Entrepreneurship Can Ruin Your Life

Here is an interesting story about a couple that started a coffee shop and… well let's just say it wasn't what they expected.

The failure of a small cafe is not a question of competence. It is a sad given. The logistics of a food establishment that seats between 20 and 25 people (which roughly corresponds to the definition of "cozy") are such that the place will stay afloat-barely-as long as its owners spend all of their time on the job. There is a golden rule, long cherished by restaurateurs, for determining whether a business is viable. Rent should take up no more than 25 percent of your revenue, another 25 percent should go toward payroll, and 35 percent should go toward the product. The remaining 15 percent is what you take home. There's an even more elegant version of that rule: Make your rent in four days to be profitable, a week to break even. If you haven't hit the latter mark in a month, close.

That's why you have to love the game. Starting a business so you can have more free time, or because you want to be rich, is a sure path to bankruptcy.

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  • “Starting a business so you can have more free time”

    This seems fairly impossible to me, except maybe after 10 years or so when you’ve “made it” with your business. But the first few years the work is 10x harder than a regular job.

    But like you said, you gotta love doing it, and most entrepreneurs do.

  • Rob,

    You are welcome to have a cup of coffee or tea at our new place, Blue Chip Café
    , later on this year.

    All the Best,

    Martin Lindeskog – American in spirit.
    Gothenburg, Sweden.

  • It most certainly was a question of competetence.

    Why didn’t he apprentice at a small coffee bar (run by a real entrepreneur, maybe an immigrant) before he started his own shop? He could have learned the hard lessons and developed some practical knowledge about the complexity of a successful business, even a small one. Plus he might have come up with a real point of difference for his own business… one that customers would reward him for.

    What conceit it takes to assume that he and his wife could succeed as an entrepreneur (of any size) without training. And to decide that his failure proves the task is impossible (or far too hard for normal people) is absurd.

  • Most people underestimate the need for scale and for a serious gross margin. In the wcenario you described the owner would be locked into working his butt off without ever being able to generate prifits to hire someone to run it. If you can’t project an obscene gross margin, avoid it, because they get eaten down every time.