Should they? Every business doesn’t have millions of dollars in cash to burn trying to find product market fit. Most start from nothing or personal savings, perhaps partially from the salary of a spouse.
When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.
While doing this, you somehow have to find a way to hire people to help you grow.
If it doesn’t work out, the business owner loses everything most likely and will probably be on the hook for the space they were leasing.
Now if you survive and make it past all that, hopefully everything stabilizes and you’re able to run a successful business that can return more to you than you put in…but it’s hard. Very very hard.
This “should that business even exist” stuff comes from not having any idea how hard it really is and how much is really on the line or the ups and downs along the way (which are even harder when you’re trying to make payroll).
>> When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.
>> While doing this, you somehow have to find a way to hire people to help you grow.
Where is that expectation coming from? It's fine if it's a side business you're looking to bootstrap or something, or if you have enough seed funding (which can be in the form of your own savings if you're okay risking that) to be revenue negative for a time, but if you have enough funding or revenue to consider hiring people, the first person you should be hiring is yourself.
>> If it doesn’t work out, the business owner loses everything most likely and will probably be on the hook for the space they were leasing.
This is why you create a -business-. A legal entity separate from yourself. An LLC at the minimum. So that your personal liability is (wait for it) limited. If you're doing a sole proprietorship or something, where you'd be on the hook for everything, WTF are you doing hiring people and signing leases?
All your theory is correct, but in practice it works in the opposite way.
Owners get pais last, not first. Sure you make enough income to pay yourself first, then you hire. Time passes, there's a bad month or 3, employees still get paid, owners start accumulating loan accounts.
LLC's and other structures are designed to limit downside, but some creditors will end-run this with personal sureties. This is really common with leases, but also other forms of credit. Inexperienced business owners may not push back against these as hard as they should (you can push back, but most starting out don't know that they can...)[1]
Building a business from scratch is hard work, and most fail within 5 years because failing is really really easy, and success requires someone to do a lot of different tasks well, and almost always some "luck" [2] as well.
[1] most bootstrappers try once, and are thus inexperienced. The folk they are dealing with (landlords and suppliers) are very experienced. This imbalance leads to contracts that are very often one sided.
[2] the best luck is advice from an experienced bootstrapper, ideally for free. They can help you avoid the most common mistakes. Of course you'll ignore some of their advice because "experience doesn't work like that".
> When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.
I think this is only true for a newfangled SF business.
Traditional business gets a bank loan, has a business plan, and pays salaries from the start (including to the owner).
I would have said exactly the opposite. Newfangled SV businesses have all that investor cash to pay salaries, whereas bootstrapped need revenue, the sooner the better.
Make no mistake, the only reason a company closes is because they run out of cash. Old-style businesses have been doing that forever. SV businesses do the same when that "next round" fails.
Which leads me to conject that a VC business is just a bootstrapped business, where VCs are the customer...
Bingo. As someone who started a brick and mortar business that is tied to our home, the financial failure would have very real impacts on us, regardless of having an LLC.
When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.
While doing this, you somehow have to find a way to hire people to help you grow.
If it doesn’t work out, the business owner loses everything most likely and will probably be on the hook for the space they were leasing.
Now if you survive and make it past all that, hopefully everything stabilizes and you’re able to run a successful business that can return more to you than you put in…but it’s hard. Very very hard.
This “should that business even exist” stuff comes from not having any idea how hard it really is and how much is really on the line or the ups and downs along the way (which are even harder when you’re trying to make payroll).
If it was easy, everybody would do it.