(Today’s guest post is by my business partner Steve Safigan.)
I knew I was going to be an entrepreneur since I was in high school. On my first date with my future wife, I told her that I was going to be an entrepreneur. (To this day, she denies this ever happened.)
I worked out of my house until I had three employees. It was cramped! When I decided to bring on three more employees, I rented some office space in town.
Just after I moved into the office and hired the additional employees, I got a call from my largest customer. It was a much larger company. They wanted to buy my whole company for $500,000!
Now, I was 25 years old. I had never seen that much money, let alone earned it in my entire life. It was like winning the lottery.
But they didn’t want the whole company; they just wanted me to come work for them. I’d have to lay off the people I’d just brought on and close the office.
What did I decide, and why? You’ll be surprised. To this day, it still surprises me. I’ll let you know later in this article.
Your child may not ever get to present on Shark Tank, but if your child has an entrepreneurial spirit, you would do well to nurture it. Here are my seven skills every parent can teach to foster the entrepreneur in your child:
1. Teach them the value of a dollar. Make learning about money fun! Find creative ways to teach them these basic principles of money:
a) Teach them what one dollar buys and how long they’d have to work to earn one dollar.
My experience: I paid my son minimum wage to do extra household chores. He got tired of that quickly!
b) Teach them to live below their means. For older kids this may involve letting them in on the family finances and how financial decisions get made.
My experience: Once my daughter came and asked me whether we were rich. I explained to her the difference between living a rich lifestyle and being wealthy. I don’t know if this talk made a difference, but she never seemed to act entitled.
c) Teach them to save a portion of every dollar they make (including allowance) and delaying gratification so they can afford something bigger.
My experience: When my son graduated high school, I gave him a lump sum to buy a new car. He decided to continue driving our old clunker and buy a car after college. He’s still driving that 18-year-old sedan as a college senior and the money is still in his bank account.
2. Let your child start small businesses out of your home, even if it’s a lemonade stand on Saturday, selling fresh vegetables from a family garden or a booth at a local craft fair. Teach them the entire process of selling, marketing, labeling, the cost of the raw materials to make what they’re selling (called “cost of goods sold”) and profit margins. If the business fails, talk to them about why and encourage them to start another. Teach your children to always learn lessons from failure.
My experience: My oldest daughter made her first several hundred dollars selling her beanie babies!
3. Have your child open, maintain, and balance a checking and savings account as soon as they begin middle school. (If they’re older, start NOW.) Teach them to set financial goals.
My experience: My daughter still had her beanie baby profits in her savings account when she got married!
4. Encourage them to take a part time job in the summer or after school. If they are going to be employers one day, they need to know what it’s like to work for a variety of bosses.
My experience: All three of our children got jobs at a Science Museum. After our oldest child did a good job for them, it was easier for them to decide to hire her siblings.
5. Take your children to visit and help people less fortunate than they are. Then encourage them to use some of their earnings or allowance to help these people or causes. One day they may have employees willing to work nights and weekends to help the business your child owns to succeed. Showing appreciation and charity to others will help them become an appreciative employer.
My experience: My daughter really cared about animals. (Today she’s married with six cats, three dogs, and a horse.) She saved 10% of her allowance and donated it to the local animal shelter.
6. Work with your child. The only way to teach your child a good work ethic is to have one yourself and let them see you work.
My experience: Unfortunately my children learned this lesson all too well. I wish I had spent more time with them rather than with my business. A business is a demanding taskmaster.
7. Teach your child to take smart risks. Risk is a dirty word to most people, but not entrepreneurs. If you think about it, it’s a risk to get out of bed every day! So when your child considers a decision, talk to them in terms of risk/reward. Brainstorm all of the possible outcomes, and consider how likely it is that each outcome will occur. Can your child live with a bad outcome? Is going for the best outcome worth it? What can your child do to minimize the odds of a bad outcome?
My experience: Once my kids got older, I gave them options rather than telling them what to do when they came to me for advice.
So what did I decide about the $500,000 offer? I decided not to sell. That may not be a surprise. But I surprised myself by why I made the decision.
In the end, I just wanted to know how it would turn out. If I had taken the money, I’d be forever wondering if I made the right decision. By turning the offer down, I got to find out!
I was 25. I didn’t have much personal “overhead.” If my business failed, I’d pick myself up and go back to work for somebody else until I had another opportunity.
This is a major advantage for young entrepreneurs! Now that I’m older, I’d need more of a guarantee that I’d be able to maintain the standard of living to which I’ve become accustomed. Back then, I was happy sleeping in a bean-bag chair and eating ramen noodles. I didn’t have a bank balance, 401(k), big salary, or expensive house to protect.
Although it wasn’t easy to say ‘no’ to a half-million dollars, it was my litmus test for whether I was really an entrepreneur, or whether I was just in it for the money. Such is the mindset of a young entrepreneur. I wasn’t in it for the money. I wanted to create something from nothing, and I wanted to do it my way. I wanted to know I had what it takes.
So did I make a good decision? Beyond my wildest dreams. That company grew to $65 million a year in income, and it spun out another company that we sold for $52 million. By the time we sold, I only owned a fraction of the businesses, but it was still substantial.
I can’t promise these results for your child. I could have easily ended up penniless.
But if your child has an entrepreneurial spirit, take it seriously. He or she is not likely to change.
Instead, nurture that spirit. Don’t try to railroad him or her into a corporate track. This will never satisfy somebody who is an entrepreneur at heart.