I always knew starting a startup was expensive and risky. I just didn’t realize how difficult it actually was. The odds really are not in your favor.

Lets start with the starup costs of the business, because thats where most people start. I have had a few ideas over the years and have ran the hard numbers to see if I could execute. One idea needed roughly a 10M investment, another was closer to 1M. A bunch landed around the 250K-500K range. The one I am landing on is about 100K, but only because I am doing it out of my basement. Those are some serious costs and we haven’t even started! Sure, you can go get a loan, but that makes turning a profit even that much harder and riskier.

You could also buy a business instead of building one from the ground up. You can find “full time” startups for as low as 150K, and all the way up past 1M. Some of these are nice because you can do deferred payments, seller financing, or even get a conventional loan. All of those help with cash flow, but they do not reduce the risk.

So, lets be conservative. You are out a minimum of 100K, lets say 200K. And all of that for a chance, a small chance, of success. And, by success I mean not bankrupting or dissolving the company. According to the BLS, less than a third of companies last over 5 years. Thats abysmal odds.

What people don’t talk about is how the system is quietly rigged against you. The upfront costs look manageable on paper, but thats only the start. Want heath insurance? That’s tied to employment. You can buy it on the open market, but you are looking at 10-15k for a person or pushing 30K for a family. Want to refinance your house to a lower interest rate? Doesn’t matter if it lowers your risk and monthly costs, you are self employed now so its not happening. Ask me how I know. Then there is the opportunity cost. Even a bare minmum job earning 15/hr is about 31K/yr. That 200K you invested into the company could have been earning 5% in a high yield savings account, another 10K/yr. Your minimum opportunity cost is 60K/yr.

So now let’s define “success”, because your baseline target isn’t zero. Its 10K for healthcare, 10K in lost interest, and 30K for what an entry level job would have paid. Even if you ignore heathcare entirely, a business making 40K/yr is still struggling. Many companies operate on margins around 20%. That means to break even at 40K profit, you need 200K in revenue. Damn. And that’s before fees. The deck is already stacked, and then platforms like Amazon take ~35% just for existing. That 200K revenue target, it just turned into over 300K in sales. Same work, same risk, less money while the big company gets bigger.

Sure, you now have a business with a cashflow of 40K that you might be able to sell to someone like yourself for 40K-80K hoping to achieve their freedoms and dreams… Wish me luck!