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The Entrepreneur Equation: Evaluating the Realities, Risks, and Rewards of Having Your Own Business

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"The Entrepreneur Equation" is essential reading for the aspiring entrepreneur. Before you invest your life savings, invest in this book! There's never been a better time to start a business--or so the conventional wisdom would have you believe. But with up to 90 percent of businesses failing within the first five years, it's time to take off the rose-colored glasses and think twice before you invest your precious time, money, and energy. This book helps you do the math before you start down the entrepreneurial path. By understanding what it takes to build a valuable business and how to assess the risks and rewards of business ownership based on your personal circumstances, you can learn how to stack the odds of success in your favor and ultimately decide if business ownership is the best possible path for you, now or ever.

6 pages, Audio Cassette

First published March 8, 2011

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374 people want to read

About the author

Carol Roth

10 books22 followers

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Displaying 1 - 30 of 32 reviews
Profile Image for Andrea McDowell.
656 reviews420 followers
September 12, 2015
Carol Roth is 100% sure she knows everything there is to know about starting your own business. And she might be right, or close to it. She's also 100% sure that you are an idiot, and she's here to tell you why.

Some of her soliloquies on the superiority of jobs over entrepreneurialism are downright hilarious. Can anyone tell me where these jobs are that give 5% raises every year forever?

She has a lot of good information about businesses and the realities of starting and running one, but it would have been better presented with fewer of her own biases on display (she takes the first three chapters to lecture the reader on why all other entrepreneurialism books are bad and stupid, and why hers is perfect and unique) and a great deal more respect for the reader. Her assumptions of the motivations of small-business owners are so flawed and insulting as to be laughable: Ms. Roth, the vast majority of people starting businesses are women, and many of them are moms; they aren't doing it because they think it's a sure path to fame and fortune. They're doing it because there are no other jobs out there, or they desperately need work that won't either suck all of their income into daycare fees or suck all of their time into commuting, or because the jobs that are out there are poorly paid, tenuous, temporary, and incredibly extraordinarily risky without ANY potential future upside. You are living in a dreamworld.
Profile Image for John Irvin.
Author 34 books11 followers
August 26, 2023
Though there were true concepts and principles discussed. There is a fixed mindset without and a lot of negative perspective on business ownership.
Profile Image for Karen Jett.
Author 1 book9 followers
November 18, 2011
The Entrepreneur Equation is the book that everyone who thinks they want to be an entrepreneur should be required to read before starting their new business. This book is brutally honest about the challenges and trade offs that entrepreneurship requires. In addition, it provides a framework for you to evaluate your readiness for the venture.

If you make it through this book and still want to start your own book, I recommend following it up with Become Your Own Boss in 12 Months by Melinda Emerson for the steps to take.
Profile Image for Rodney Hall.
216 reviews2 followers
December 8, 2023
If readers believe that reading this book will provide the necessary motivation to catapult them into business ownership, they will probably be sadly mistaken. Unlike most business books I have read, "The Entrepreneur Equation" is more like Robin Williams comedic film, "License to Wed". Roth seems to do everything she can to convince readers that business ownership is a bad idea for them - and rightfully so.

Using her rich background as an investment banker and entrepreneur, Roth unveils a giant tool chest full of tools to evaluate risk before signing on the bottom line. If everyone interested in business ownership read this book, I dare to suggest that business failure statistics would improve. The first reason is because less ill-prepared people would choose to not enter the world of entrepreneurship. The second reason is that the tenacious ones would be better equipped to succeed once they did.

As a Business Major and Entrepreneur I can't recommend this book highly enough. It ought to be the text book for the first semester of business school.
Profile Image for Joel Jenkins.
Author 105 books21 followers
August 31, 2021
This book is an attempt to get someone who wants to start their own business to think hard about it before committing. It's a brutally honest assessment of the risks and requirements of running your own business versus the possible rewards. With nine out of ten new businesses failing in the first three years it makes a very persuasive case for leaving the entrepreneurial risks to others.

If I wasn't already running three businesses of my own I might have been dissuaded. Still, this book was quite useful in assessing the types of businesses I do run: One would qualify as a business (where if I stepped away the business could continue to run and it has equity value), one is a job-business (where if I stepped away it would cease to exist and has no equity value), and the other is a jobby (which is a job and a hobby rolled into one and makes less than minimum wage).

Based on my own experiences, everything Roth talks about rings absolutely true.
Profile Image for Daniel L..
250 reviews14 followers
October 10, 2014
Should I Be an Entrepreneur?

As counselors, we come upon so many people smitten with the idea of starting a business. After all, the very idea of doing so has tremendous allure, enough to ask oneself, “Could I be an entrepreneur?” More important, though, is the question “Should I be an entrepreneur?” That is the theme of The Entrepreneur Equation, a very highly received book by Carol Roth.

The Assumptions, Myths, and Realities of Entrepreneurship
What are the assumptions, myths, and realities of entrepreneurship? This is Roth’s starting point. Each year, millions of people take a huge financial and emotional risk to invest in a business venture. After all, as the story goes, anyone can start a business at any time…. Does the American Dream not hold promise in an individual’s ability to achieve prosperity? To answer this question, Roth proposes a two-way screening process, one of self-examination, based on one’s period circumstances:
Is entrepreneurship right for you ← → Are you right for entrepreneurship?

Assessing Your Fit with Entrepreneurship
The first step is to understand what a business is and what it means to be an entrepreneur. First, it’s important to know what a business is not. Roth emphasizes that a business cannot depend on a single person or select group of employees. In other words, an entrepreneur cannot do everything him- or herself. A true business creates more than a job for oneself—it creates equity. A single worker is the business; it is difficult to work on the business, because he or she is always working in the business. An entrepreneur takes on multiple functions but does not get to choose which ones to do.
Opening a business to escape control under a boss or a company is a false assumption. A person in business for him- or herself will have to answer to many more people, especially customers. An ego is not an asset; rather, it something that can get in the way.
A business is much more than an idea. Conceiving the idea is a one-time activity, as are conceiving a business model and creating an initial business plan. For those activities, very little work is required, giving many prospective entrepreneurs a false sense of what will actually be involved in creating, building, and maintaining that business, all very challenging tasks that demand a great deal of time. To help one answer the questions “Should I be an entrepreneur?” and engage in that all-important two-way screening process, Roth provides several self-assessment exercises:
• Defining motivations. The object of this exercise is to weigh one popular notions and common misconceptions with the realities, both positive and negative, of owning a business.
• Evaluating control factors. Here, one weighs control over others; a small-business owner may have the title of President, but he or she must answer to employees, lenders and investors, and customers. The owner is at the bottom of the inverted pyramid; as for upward mobility, there is none.
• Examining the “jobbie” and hobby phenomenon. Does an activity net an income that at least meets the federal minimum wage? A hobby is a pleasurable pastime and can fulfill important needs, but it is not necessarily a business.
• Assessing working with others. Which individuals and behaviors cause stress? Is starting a business the only way to eliminate these unpleasant situations?
• Is the timing right? One cannot have two priorities at the same time, of running a business and other pressing responsibilities. However, “not right now” does not mean “never.”
• Accepting the necessity of moving backward to go forward. Anyone starting out in a new area must know every position to learn about the new endeavor.
• Evaluating one’s network. Starting a business is both who one knows and what one knows.
• Assessing one’s financial situation and responsibility. It takes money to make money; one must also be financially responsible and willing to sacrifice.
• Analyzing one’s personality. Running a business requires perseverance and a willingness to commit for the long haul. Says Roth, “Business is a roller coaster, not a merry-go-round.” One of the great paradoxes of entrepreneurship is that an entrepreneur may own a business but has very little control over circumstances.

Assessing the Business’s Fit for You
Even if one’s fit with entrepreneurship is favorable, one must ask whether a particular business makes a good fit at the current time. In creating a sound business plan, one must have a firm understanding of every financial aspect, from costs to profits to the overall marketplace. And then come the hard part, raising capital. Many businesses fail for the sole reason they are undercapitalized. With this, the self-assessment exercises continue:
• Understanding the numbers. This exercise serves to evaluate risk and reward for the entrepreneur and the venture.
• Assessing opportunity. Does the business or what it offers has a competitive advantage?
• Determining whether the business is scalable. Does running the business rely on a single person, or could someone else perform some of the functions?

The Risks and the Rewards
How do the projected earnings between working for a company versus having one’s own business compare over a ten-year span, also taking the risk of losing the initial investment into account? (Roth also covers what one needs to know for buying an existing enterprise or taking over a family business). In addition, as with any investment portfolio, diversification is key. Should the business not work out, an entrepreneur must have other money to fall back on. Most important, doing one’s homework, including an in-depth self-assessment will help minimize that risk.
Profile Image for Donald Scoby.
Author 4 books8 followers
December 2, 2021
Invaluable book! Plenty of texts out there of how to become a small-biz owner / entrepreneur -- but none I'm familiar with that present the frank facts of biz-owner life. I would recommend this to all folks considering starting a business. Listening to the audiobook now after starting my business 7(?) years ago ... it said things I knew, things I came to know through my business, things I didn't know then or now, and helped to give perspective as to where my company is at now after pivoting its foci.
Profile Image for Charles D..
Author 1 book8 followers
March 5, 2023
Carol Roth offers a pragmatic look at starting your own business in her book, The Entrepreneur Equation. She does not set out to dispel the romantic view of owning your own business so much as acquainting would-be entrepreneurs with risks and challenges of taking on the responsibility of all the aspects on running a company. I've heard her book described by some readers as being 'negative', but I would say it provides hard knocks preparation to anyone contemplating the enormous leap of striking off on their own.
164 reviews1 follower
August 20, 2018
Honest, raw, blunt where needed to be, thorough- and funny in places. I would think this should be a must read for anyone considering starting or buying a business. It is ok to discover that being an entrepreneur is not for you.
Profile Image for Ayaz Zafar.
25 reviews
September 2, 2019
This book really changed my perspective on having and owning a business. Although most people only highlight the rewards side of business, this lady with her own experience of financial advisory career shared the downsides or compromises, risks you have to make/take to get these rewards
Profile Image for Nikki.
2,203 reviews9 followers
September 2, 2021
Whew this was harsh and I gotta say I loved it. If you want to work for yourself or start your own business read this to get a not cookie cutter 'how to guide' is a 'should you' guide. This will knock down alot of people's deluded view of starting their own businesses.
Profile Image for Jack Munn.
74 reviews1 follower
January 2, 2025
I think the information is straightforward and vital. However, I listened to the audiobook, and it's read by a man. It was very frustrating.
Profile Image for Adrienna.
Author 18 books242 followers
October 18, 2012
I borrowed this eBook version from the WI library system to read on entrepreneurship and whether or not this is another goal for me.

My favorite chapter was "entrepreneur: screening process" since it mentioned briefly about law school, which I was also considering but we can be blinded by our passions. "most big risks and financial, emotional, or achievement-oriented rewards have a screening process." It suggests the 5 step screening process: FIRED UP, and professions that you put forth effort, the time, and path worth pursuing is a "good" fit. If you find out about the profession during the screening process, will determine if you want to continue or have a commitment to it.

Next, I took some brief notes on some things; Carol's lingo makes me nod my head and laugh out loud. This is the first time I read a business-related book with profanity, or such vulgar language can be abrasive in some aspects. Chapter 28 discusses about "cash flow" that doesn't flow and be aware of upfront costs to start your own business; competitors and preexisting relationships can play parts in the dynamics of longevity of your business to name a few. We have to evaluate our risks and rewards of being an entrepreneur.

Some equations or business things goes over my head like it did in college! I cannot be a financial advisor, accountant, CPA, or nothing like that--will find a team of workers that are talented and smart in their given-talents if I ever start a business. I see I have been just doing a "jobbie" or "job-business" at this time after reading this book.
Adrienna Turner
Author of "God is in the Equation"
www.adriennaturner.webs.com
Profile Image for Kristal Stidham.
694 reviews9 followers
May 18, 2016
I'm ashamed to say that I won an ARC of this book over four years ago and I haven't read it until now. About 25 years ago, I went to college for a degree in Entrepreneurship, so I figured I already knew better than the fresh-faced "kid" on the cover of the book. Turns out that the author is blessed with youthful good looks and is actually about my age. More importantly, she's been amassing an impressive career consulting for a wide variety of businesses and she offers her best advice to would-be entrepreneurs in this book.

Most books about starting a business focus on how to write a business plan and are written by cheerleaders. Carol Roth is telling you to hold off on that and read this book first. She provides a gut-, reality- and sanity-check so you'll re-evaluate, over and over again, if business ownership is really right for YOU and if it's right AT THIS TIME. She's thorough, thoughtful, and provides lots of real-world examples. I can't think of a single subject that isn't addressed.

This is ESSENTIAL reading before you quit your day job or invest any more time/money in a business idea. You'll finish the last page knowing that the purchase price was well-spent.
Profile Image for Steve Coughlan.
255 reviews11 followers
March 22, 2013
Fantastic book. Based on my experience as a small business counselor for the last 10 years, truer words were never put to paper. And with a nice sense of humor.

Everybody who wants to start up a business, or is in the middle of starting up a business, or is close to somebody who wants to start up a business, should read this. It is 100% correct, and vital knowledge for you. I wish all the small business people I've counseled had read this book before they started.

If you are married to or related t or working with somebody who wants to start a small business, read this book yourself, then read it aloud to your entrepreneur relation.

If you're not in any of those categories, then this book is the most boring thing in the world... go pick up a science fiction blockbuster by Peter F. Hamilton and lose yourself in another world.
Profile Image for Jenny.
Author 14 books414 followers
October 24, 2011
This book was very thought-provoking - and makes you REALLY take a critical look at why you want to become self-employed or a business owner and whether that lifestyle is right for you. One of the most powerful images in the book is a graph where Roth shows that instead of becoming the top of the business food chain when you strike out on you're own, you're actually now at the very bottom -- catering to the needs of your clients, partners, and distributors moreso than anything else. Funnily enough, after reading this book I thought that my answer should be to keep working corporate -- but I had a fire in my belly that told me otherwise. So against (or rather empowered by) Roth's many potential pitfalls, I made the leap anyway. Some might call this book discouraging -- but it's actually a great (and important) expectation-setting dose of reality.
Profile Image for Angela England.
Author 12 books32 followers
April 11, 2012
Do not buy the book unless you want an honest opinion. If you want to pursue the life of an entrepreneur and you aren't sure what it will take, this book is an absolute must-read. No doubt about it. Because this is the book where Carol Roth lays it all out there.

I've had the honor of hearing Carol speak at SOBCon 2011 and I can tell you she genuinely cares. But she doesn't want you to waste your time of you truly aren't ready to jump into the entrepreneur life.

This book will explain the difference between a business and jobby, the personality and skill set you'll need as an entrepreneur, and powerful self-assessment questions. It will NOT serve as another step by step how-to guide....there are enough of those out there already.
Profile Image for Maryellen Miller.
10 reviews1 follower
May 20, 2013
At first I judged this book by its cover. At first glance I thought the book would be simplistic and not very serious. But after making a few rounds in the book store I couldn't find anything else that seemed to cover the topic so well.

The book in fact is a cold hard look at the realities of having your own business. If you are thinking about starting a business or just want to understand more about how business works, I recommend this book. If you can make it to the end and you aren't completely scared off of the idea, you might make a good business owner.
Profile Image for Ben Donahower.
94 reviews
August 9, 2012
The anti-business books, I really appreciated how Carol Roth thoroughly examined the reasons why entrepreneurship isn't right for some people or at certain times. There are plenty of books why you should start a business, but too few why you shouldn't. Roth's book, however, is so good that I doubt there need to be many more. The decision to start a business is an important one that shouldn't be taken lightly. Part of that is understanding the reasons why it might not work for you.
Profile Image for Lenore Webb.
507 reviews8 followers
February 28, 2011
Barbie may have showed young girls they could go anywhere and do anything. But Carol Roth is guiding them to be leaders in the business world. With common sense and business sense combined, The Entrepreneur Equation has step by step instructions on how women can be business owners while holding on to their self identity.
Profile Image for Lee Ann.
404 reviews
May 29, 2011
This seems like a nice book for those thinking about starting a small business. It's not your typical book touting the success that is possible. Rather, it asks you to think about whether this is the right thing to do. It outlines many of the possible downsides to being an entrepreneur. A good book for SCORE mentors and clients. I'm going to pass it on to one of my favorite clients. :)
Profile Image for Beth Gordon.
2,702 reviews9 followers
March 6, 2012
I really enjoyed this book on what it takes to become an entrepreneur. It takes a hard, critical look at what your new reality would be as a business owner. It isn't going to be easy, and you're going to either be a master of a lot of different aspects of running a business or a master at delegation or, more like, a master at both.
Profile Image for Tanya.
1,139 reviews
December 22, 2012
Hmm. The realism is a good counterpoint to most other business books. I certainly see her point, that pretty much you should not start a business. And yet, I read these other books about stretching yourself and taking risks, especially in this rising Conceptual Age. Perhaps her realism is too choking? I don't have the answers, but is it a good book for the exploring entrepreneur to browse.
Profile Image for Susan Payton.
Author 9 books40 followers
September 6, 2011
I love that Roth makes people who think they want to be entrepreneurs take a cold, hard look at the reality. Running your own business isn't glamorous. It doesn't pay a lot. And it's thankless. Are you SURE you want to do it??
Profile Image for Mary Thompson.
Author 96 books363 followers
February 5, 2014
Made me feel like my business wasn't good enough because my goals weren't to dominate the world. Good view of being an entrepreneur but felt it would be better suited to someone intending to build a huge corporation.
Profile Image for Glenn.
235 reviews2 followers
July 3, 2014
While most books on this subject are full of sunshine and encouragement, the tone of this one is entirely the opposite. It contains all the same information as others, but works via "reverse psychology."
Profile Image for Danielle.
144 reviews43 followers
August 5, 2015
One of the best business books I've read. A little terrifying, but a dose of reality that you don't find in many other books. This will really show you whether or not you are ready to start your own business.
4 reviews
December 4, 2013
Very interesting way to discuss Entrepreneurship. It really focuses on the negative aspects of being an entrepreneur and makes you really consider if this is were you should go.
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