I had no idea what I wanted to do in the future. I only knew that I didn’t want to continue working at the bank. I needed some way to support myself, and it would have been foolish to just quit such a well paying job. I needed to figure out a few things first. I needed to figure out how much money I spent each month so I could comfortably build a sizeable savings in order to figure out what I wanted to do with it later. I detail this process here: How I Was Able to Retire at 24.
I threw around a lot of possible scenarios including starting businesses and biking across Africa, or moving to France to study French. I didn’t know what I wanted to do, but I knew in time an idea would come and then I would strike.
How much do you need to leave your job and start your own business?
It’s different for everyone, but depends on a few things. First you need to find your “sustainability” rate or how much you spend each month (your upkeep costs). If this is $2,000 a month, you need to save $24,000 in order to live for a year without any income. Multiply this number by 150% to take into account any unforeseen expenses and taxes. This is $36,000. Now, if you need $5,000 or $10,000 to start your business add this to your number. The numbers are going to be different for everyone depending on what your “sustainability rate” is, and the estimated costs for starting your own business.
Finding the idea
Living in Chicago, parking has always been a huge pain. Parking in Chicago is expensive. Chicago also has a private army of parking ticket enforcers that ticket and tow cars mercilessly. Parking at sports venues is the worst. My friend Jeremy Smith lived in Wrigleyville right next to the stadium where parking is so sparse that parking space owners will rent out their space for games by holding up a sign, waving a car into the space, and taking cash. The idea was formed to implement this through an online parking reservation system. This guaranteed spaces for buyers, and easy listing and peace of mind for sellers. SpotHero was spawned. We decided to go into business together and Co-Founded SpotHero.
How we started
We set up an S Corporation, and each put in $5,000 from our savings for a total of $10,000 we would invest in the business. That was the easy part. Finding people we trust to work with to develop the application that were also cost effective and got things done was another thing. We used 99 designs and Crowdspring for a logo and some design work. These websites are a great way to get work done in a cost effective manner while being able to have an idea of how much it’s going to cost beforehand. People bid for your project or you can set how much you’re willing to pay. However, the drawback is you’re only doing a project and once you pay, it’s over.
We were looking for people we could trust and have more of an ongoing relationship with. There are so many ways to do things. The amount of choice can be overwhelming. Especially without a technical background, you are at the will of whatever they say. I’ve never coded anything in Python before. How am I supposed to know if the task was supposed to take 2 hours or 10 hours? There’s a wide range of hourly rates for work. If someone’s rate is $100 and they take 2 hours to do a task that someone with a $50 rate takes 10 hours to do that’s a big difference. There’s no way to know until it’s too late. Then there are the technical decisions. Do we use a CMS? Code in php or python? Which database to use? These are things I had not been familiar with at all. With all these things to think about, what were we to do?
We looked to our personal network of friends and family.
I reached out to bloggers I had interacted with over the past year with my blog Lifestyle Ignition. My Uncle made the introduction to someone who became our programmer. We were able to work out an agreement where we would pay some money up front, and then more later on, once SpotHero started taking in revenue. This allowed us to save on development costs in addition to forging a long term relationship with someone who had a vested interest in the entire project’s success. For a design team, we wanted someone local where we could talk to and interact with instead of over the phone outsourced far away. SpotHero’s other Co-Founder Jeremy had a close friend who owned a design company. We had a meeting and were able to work out an agreement. It can be overwhelming to get everything together, but finding people you can trust and get along with makes things much easier.
Ideas are just ideas. Execution is everything
There are tons of good ideas out there. I come across good ideas every day. Though it’s not every day you find someone you believe in, get along with, and trust who is motivated to put those ideas into action. Because without action, ideas are just ideas and nothing more. We are both financing the startup with our own money and currently living as cheap as possible while we bootstrap this startup to launch. Since SpotHero has a revenue generation model from the start, we hope to grow and become profitable from the earnings from commissions we will take by facilitating parking transactions. However, we are not opposed to raising capital under the right circumstances.
Capital expenditures have three major areas. Design, programming, and marketing. We made estimates based on research for each item, but the estimates are hardly ever correct. The most recent purchases we had never even heard of a few months ago. (Github, Balsamiq Mockups, etc.). If something goes over budget, we try and scale back the scope of the idea. We want to get a working product up and running as soon as possible. We have foregone many features we once thought were critical in the name of getting the product out there sooner while saving time and money. We also try and use other services in the framework of our application where possible to save on capital expenditure. For example we plan to use Amazon FPS for our payments processor because we can use their framework, instead of building our own. This saves time and money, in addition to lessening complexity and increasing security of the site.
To be an entrepreneur is to turn ideas into action.
There are a million aspects involved in turning the ideas into action that I have never encountered before. It takes a willingness to adapt and to constantly work hard in the midst of an uncertain far off future pay off. It feels great though to be working on something I am passionate about while creating something of value.
Now, the first thing that comes to mind is, well what happens when that money runs out? I am hoping that my start up becomes profitable before that happens. This might sound scary to some, but I am willing to take the risks if there is a chance I can do something I am passionate about and live the life I want to live. Will I succeed or fail, I have no idea, but I’m willing to take the risks to try.
Would you rather make $15-000-$30,000 a month and “work” only 2-4 hours a day? Or, would you rather make minimum wage working 12-18 hours a day for two years with a 25% chance of selling your business for $100 million dollars and netting yourself a cool $25 million? If you don’t, all you are left with are your experiences.
To me the general tone is not so much about specifics regarding money, but a mentality. Do you complacently accept something that is comfortable, or do you take the risks for greatness? I go for taking those risks. Complacency is evil.