Book Offers Tough Love for Aspiring Entrepreneurs

There is a popular expression in business that says, “Success leaves clues.” 

Consider this: Warren Buffett ran a paper route before he became a billionaire investment strategist; Thomas Parkinson started a chicken coop in his backyard before he founded Peapod; and Mark Zuckerberg invented a way for college guys and girls to connect online long before Facebook became a household name.

Those examples lead a path to local author Carol Roth. Decades before she completed millions in mergers and acquisitions deals, she operated a store that featured stuffed animals and toys. Where did she set up shop? Her bedroom. Who was her first customer? Her younger sister, Tracey.

“It was the perfect business model,” said Roth. “I had no cost of goods, no rent. And my sister got to hang out with me.” 

A lot of people are vying for Roth’s time these days. That’s what happens when you have a New York Times and Amazon.com best-selling book. The 38-year-old investment banker and business expert just published The Entrepreneur Equation: Evaluating the Realties, Risks and Rewards of Having Your Own Business.

It’s a manual filled with tough love and sound advice for anyone considering starting a business. One could trace the author’s inspiration for the book back to her days as a child hocking Barbie dolls and Smurfs to her little sister. Her model—free rent, no cost of goods—is easily attainable for today's Internet entrepreneurs. But her message resonates like wisdom from a nature guide before a white water rafting trip: just because the barriers to entry are easy doesn’t mean you should jump in.

“It’s never been easier [to start] but that doesn’t mean it’s easy to execute,” said Roth, who lives in Northbrook with her husband, an investment banker. “It’s like people who plan a marriage and focus on the wedding and the honeymoon. After [that] is when the hard work begins.”

Speaks to Women

Statistics show women are starting businesses at a higher rate than men—52 to 48 percent, according to a study by SCORE, a nonprofit that mentors new business owners.

But when it comes to sales, the advantage swings back significantly to men. The SCORE study finds that men who own small businesses do well over $1 million more in sales than women-owned small businesses. This burns Roth, who thinks female-backed startups fall prey to the disease of patronization.

“There aren’t a lot of women talking about business, or they pigeon-hole themselves as advocates,” said Roth. “A lot of these men thought leaders talk to these ‘mompreneurs’ like, ‘OK, you have this cute little business, now go away.’

"They need someone to kick them in the pants and say, ‘You can do more.’ The modern woman who is out there and doing it can relate to me,” she added.

In keeping with her punch-in-the gut philosophy, part of doing more is taking a closer look within oneself. Psychologist Sigmund Freud called it the “id,” or personality structure. Not surprisingly, Roth has a less clinical exercise for determining whether someone has what it takes to start a business. 

“Are you comfortable being uncomfortable? Am I OK not knowing what’s next?” she said. "If you are a control freak and have to know what’s coming you would not be a good entrepreneur.”

'Jobbie' vs. Hobby

There is a vocabulary to Roth’s business philosophy, a linguistics avatar distinctive to her belief structure. Call the glossary the Roth Rosetta Stone for the budding business owner. 

Examples: 

*Business beer-goggling: “Being intoxicated by an idea that isn’t as good in reality.” 

*Business Slut: “When someone gives their business services away for free, or for significantly less than their true value.”

*Cirque-du-So-Lame: When something is beyond pathetic and pitiful, it is "Cirque-du-So-Lame"

*Jobbie: A hobby disguised as a business or career

These whimsical, pop culture-fueled colloquialisms (I believe I did hear Snooki use “cirque-du-so-lame” on a recent episode of “Jersey Shore,” although she wasn’t talking about a startup) fit Roth’s unconventional approach to business: When you set expectations up front, there is no back draft. The decision to not start a business is sometimes just as good as the decision to plow forward--and a lot less expensive. 

“I want everyone to improve and be successful, but it is critical you don’t ignore the elephant in the room,” said Roth. “If you’re being an idiot, I’ll tell you, but give you a hug afterwards.”

And so this is the world according the Carol Roth. The daughter of a union electrician--who taught his girls the art of saving for a rainy day (by her glossary’s definition, her father, Bernie, would be an “El Cheapo”)--has now become an expert on the art of spending money. She just taped a TV pilot and is a regular on the Fox Business Network.

By now, you should be clear on what she does. But what doesn’t she do? 

“I told my husband before we got married, ‘I don’t cook and I don’t clean; I make my own money,’” said Roth. “He can play all the X-Box he wants. We have a phenomenal partnership.”

No, if you want a home-cooked meal, you won’t find Roth in the kitchen. Instead, she'll be the one offering tough--but well meaning--advice on the cost-effectiveness of the ingredients. 

Carol Roth's book, The Entrepreneur Equation, can be found on Amazon.com, BN.com and carolroth.com.