While entrepreneurship is a worthy vocation and can be rewarding, it is always costly! Many aspiring, and starting entrepreneurs don’t count the full cost of launching and running a business until those miscounted costs show up to collect and wreck your hopes of prosperity.
Jesus says in Luke 14:28-32,
“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’
“Or suppose a king is about to go to war against another king. Won’t he first sit down and consider whether he is able with ten thousand men to oppose the one coming against him with twenty thousand? If he is not able, he will send a delegation while the other is still a long way off and will ask for terms of peace.”
His instruction here is not limited to those building towers or waging war, but to any of us who are hoping to build anything in a competitive environment. He gives two essential assignments: 1) Sit down before you start building and estimate the full costs: 2) Sit down before you march off and consider the competition. Then He will give you a way out if after fully counting the costs and considering the competition you determine it is not affordable, nor winnable.
When it doesn’t look affordable or winnable, negotiate a peaceful exit. Yes, sometimes, it is better to quit on peaceable terms than fighting a war of futility that will cost you far too much. Even, when you have been taught to say, “failure is not an option,” please hear this: Failure is always a real option! It is just not fatal. The failures that you will most certainly endure en route to becoming a successful entrepreneur will be shorter and less costly when you follow Jesus’ advice: Count the Costs and Consider the competition.
So what are the full costs? There are three kinds of capital to focus on and three kinds of costs to consider. First, take inventory of your relational capital. Who are the stakeholders: Your family, your customers, your community? Who’s help will you need? Then take an honest inventory of your intellectual capital. What do you know that is essential to your success? More importantly, what are the things that you don’t know, and will need to learn in order for your ideas to win? And finally, what financial capital is required? (dollars and cents)
Over the decades of my serving in the area of entrepreneurship and education, countless aspiring entrepreneurs have met with me seeking the encouragement to proceed with their idea to start a business. Fortunately for them, I had established an early option out for them, even before (in most cases) they had counted the full cost.
My 2Q litmus test:
- Are you prepared to go 2-3 years without earning any income from your business?
- Is your spouse or significant other prepared for you not earning income for 2-3 years?
If these queries do not put them on their proverbial heels, they would get the encouragement and advice they were seeking. Else, I’d inform them that is the typical cost for most successful entrepreneurs. If you don’t believe me, just ask any of your entrepreneur heroes. They will tell you. This is not what typically comes out in the interviews and entrepreneurial celebrity panel discussions. You gotta Count the Cost!
The specific costs you need to estimate are fixed costs, variable costs, and start up costs.
Variable costs are expenses that vary with output. If you are in the pizza business, then each pizza requires an amount of dough, sauce, cheese, toppings, and boxes. How much will this cost per pizza? The fixed costs would be things like the store or restaurant, the oven, the utensils, and staffing. The staff of labor is a fixed cost, while certainly adjustable. It is not a variable cost because you have to buy in tranches much bigger than on a per pizza basis.
If you have a service business, you will still have some fixed and variable costs. The fixed cost might include your office, computer, phones, other equipment. The variable costs might include the time and material required to service a customer. Nevertheless, you will have both fixed and variable costs that need to be counted in advance of your building the tower or waging war.
The third and final cost is the start-up costs. These are a blend or one-time fixed costs, and the initial acquisition of certain variable costs you will need to serve your initial customers. These are the upfront cost that equates to your breathing life into your creation. Carefully estimating these costs will enable you to pursue sources of capital to fund your business.
So, please, before building anything or waging any wars, sit down and count the full cost, sit down, and fully consider the affordability, viability, and feasibility of your creating a winning solution in the marketplace. Evaluate, and go back to the drawing board, or boldly breathe life into it and march forward!
In all your getting…. get understanding!