How to Be Happily Self-Employed

Many people would like to be self-employed but fear the risk--with good reason.

WITHIN FIVE YEARS, half of new businesses are out of business. Ironically, you're particularly likely to fail if you follow such standard business school exhortations as "Innovate!"

While such advice makes for interesting class discussions and may be appropriate for intrapreneurs in deep-pocketed corporations, it puts the average entrepreneur at grave risk of going broke. The key to maximizing your chances of success is to do the opposite of what they teach in business school: Don't innovate; replicate.

Being a guinea pig is so risky: Your idea or its execution could easily be flawed, or it can be so new that the public isn't ready for it. Tivo, an unquestionable improvement over the VCR, lost hundreds of millions of dollars in its first five years as it tried to educate the public. Last I checked, you don't have hundreds of millions of dollars and five years to become profitable.

Instead, clone a simple, small-investment business that, in multiple locations, is successful. How can you tell? Check out retail shopping areas. Which stores are busiest? When I did that recently in the San Francisco Bay Area, I found that burrito joints are booming. The Bay Area is very anti-corporate yet needs fast food--Burrito joints are perfect.

Don't seek status; avoid it. Many business school case studies focus on high-status businesses, for example, biotech or high-tech. But the higher a business's status, the tougher its competition. Instead, consider what Thomas Stanley in The Millionaire Next Door calls "dull-normal businesses." Few graduates of prestigious MBA programs start sand-blasting, plumbing, mobile home park-maintenance, or truck brokerage businesses, let alone a chain of burrito carts. A dull-normal business not only has less competition, it's simpler to run, so less can go wrong.

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