking it might work, and involving massive financial outlay up front… then sure, 95% of those ventures will fail within a year, and this shouldn’t come as a surprise to anyone.
If you consider smart people who decided to proceed cautiously, who started businesses that required very little money up front, and who had taken the time to think things through and to make sensible plans, about 80% of those businesses will survive beyond their first year, and even the ones that fail won’t have catastrophic consequences.
It’s no good just lumping them all together and saying ‘95% will fail’.
Mmm.
I have two friends (well, I have more than two friends, but for the purposes of this post I have two friends.) Both are very talented artistically. Both would like to make a go of it financially. One is pessimistic/realistic about what that’ll take before she can make enough to think about not being white-collar comfortable any more. The other is sure that we could all be financially stable in the blink of an eye once we get our ‘businesses’ up and running.
It’s not shutting him down about his business ideas that wears me out. It’s shutting him down about his annoyance that I won’t pursue my artistic endeavours for money that drives me up the wall. And no, I don’t think that being able to bake a nice cake means I should run out and open a bakery. Hell would freeze over first.
Yeah. My plan is to get paid for NOT growing alfalfa (a la catch 22). It’s cuts the overhead way down - something your mother should look into:D.