If you’re thinking about attending university, or if you’re already enrolled in classes but are considering dropping out for something else, you might consider entrepreneurship. After all, anybody can become an entrepreneur, and if you’re successful in your business, you might be able to make a lot of money and carve a career for yourself without a degree.
But is this really a viable option for the average college prospect?
Stories and Misconceptions
First, let’s address where this idea usually comes from: the stories of entrepreneurs who dropped out of college or skipped college, and eventually became multi-billionaires. Steve Jobs, Bill Gates, Larry Ellison, and Evan Williams are just a handful of examples here.
Unfortunately, the prominence of these stories has led to the misconception that skipping college or dropping out of college is often, if not always, a good idea if it means getting started on a business. But these stories are a perfect example of survivorship bias; we tend to sensationalize the rare stories of entrepreneurs who dropped out of college and became successful, but ignore the thousands of stories of entrepreneurs who dropped out of college but ended up on a worse career path because of it, or those who went bankrupt in their business pursuits.
Of course, this doesn’t mean that it’s impossible or stupid to start a business instead of going to college, but it does mean you should be adequately prepared—and avoid falling for common misconceptions, or the distortions of your own personal biases.
What It Takes to Start a Business
So what exactly does it take to start and run a successful business?
- The idea. First, you need a strong business idea—and one that hasn’t been thought of before. It needs to be compelling if you’re going to attract investors, partners, and clients, and you’ll need to thoroughly research that idea by writing a business plan before you start making moves.
- The capital. Next, you’ll need the capital. It takes about $30,000 to start the average business, which most young people don’t have ready access to. There are businesses that can be started for $3,000 or less, but that’s still a significant chunk of money to obtain before you can get things started. Before dropping out, you’ll need a good plan to obtain those funds.
- Insurance and paperwork. Don’t underestimate the amount of paperwork and insurance your business will need; most businesses can’t be started on a whim. For example, most businesses are required to have workers’ compensation insurance in place for their employees. These legal requirements are often difficult and complicated, requiring education and experience to navigate.
- Even with a near-perfect business plan and a strong leader running things, it takes time for a business to become successful. Depending on your industry and your specific approach, it could take months, or even years, before you start turning a profit. You’ll need a plan to make money and survive while you wait for your business to develop.
These factors are just the tip of the iceberg.
Odds of Success
You also need to be realistic about the chances of success as an entrepreneur. Approximately 20 percent of small businesses fail in their first year, with half of businesses failing within the first five years. Even among the half of businesses that succeed after five years, very few of them become billionaires, or even millionaires. You’ll need a ton of factors on your side if you want to get to that level, including an amazing idea, an amazing team, and a lot of luck.
On top of that, one of the most important factors for success is business experience—and most college prospects and dropouts don’t have it.
A Backup Plan
If you do decide to start a business instead of continuing with your education, it’s important to have a backup plan in place. What are you going to do if the business isn’t developing the way you thought after a few years? What will happen if you run out of money?
Your best course of action may be finishing your education, getting your degree, and starting your business once you have it; that way, if the business crumbles, you’ll still have a career to fall back on.
The Bottom Line
The bottom line here is that starting a business instead of attending university, or after dropping out from college, can be viable—but it’s certainly not a guarantee of success. Stories of entrepreneurs who found success after dropping out are rarer than they seem, and finding success in business, in general, is rare and hard to achieve. Think carefully about the real odds of success, as well as the resources available to you, before you make any major decisions.