The 2 Types of Entrepreneurs

By Oliver Wu
May 2007

As a business owner, you are an entrepreneur. Instead of depending on someone else for your paycheck, you take charge of your own financial destiny. What most people don’t know, however, is that there are two types of entrepreneurs. Knowing which type of entrepreneur you are will allow you to better direct your business in the long run.

The first type of entrepreneurs is the people you hear about in the news. They start new businesses. They write business plans. They obtain funding from investors such as venture capitalists. They build their business to annual revenues of $10 million to $100 million within 5 years. They either sell their business to a larger company or take their company public, and become billionaires or multi-millionaires. Examples of these companies include Google, Microsoft, and Dell Computers.

“The big advantage of being the second type of entrepreneurs is the low level of risks compared to the first type.”
The second type of entrepreneurs is people like my business partner Aaron. Aaron doesn’t like the risks associated with the first type of entrepreneurs. It is great to become a billionaire or multi-millionaire within a few years, but how likely is it that you are the one? Thousands and thousands of new startup companies fail every year, and you only hear about the one company that succeeded in the news. It is great that the founders of this one company became billionaires, but the founders of the rest of those new startups are still broke.

Entrepreneurs like Aaron operate in the world of small businesses. Aaron is not going to build his businesses to annual revenues of $10 million or $100 million, or take his companies public. Instead, Aaron is happy if his business can maintain a steady revenue of anywhere between $1 and 2 million annually. Instead of owning one business that generates hundreds of millions of revenues, Aaron owns multiple small businesses each generating $1 to $2 million a year in revenues.

When you become the first type of entrepreneur, you have the potential to become a billionaire or a multi-millionaire within a short period of time (let’s say 5 years). You are accepting a very high level of risk, knowing that there is a 99% chance that your business will fail within 10 years. But if you make it, congratulations! You will have millions or even billions of cash with you, and we hope that you’ll invest it wisely.

When you become the second type of entrepreneur, you are probably not going to become a billionaire. You will have multiple small businesses that you own as an absentee owner, which allow you to take home anywhere between $100,000 and $400,000 a year from each business. Let’s say you own 3 small businesses that each generates $200,000 a year for you. Can you live comfortably with $600,000 a year as an absentee owner? For most people, they can do everything they want to do with their lives with $600,000 a year, knowing that they only have to spend 15 hours a week monitoring these 3 businesses.

“We can’t teach you how to become a billionaire and an absentee owner in 33 years, but we can teach you how to make a nice income stream within one year.”
The big advantage of being the second type of entrepreneurs is the low level of risks compared to the first type. You don’t have a 99% chance of failing. You can go absentee with your current business in 1 year, buy a second business and go absentee in a year, then buy a third business and go absentee in a year. In 3 years time, you will make (let’s say) $600,000 a year by working 15 hours a week. Is $600,000 a year enough to support your lifestyle? Does having to work 15 hours a week give you enough free time to do what you want to do? Only you can answer these questions for yourself.

The second advantage of being the second type of entrepreneurs is diversification. Your $600,000 a year is not coming from 1 asset. It’s coming from 3 different assets. That’s a good thing, because you don’t have all your eggs in one basket. If you are the first type of entrepreneur, all your hope is nested in one business. You either succeed greatly, or fail miserably.

For most business owners and people that aspire to become business owners, we recommend they become the second type of entrepreneurs first. Establish yourself, and give yourself a very nice and stable income from multiple sources without incurring a huge amount of risk. Once you own several small businesses as an absentee owner, you can do whatever you want! If you want to become a billionaire by becoming the first type of entrepreneur, go right ahead. You are now not affected by the 99% failure rate of starting new businesses, because you already have 3 assets that pay for all your living expenses. You don’t have to worry about being broke or your business failing, because you are already set financially. Any more ventures you get into are just extra. If they succeed, you enjoy the handsome profits. If they fail, you are not living on the streets.

That’s why our consulting program is focused on teaching you the skills of becoming an absentee owner in a small business. Small businesses are less complex than big businesses, which makes small businesses easier to run and manage. You don’t have several thousand employees; you might have 5 or 10 employees. Having a less complex business means lower risks for you. When there are many moving parts, anything can go wrong, and you have to spend your time figuring out what went wrong. That’s why the founders of big businesses are rarely absentee owners. They often serve as the CEO of their company, and they work 40, 60, or even 80 hours a week dealing with shareholders, Board of Directors, company Vice Presidents, the media, and any company crisis that may come up.

Becoming an absentee owner for a big business is hard. Bill Gates founded Microsoft in 1975, and he is planning to become an absentee owner in July of 2008. That took about 33 years. In contrast, it takes about 1 year to become an absentee owner in a small business. You don’t become a billionaire by owning a small business, but you get a very nice income stream within a short period of time, and with a relatively low level of risks.

We can’t teach you how to become a billionaire and an absentee owner in 33 years, but we can teach you how to make a nice income stream within one year. Becoming an absentee owner for a small business is not rocket science. If you already own a small business, build it up, systemize it, and hire a good manager. If you don’t have a small business right now, buy a good small business, build it up, systemize it, and hire a good manager. If you don’t have a small business and you don’t have the money to buy one, start saving some money from your job.

For more information on how you can become the absentee owner of a profitable business, check out our consulting program.

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