Programmers Starting a Business: Pitfalls and Advice
Hello everyone, I'm Yang Zhongke. Today, I want to discuss the topic of programmers starting their own businesses. I have personal experience in this area, having worked as a programmer after graduating in 2005 before starting two companies in early 2010. By the end of 2019, I concluded those ventures and now live in New Zealand. While I didn't achieve extraordinary success, my cash flow is consistently growing, placing me ahead of many entrepreneurs.
Why Programmers are Tempted to Start Businesses
Many programmers are drawn to entrepreneurship because they see examples of others succeeding. Ma Huateng with QQ, and the founders of e-commerce companies are often cited. The appeal lies in the potential for unlimited earnings, as salaries, even high ones, are ultimately capped. The idea of creating a popular app or a website generating significant revenue is alluring.
However, it's important to remember that the failure rate for startups is high.
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According to reports, the average lifespan of small and medium-sized enterprises in China is only two and a half years.
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Less than 7% of companies survive beyond five years.
Therefore, while entrepreneurship may seem like a fast track to wealth, it's more likely to be an accelerator for failure if you don't proceed with caution.
Common Pitfalls of Entrepreneurship
I've identified several pitfalls that can lead to entrepreneurial failure. Avoiding these mistakes is crucial for aspiring business owners.
1. Overvaluing an Idea
Many believe a unique idea is the key to success. However, execution is far more critical. At the time of Taobao's creation, Ma Yun wasn't the only one pursuing e-commerce. Success requires:
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Excellent execution by the founding team and early employees.
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Perseverance and dedication over years or even decades.
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Factors outside of your control, such as timing, location, and luck.
2. Prematurely Acting Like a Boss
Some entrepreneurs rush to rent large offices and create a lavish "boss" environment. In the early stages, a hands-on approach is vital. Even seemingly minor tasks like changing a lightbulb should be handled personally to understand the true costs involved in running the business. Don't get caught up in the image of being a boss without understanding the fundamental operations. Being a boss is not a magical thing.
Entrepreneurship demands serving everyone – employees, clients, and regulatory bodies. You must be prepared to work harder than anyone else. Even achieving acquisition or going public may not be as glamorous as it appears due to issues like equity suppression and performance-based agreements.
3. Programmers Pursuing Unrealistic Projects
Many programmer-entrepreneurs want to develop a game engine or programming language. Consider whether it is something people will buy and if there is already too much competition. If people who have greater resources are not doing well in the field, your prospects may not be good.
4. Choosing a "Red Ocean" Market
Avoid entering saturated markets where competition is fierce, such as developing standard ERP systems or basic websites for local businesses. The profit margins are often slim, and many companies struggle to break even. Unless you have unique resources or opportunities, developing standard software or outsourcing projects is generally not a viable path to success.
Instead, look for "blue ocean" markets with less competition. However, ensure there's actual demand and that you're not simply creating a product for a market that doesn't exist. Start with a Minimum Viable Product (MVP) – a simple version – to test the market before investing heavily in development. Aim to test it within two months by finding a client who will use it.
5. Underestimating Customer Acquisition
Many people underestimate the difficulty of getting clients.
Developing a product is one thing; attracting customers is another. Customer acquisition can be a major expense. Explore cost-effective customer acquisition strategies beyond traditional advertising methods.
6. Venturing into Unfamiliar Territory
Resist the temptation to enter industries you don't understand simply because they seem profitable. Every industry has hidden complexities and unexpected costs.
7. Disregarding Legal and Ethical Boundaries
Be aware of legal and ethical boundaries. Violating these can result in severe consequences, including legal penalties.
8. Refusing to Admit Defeat
Know when to cut your losses. Some entrepreneurs become overly attached to their ventures and refuse to give up, even when it's clear the business is failing. Don't risk your family's assets or personal well-being. If necessary, protect your family's property from the business, and don't keep pouring money into a lost cause.
A Word of Respect
Despite the challenges, I respect entrepreneurs. Their efforts drive progress and improve the world. At the same time, as someone who has received a salary as an employee, I want to thank my former bosses. The entrepreneurial journey is tough and can be risky for your life savings.
If you have the opportunity and can avoid the pitfalls I've mentioned, don't hesitate to start a business. The experience can be invaluable. If there is a chance to have a creative experience in life, you will not regret it. I wish everyone a good salary and a successful career. I am Yang Zhongke. Goodbye!