I’m going to preface this discussion about making prudent decisions using Bill Gates as an example. Cliché, right? I think so too. At this point, everyone’s heard about how Bill Gates had dropped out of Harvard to work on his software company which eventually turned into one of the premier multi-billion dollar technological behemoths of the modern age. It’s a story that’s cited and circulated by all aspiring entrepreneurs, far and wide, as a justification for the risk-taking philosophy they want to embrace in pursuit of their dreams (or money).
However, what you may or may not realize about Bill Gates is that before he dropped out of Harvard, he had the necessary predispositions and had carefully laid plans regarding his own future. He also informed his parents of his decision and could explain in-depth why he was making such a choice. The point here is that beneath the veneer of Gates’ act of taking a huge gamble and forgoing his Harvard education was a solid sense of self-confidence, a well-conceived goal, expertise, passion, and most importantly a shrewd ability to calculate.
The tenacity to start of business is something that you should be able to sense from your child at an early age, it should be part of their personality in a sense. Continuing with the example of Bill Gates, a retelling of his childhood by a piece in the Wall Street Journal notes that: “From age 13, he was given rare independence. He took off some nights to enjoy free use of the computers at the University of Washington. He spent chunks of time away from home -- much as his dad had done as a kid” (Guth). Robert Guth actually gives more examples than this, but the point is that Gates had an unrivalled self-motivated intent to learn programming and a particularly independent and headstrong attitude with regards to making important decisions. These are the qualities that are absolutely essential for any entrepreneur that wants to start a successful business, and such qualities highlight the untold context behind Gates’ success.
If your goal is to help your child start a business without failing and running into serious financial issues, it would be wise to take a lesson from Bill Gates as well as any other incredibly successful entrepreneur involved in big industry. Let’s examine some of the key parts of this equation to help guide you in supporting your child’s business.
Expertise, Commitment, and Passion
This one is straightforward. Along with expertise in something, your child should also have a genuine passion or goal that they are aiming to pursue that relates to the utilization of that expertise and a sense of initiative that indicates their independence. In order to start a business, you need to provide value to society. There is no example of a successful business that does not contribute in a significant way to society. Therefore, it is essential to consider and really be honest with yourself when it comes to your child’s talent and future ability to grow as they endeavor through the challenges of a startup.
One of the most important things here is not necessarily your child’s talent - barring the fact that they are a complete outlier like Gates - it is your perception of your child’s talent. Confirmation bias is an absolute curse when it comes to investing. In the simplest sense, it refers to the tendency for people to believe and interpret things in a way that fits with their pre-existing beliefs. Parents are notorious for thinking the best of their children. Yet, when it comes to the decision of starting a business, it is imperative to set aside some time and take a few steps back to ask yourself whether or not your child really has the talent, the expertise, the continual thirst for new knowledge, and the practical skills to implement that knowledge when it comes to their decision to start a business.
If you’ve reached the point where your child has suggested a business plan and is precocious enough to demonstrate a significant sense of responsibility and expertise with regards to the subject of that business, you must also check the nature of the commitment and passion. This is because commitment and passion often go together: you’ll want to ensure that your child does not make a promise to commit only to lose interest after months of hard work because their commitment was not tied to an overriding passion or goal.
The Last Thing
Your finances are the last part of this equation. Once you have a good grasp of between the relationship between your child and their business concept, the relevance of that business to society, a solid grasp of their character and long-term decision making skills, passion, and commitment you are ready to begin entertaining the costs of starting that business.
In short, the most important thing when it comes to minimizing the chances of failure when your child starts a business begin with ensuring that your child has the right personality and motivations to start that business, and with ensuring that that business can benefit society in a reasonable way. The sources of funding (investments into the business) and the allocation of costs are secondary since the growth of the business really depends on the presence and constancy of these traits in the long run.