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4 Reasons People Who Follow Their Passions Fail (and How to Avoid Them)

4 Reasons People Who Follow Their Passions Fail (and How to Avoid Them)

Following your passion is a great way to live. It’s a lousy way to make a living. For most people, anyway.

Why’s that? Because not all passions can be made profitable. And, for those that can, not all passion followers have the right knowledge and skills to be successful in their endeavors. Not to mention the patience.

Don’t get me wrong. I’m not saying that following your passion is a bad thing, even as a career. It’s worked for a few people. You know. You’ve read their stories on the internet. The headlines that proclaim “I gave up a [successful career/six-figure salary/dead-end job], moved to a [foreign country/tropical paradise/treehouse in the jungle] to pursue my dream of [scooping ice cream/opening a yoga studio/becoming a modern-day Robinson Crusoe] and never looked back.”

Well, I’m calling it bullsh*t.

Because let me let you in on a little secret. It. Almost. Never. Happens. That’s why those unlikely stories are so intriguing. They’re aberrations. Anomalies. Completely out of reach of the average person.

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There’s More to the Story

Now that I’ve successfully dashed your hopes of realizing your dream, here’s the good news. It is entirely possible to follow your passion and still be successful doing so.

But in order to succeed, you must avoid these five mistakes that make people who follow their passions fail. It’s only by dodging these pitfalls that I’ve been able to get to where I am today.

1. They think they can follow their passions all the way to the bank.

Some passions translate well into careers or business endeavors. Others do not. Take me, for example. Sure, I’m passionate about real estate. But I’m also passionate about nature, travel, fishing, and lots of other stuff that’s never made me a dime.

What if, instead of real estate, I’d chosen fishing as a career? Spoiler alert: I would never have made much, if any, money as a professional fisherman. Yeah, maybe I could have moved to the tropics and opened an operation that offered deep sea fishing charters. But that’s not exactly the most lucrative profession out there.

Instead, I focused my efforts on something I knew I could make money doing. I worked hard to be successful at that and, as a result, I now get to enjoy all those other interests as much as I want!

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Bottom line: If you can’t make money doing what you love, then make money doing something else. Then put that money towards pursuing your passion.

2. They may love it, but they don’t understand it.

When I was getting my start in the real estate world, I had a heck of a lot to learn. And when I moved my family down to Central America to start investing in property down here, I had to learn way more. Property valuations and real estate transactions just don’t work the same as they do in the U.S.

I had to do a ton of research just to learn about the process, before I could even consider making any investments. I talked to realtors, attorneys, and other professionals. I talked to local farmers and land owners, the ones who would ultimately be the people I would be buying property from.

It was more work that I’d ever dreamed I’d have to put in. But it paid off. My business partner and I could never have experienced the success we’ve found if we’d approached the Latin market with only the knowledge we had when we left the U.S.

In other words, being passionate about something isn’t enough. You’ve got to know it backwards and forwards. Eat, sleep, and breathe it. And, most importantly, be willing to keep working hard at it even when it isn’t easy.

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3. They don’t have an exit plan.

One important thing to note about my success in the U.S. real estate market was that it happened during the biggest boom the business has ever seen. Practically everybody was developing projects and flipping houses. Any idiot could have made money in that market.

That was one of the reasons my partner and I started looking toward the tropics. We saw what was happening in the U.S., and we knew it wasn’t sustainable. We suspected a crash was coming, although we thought it would be specific to real estate; we just didn’t know when.

We could never have imagined the magnitude of the global economic crisis that ensued. But thankfully we had already devised a plan to not only stay afloat, but to build a thriving business in spite of the unfavorable conditions.

In short, if the pursuit of your passion is all that you have on your radar, then you will be devastated if–no WHEN–the unthinkable happens. And you will lie awake at night in fear that it will.

4. They rush in with guns blazing.

When my partner and I decided Latin America was the place to be, we didn’t turn in a two weeks’ notice, sell everything we had, and buy a one-way ticket. We took our time, and we did our due diligence.

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We spent every day for months scouting properties. We traveled the entire Pacific Coast from the El Salvadorian border, through Nicaragua and Costa Rica, and down to Panama. That’s when a lightbulb came on, and we knew we’d found the right place to focus our efforts.

Even then we had many more weeks of searching before we settled on what ultimately became our first project. Meanwhile, we still had work going on back in the States to help sustain us until we could get things off the ground in the tropics.

We spent many days puttering around in a beat-up truck with a crude map, trying to reach some remote destination. We’d drive until we ran out of road. Then we’d find a guy with a horse or a canoe and keep going til we got to where we were headed.

My advice to you? Don’t buy into the hype. Getting to a place where you can live a life you’re passionate about is not an overnight process. It takes work. But, more importantly, it takes time.

What’s Really Going on Behind the Scenes

The climax of most true “following your passion” success stories isn’t a mystical epiphany, an impulsive decision, or a rare stroke of luck. Instead it’s a mixture of many far less glamorous elements. Like patience, prudence, and a lot of hard work.

Sure your success story may not go viral on social media. But when you read the ones that do, you can laugh, like I do, knowing they just got lucky. Things may work out for them; they may not. But, at the end of the day, you and I can sleep a helluva lot better at night.

Featured photo credit: woman-1006100_1920/Counselling via pixabay.com

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Published on December 13, 2018

How to Start a Company from Scratch (A Step-By-Step Guide)

How to Start a Company from Scratch (A Step-By-Step Guide)

If you’ve ever thought about starting and running your own business, you’re not alone. Being your own boss, having flexibility with your schedule and keeping more of the financial rewards that come with business ownership are all good reasons to own your own company.

But as you might expect, it’s not all vacations and fat bank accounts. According to the SBA, 2/3 of businesses survive at least 2 years and approximately 50% survive 5 years.[1] So why is the failure rate so high? At least for the businesses that fail early on, lack of, or poor planning can be a major factor.

So how to start a company?

Starting a business from scratch doesn’t have to be hard or complicated, but it does take planning and work. Here are the first and most important 9 steps to take when your are starting a company from scratch.

1. Do an Honest Evaluation of Yourself

Do you work better in a structured or unstructured environment? Does a daily routine reduce your anxiety? What kinds of things are you good at? Does public speaking or making presentations make you nervous? Are you good at accounting and numbers? Can you handle the rejections you’re bound to get when selling or cold calling?

These are all important questions to ask yourself, in fact it’s a good idea to get other peoples opinion about their perception of you in each of these situations.

Whatever the answers you come up with for your evaluation, remember that’s all it is, an evaluation of where you are now. Think of it as a way to identify both your areas of strength and weaknesses.

You maybe good at public speaking which can help when raising money, but bad at accounting which just means that you’ll need to find some kind of help with that area of the business.

2. Evaluate Your Idea

If your business idea involves a new product or service (or even an enhancement to an existing product or service), it needs to be evaluated. This is technically called market research.

There are firms that specialize in doing market research for new products, but if you are on a tight budget, you can do this yourself.

First, if you can build a prototype for people to use, touch and look at that’s the best option. If a prototype is not possible or it’s a service business, then offer a highly descriptive presentation of the business plan complete with it’s unique benefits and how it’s different from the competition.

Then listen! Remember that this is not about others liking your product, this is not your baby that they are talking about. You want honest market research that gives you the best chance for a successful business. Take notes, when someone tells you that they didn’t like a feature or some aspect of your idea tell them ‘Thank you”.

After several rounds of market research with different groups of people, you should see patterns emerging about things that they both liked and didn’t like. Use this information to tweak your product or service and do another round of market research.

Keep in mind that you’ll never come up with a universally loved product, your job is to produce a product or service that appeals to the broadest range of your target market.

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3. Make a Business Plan

I know, I know this isn’t the “fun” part of starting your own business, but it is an very important step in creating a successful business!

Basically, you can think of a business plan as an outline or blueprint of your business. A good business plan should have the following elements:

  • Executive Summary – This should lay out the businesses product or service and the problem that it solves for the consumer.
  • Market Evaluation – This should talk about the market you are serving. Is it an expanding market, and how does your product better fulfill the consumers in that market.
  • Market Strategies – How are you going to penetrate the market and sell your product.
  • Operational Plan – How will the company run from day to day? Who are the key employees and what are their specific rolls. Do your key players have specific goals set for them in advance?

A final word on making a business plan: while lying is never acceptable especially when you are using the business plan to raise money, it is acceptable to “put your best foot forward”.

Playing up the positives while minimizing the negatives is almost expected in a business plan.

Besides, banks as well as professional investors will both do a more in-depth analysis before investing any money into your idea.

4. Decide on a Business Structure

You have many options here, and discussing them with your accountant or financial adviser is really the only way to know what’s right for you. But just to give you a quick rundown of the types of business entities and their pros and cons we will briefly go through them:

Sole Proprietorship

This is a common way for small businesses to get started.

The pros being:

Relatively low costs to set up (usually a business license and sales tax license).Owners normally do not have to set up a special bank account, they are allowed to use their personal one. Any income earned can be offset by other losses (check with your state!). You as the sole proprietor have complete control over all decision making. 

Finally, sole proprietorship’s are relative easy to dissolve.

The cons of using a sole proprietorship include:

You as the sole proprietor can be held personally responsible for the debts and liabilities of the company. Some benefits, such as health insurance premiums, are not directly deductible from business income.

If you need to raise money, you are not allowed to sell an equity stake in the company. In that same vein, hiring key people maybe more difficult because you cannot offer them an equity stake in the company.

Partnership

A partnership is formed when two or more people decide to start a business. Although there is no legal requirement for any documentation to form a partnership, it is my advice that you never enter into a partnership without having a partnership agreement. (Remember, spending $1500 now can save you $150,000 in legal fees later!).

The pros of a partnership include:

Being relatively easy and inexpensive to start. Hiring key employees can be easier as you are allowed to give equity ownership to as many partners as you want.

For tax purposes, partnerships are relative simple as any income is treated as “pass through” meaning that each partner pays tax on their individual portion of the partnerships income (As of this writing, always check with your tax adviser).

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As far as the cons go:

It can be difficult for some general partnerships to raise capitol. Because it is a partnership, the actions of one of the partners can obligate the entire organisation. All profits must be shared according to the partnership agreement regardless of the amount of work done by any single partner.

Some employee benefits may not be able to be deducted on income tax returns.

Limited Liability Company (LLC)

This is a very popular business entity for small to medium sized businesses. The reason for this is the cost of set up is not prohibitive and there is a separation between the owners and the company.

The pros of an LLC include:

Limited liability for the partners, unlike sole proprietorship’s and partnerships where the owners are held responsible for all of the companies debts and liabilities, an LLC provides some protection against certain debts and liabilities that are solely the companies.

Simple taxation, just like the sole proprietorship and partnerships, income is considered “pass through” and is only taxed once on an individual level.

There is no limit on the number of shareholders in an LLC. An LLC requires fewer fillings and administrative requirements than a corporation.

Corporation

A corporation is much more complex and expensive to set up. And a corporation is legally considered an independent entity that is separate from its owners.

The pros of a corporation include:

Complete separation between the owners and the company. Because the corporation is considered its own legal entity, owners can not be held personally responsible for any debts or liabilities of the company.

A corporation can raise capital much easier just by selling more shares in the company.

Cons of corporations include:

Much higher administrative costs than any other business entity. Corporations generally have a higher tax rate. Dividends are not tax deductible for corporations. Income paid in dividends is taxed twice, once by the corporation and again by the shareholder.

Again, this is just a short summary of the pros and cons, always check with your tax adviser about what will work best in your situation.

5. Address Finances

Again, not one of the “Sexier” parts of starting your business from scratch, but very important nonetheless.

So, you’ve done your business plan and an estimate of your start up funding should be included. It should include the amount of funding you’ll need to get you through your first full year of operations.

Now, how do you get that money?

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Self Funding

If possible, self funding is the easiest. You won’t have to go to banks and investors with hat in hand, or give up ownership or control of your company. But as we know, this is not a reality for most people. But don’t worry, there are still plenty of options available.

Friends and Family

They can be a good source of funding your business if they can see and understand your vision.

Remember that business plan? Pass them out to everyone you know. Then follow up, be prepared to tell them the total amount of money you expect to raise, the minimum investment you are looking for and what you will give in return for the investment.

For example, you give a friend your business plan and follow up with him/her a few days later. You can explain that you have secured funding for $80,000 of the $100,000 you need. You are selling a 2% share in the company for every $2,000 investment. How many shares would he like?

And when he/she tells you no, thank him/her and ask if he/she can think of anyone off the top of his head who might be interested? Tell him/her you really appreciate his/her time and if he/she does come across someone who might be interested to let you know.

Banks

These guys are happy to lend you money when you don’t need it, but all of the sudden they get stingy when you actually need a loan! This is where preparation comes in.

It’s a good idea to go over your business plan with an expert and maybe even have it rewritten by an expert before you approach either a bank or professional investor. Both will want to go over your business plan with a fine tooth comb, verifying all the numbers and data you provide.

You should also brush up on everything in the plan so that you can answer any questions they have with authority.

Crowdfunding

Finally, there is crowdfunding through sites like Kickstarter or GoFundMe. Crowdfunding helps to build interest, community spirit, and a customer base. It’s also an efficient way to raise funds. You can take a look at these tips to find out more:

6 Crowdfunding Tips To Get Your Project 100 Percent Funded

6. Register with the Government

As stated earlier, different types of business entities have different filling and administrative requirements. At the very least, you’ll probably need a business license as well as a state sales tax license.

Unless you are forming a corporation, there are many good resources on the web that will do everything for you at a minimal cost.

7. Assemble Your Team

Remember when we evaluated your strengths and weaknesses? Here is where we fill in the gaps!

Do you hate sales and cold calling? Great! There are people who love selling and wouldn’t want to do anything else.

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Bored to death with accounting? There are a ton of small accounting firms out there that will take care of that for you.

What about marketing? You can hire someone in-house or out-source that too.

Your job is to keep on top of all the different aspects of the business to make sure they are all running smoothly and getting the results you need. If not, it’s your job to figure out the problem and implement a solution.

Check out this guide and learn how to delegate effectively:

How to Delegate Work (the Definitive Guide for Successful Leaders)

8. Buy Insurance

No matter what kind of business you start, you need insurance! Yes, I know, no one likes to buy insurance, but it can literally be the difference between having a minor inconvenience and declaring bankruptcy.

We live in a very litigious time, even a minor slip and fall at your place of business could bankrupt you without insurance. If you need help finding a good agent, check with your local trade organizations or fellow business owners.

9. Start Branding Yourself

Has anyone ever ask you for a Kleenex or a QTip? We all know what they are because of branding, Kleenex is just a brand of tissue and QTip is just a brand of cotton swab. It doesn’t have to be as widely known as Kleenex or QTip, but you can make your brand a common name within your niche.

I once owned a manufacturing company that developed a product that was so popular that my competitors started co-opting my brand name for their products.

If you aren’t sure how to kickstart branding yourself, check out these ways:

5 Ways to Build your Personal Brand & Make More Money

The Bottom Line

Starting a business from scratch can be one of the most rewarding experiences a person can have.

But do you know what’s even more rewarding? Having a business that succeeds, is profitable and provides a good source of income for you, your employees and their family’s.

More Resources About Entrepreneurship

Featured photo credit: Tyler Franta via unsplash.com

Reference

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