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With the unemployment rate still over 8%, many college graduates are finding it difficult to find gainful employment, despite their academic achievements. But while entrepreneurship may look like a natural course to pursue, many college graduates are not truly ready for this route.
A 2011 graduate has racked up $22,900 in debt, according to Mark Kantrowitz, publisher of student-aid website Fastweb.com. This makes it even more difficult to find start-up capital. And when combined with little or no track record of borrowing and repaying, and a lack of hard assets, banks are far less likely to extend a loan. Since colleges often teach business from a very theoretical standpoint, recent grads will likely lack the years of hands-on management experience and success that venture capitalists look for.
That said, business consultant and best-selling author Carol Roth (The Entrepreneur Equation, $15, BenBella Books) advises the following five steps for recent grads prior to taking the entrepreneurial plunge:
Seek out a job in the industry you’d ultimately like to start the business. This will allow you to earn enough to pay down whatever college debt you have, or build up that nest egg to launch the venture. You can also use the opportunity to forge relationships with those in the industry and leverage those contacts upon becoming a business owner. “So, if you spend a couple of years making the right connections, learning the industry… seeing, really, where are the pitfalls in this kind of business,” says Roth. “And you learn on someone else’s dime, so what is wrong with that?”
Assess your motivation. Starting a business simply because you can’t find a job is not is more likely to lead to a bad end for your venture. “If you can’t convince someone to hire you, how are you going to convince customers to buy your product or service?” asks Roth. However, if you’re focused on solving a customer problem, believe you can do better than anyone else, think you have a business model that’s repeatable (i.e., one that’s not dependent on you and your skills), and you’re dying to work long hours, wear many hats, and balance responsibilities, you have the right startup mindset. Roth recommends connecting with the Young Entrepreneur Council, which offers tools and resources for recent grads looking to create a startup.
Create a “jobbie.” This is a hobby disguised as a business also known as side venture (aka a side hustle). “Maybe you can start it on nights and weekends while you’re doing this kind of day job thing, and really building that foundation so that when you are in a position financially to be able to take the risk, that you’ve kind of taken some of those early stage risks out of the equation–hit some key milestones, got some customers, tested the viability, tweaked it,” Roth advises. “And then when you’re ready and raring to go, you can jump in with both feet and hit the ground running.”
Seek employment at a start-up. This will give you a real life feel for what it’s like to launch and operate an entrepreneurial venture. “A lot of startups are looking for fresh minds right out of college, and there are even placement organizations that will put the two of you together,” she says. Among them is Venture for America, which helps grads find employment at startups in order to give them a real-world taste of entrepreneurship.