I've got a saying that goes something like this:
"The best thing about America is that anyone with a good idea can start a company. The worst thing about America is a lot of them do..."
Let me explain that comment a bit. You have entrepreneurial people in your company and your life. Some of you best people think they are destined to start their own business, even if their Behavioral profiles tell them (and you) that would result in the life equivalent of a dumpster fire.
Not everyone is cut out to do their own thing. In fact, most aren't.
Combine that reality with the fact that entrepreneurial life in American is uber-competitive, and you've got the prospect of wrecked lives and retirement accounts.
How competitive is it in America? Consider the study Ongig released a couple of weeks ago – The Top 70 Applicant Tracking Systems of 2016. I found this study via the aptly-named Tim Sackett Project and here's what Tim had to say to set up the study:
This study is based on around 3300 employers around the world, most in the U.S. To put that into perspective, there are over 200,000 employers in the U.S. alone with over 100 employees.
I use 100 employees, because once you get to that magic 100 employee number, usually at that point we see companies begin to purchase their first real HR technology – HR System of Record and an ATS. So, it’s a pretty limited sample, but better than anything else you’ll find, plus, it’s a good list of a possible 70 ATSs to take a look at. Also, realize, and I don’t have an exact number, but I would be there are well over 500 ATS systems on the market right now.
A lot of your best employees think they need to go start a company. This study shows the freak show of competition that exists in America. Here's the market share of the top companies that represent the tip of the spear when it comes to 500+ ATS providers:
|Kenexa – Brassring||7.56%|
|PeopleFluent (Formerly PeopleClick)||2.52%|
The point here is that unless your employees have a truly novel idea which they can combine with access to capital, they basically have a very limited shot at being successful in starting a business. True, this is one snapshot, but capital flows to areas of existing and potential need via the efficiency of the marketplace. Most segments any high potential employee is looking at to start a business will look like this.
If the segment doesn't look like this, you have to question whether theres' a market for the product/service in question.
So let's do some math. Let's say you're HireRabbit with .04% market share. Most of the players downstream in this market are going to be SasS companies with limited barriers for customers to get started. Let's be generous and say HireRabbit is going to get 5K in revenue per customer. Do the math based on Tim's numbers (200,000 companies) X .04% and you get a customer list of 800 clients. Do the math and that's annual revenue of $4M.
Then remember this is a company that is well into the top quartile of 500 ATS companies. Your employee has a great idea to start an ATS - a better way to do applicant tracking. Is the dream this level? Probably not. What's market share look like in quartile 2? Quartile 3?
Most other ideas enter into similar markets related to competition. They have to, or the idea is generally not viable.
If you're coaching your star on the math related to starting their own company, you might want to share this.
Of course, it's America. They can do their own thing. #AmericaHeckYeah