This post is a little advice for those just starting out in business. As is with most web entrepreneurs, Jamersan is not my first rodeo. I did, however, start off in the internet realm designing and developing websites in college. Over the last 11 years I have endeavored into several more traditional businesses without much success. Regardless, my failures have taught me much more about myself and the business world in general than my successes. Without those failures, There is no way I would be where I am today. With that, I offer a little advice that I have picked up over time.

Average Reward
When starting a business in any market, you need to consider and compare what you are risking vs the average reward for such a business. This simple little comparison can save you the headache of chasing business that offer very little chance of bringing a return.

First, let’s look at the reward side of the equation. This is where most people begin thinking about their business anyway and begin dreaming of the tons of cash it will soon be bringing in. Unfortunately, this rarely is the case. When considering reward, don’t get caught up in all the hype and glamor by just looking at the big earners in your industry. You want to know the AVERAGE REWARD. See what the struggling companies are doing. What is the failure rate of a business in your market? Be honest with yourself. It is easy to get emotionally attached to an idea or skip through this step.

Your time has value. Make sure you consider that in your risk costs when you are tallying them up. If you had a job somewhere and worked the time you are spending on this venture how much would you make that you will now be losing? If you are able to work a full time job and do this in your extra hours, you can discount this time value some but it should always be a factor.

For instance, when starting a restaurant, it is easy to look at your local Olive Garden and see the big business they are bringing in. However, if you did your research you would realize that the average restaurant fails. That’s right, average reward in the restaurant industry is near zero. For every one that makes it, there are two that close.

The Risk
The risk needed to start a business is often difficult to measure without fully understanding the industry you will be in. You need to completely calculate everything you will need to purchase and pay for, and include how much time you need to spend on the business. In many businesses, this can be quite an extensive list. Do you need employees? Well, then it gets more complicated with taxes, insurances, offices, etc… Don’t short yourself here by leaving things out and always over estimate. One simple underestimation could be the difference between having what it takes to make this business work and not.

As Einstein would say, risk is relative. For one person, risking $1,000 on a business venture is difficult. For others, it is very little risk. You need to calculate how much you are risking and how big of a risk that is for you.

Compare Risk vs Average Reward
Take the risk and compare it versus your average reward. Is it worth it? I owned a BBQ Restaurant for all of 6 months. It probably cost me around $15,000 cash not including time spent on it. Had I done my research, I would have realized that I was risking $15,000 on a business venture that has an average return around $0. I would have passed and invested my $15,000 on something more lucrative and would probably be richer for it. For me, that was a high risk, low reward type of business. Not exactly ideal.

I guess this is where the internet intrigues me the most. The initial investment is minimal: a computer, and a ton of your time. All that is required on the internet to be successful is someone that is willing to put the time in to get the job done and continue to learn and adapt. Low risk, moderate average reward is more the industry I want to be in.