I’ve mentioned several times on my podcast that my husband and I have created a business incubator of sorts for our children. It’s a mini Shark Tank model that we will use to teach them business skills and life lessons during their high-school years.
It’s easier to do this since we homeschool, and they’ll finish most traditional bookwork by age 14 and start this business program. They’ll still take the SAT and ACT and get a regular high school diploma in case they decide to go to college, but entrepreneurship is such a part of our life that we want to equip them with the skills to pursue their own business endeavors if they want to.
If our children decide to go to college, we will fully support that, but inspired by the Thiel Fellowship, we’ve decided to give them the space and support to pursue their big ideas early.
Since we are both entrepreneurs, this is also a way for us to spend time with them while passing along lessons we’ve learned in our own business journeys.
Why a Business Incubator?
My husband and I both felt like we went through this process accidentally as adults when we started businesses and learned many lessons the hard way. Despite the struggles that come with running a business (and often through them), we’ve learned so many valuable life lessons.
Yet, for us, these lessons were learned as adults when the stakes were higher. We have kids to provide for and monthly expenses to cover. We wouldn’t trade these hard-learned lessons for the world, but we want our kids to have a chance to learn similar lessons while the stakes are a bit lower.
Our Deal With Our Kids
The business incubator led to a deal (a contract of sorts) that we have with our children. Specifically that:
Our kids must run a profitable business for one year before we will sign off for them to get their drivers license or have their own cell phone.
We chose those specific things because they are highly motivating for teenagers, but also because these are two things that require a degree of responsibility that they can demonstrate through the consistency of running a business.
Learning Life Lessons & Financial Skills
When we sat down and thought about all the values and skills we wanted to pass on to our children, we realized how many of them can be learned just from starting and running a business. To run a business (even one as simple as a pet sitting, lawn care, or a health blog!), a person would need to:
1. Find a Problem and Solve It
We’ve always explained to our children that an entrepreneur is someone who finds a problem and solves it. Or, to use the definition from Howard Stevenson, a longtime professor at Harvard Business School:
Entrepreneurship is the pursuit of opportunity beyond resources controlled.
Both of these definitions take into account the problem-solving and risk-taking skills associated with entrepreneurship. We especially want to help our children learn the value of finding a problem and solving it. Or put even more simply, how they could benefit from helping others in a meaningful and positive way.
2. Learn Self-Discipline and Motivation
It’s often said that an entrepreneur is someone who works 80 hours a week for him or herself rather than work 40 hours a week for someone else. This has been true for us much of the time over the last 13 years. But it speaks to another important point of being a business owner… the need to be self-motivated and self-disciplined.
Types of businesses vary greatly, but often there is no boss telling a business owner what to do, or giving set hours. While this has many benefits, it also means that the person has to be disciplined enough to work when needed.
We try to stay as hands-off as possible. Once our kids have an idea and are working toward it, we don’t remind them what they need to do or what hours they need to work. They’re responsible for keeping up with their own responsibilities and schedule related to their business.
3. Be Consistent
My husband often says that being successful requires three things:
Doing the right things, long enough, consistently.
Running any type of business is also a great lesson in consistency. It teaches our kids (and has taught us) that success is not about showing up once, or being good at something one time. Rather, it is about the consistency of doing the things necessary for success over the long term. And, we remind them about finding a way to help others and solve a problem consistently.
4. Learn Interpersonal Skills
There are exceptions, but most businesses require some type of interaction with people from all walks of life. I remember pet sitting and baby sitting businesses as a kid and how I had to interact with the pet owners and parents. Through this, I learned skills like negotiation and customer service (as well as many of the other skills listed here). Even something as simple as a lemonade stand requires interpersonal activity and interaction.
At a time when texting and email dominate conversation, we wanted to find something that would challenge our kids to interact face to face with other people, especially adults.
5. Understand Basic Accounting
In order to show that their businesses are profitable, our children have to track their financials. I’m grateful to my own parents for teaching my brother and me personal finance from a young age. We managed our own checkbooks that we used to pay for school activities and any expensive clothing or any expenses my parents considered unnecessary.
That background in personal finance made it relatively easy for me to learn business accounting as we started a business, but we wanted to give our kids this skill from an early age. We teach them how to use accounting software to track expenses and income, and how to create a profit and loss statement.
6. Set and Measure Goals
We talk about goal setting often in our family. Our kids often set personal goals in their own activities (like reaching a certain height in pole vaulting or a gymnastics or music milestone). In business, goals are just as important and necessary for a business to succeed.
Yet, a goal without a plan is just a dream.
In starting a business, we help our kids map out monthly and yearly goals and then work backward to create a plan to achieve them.
7. Think Outside the Box
In his fascinating podcast episode, Opher Bayer explained that those who succeed in a world that is increasingly automated and controlled by technology will be those who do things robots can’t do. Specifically, those who connect the dots where others don’t. People who see patterns where other people can’t. And those who maintain creativity and critical thinking.
We’ve found that starting and running a business is one of the best teachers of problem solving and thinking outside the box. New problems constantly pop up, and there isn’t an instruction manual. Solving them requires creative and critical thinking, often on the fly.
8. Learn Through Struggles and Adversity
One of our family mottos is that:
You were made to do hard things.
But the real value is the lessons learned and character that is achieved doing those difficult things. Or, as Marcus Aurelius said in the quote that became the inspiration for Ryan Holiday’s book The Obstacle Is the Way:
The impediment to action advances action. What stands in the way becomes the way.
Entrepreneurship and parenting have been my best teachers in this lesson.
9. Work Through Failure
Teaching my kids a high tolerance for risk and failure is very important to me. It’s something I had to learn as an adult and it was extremely uncomfortable at times. I loved school and it came pretty easy to me, so I never had to face failure there. Until I started running a business, I didn’t have to face any really uncomfortable situations involving risk and failure.
As Henry Ford said:
Failure is simply the opportunity to begin again, this time more intelligently.
Starting a business requires solving a problem or “pursuing opportunity beyond resources controlled.” As such, there’s often no clear path or checklist to follow. In most cases, starting something new requires researching and understanding a problem and figuring out how to solve it.
Depending on their age, we provide some help at this stage to point them in the right direction and then let them take it from there. We also encourage them to test their ideas through in-person conversations with people who experience the problem they are trying to solve.
11. Take Advice and Ask for Help
In my own work, I’ve occasionally run into roadblocks that I wasn’t able to solve through my own effort or research. At these times, I reached out to others who had encountered similar struggles and asked for advice. I also found business mentors who were ahead of me in their businesses and who I could ask for advice.
For most of my life, I’d been fiercely independent and these times taught me the value of asking for advice and accepting help from others when needed.
12. Be Involved in Community
In many cases, especially for small businesses our kids are starting, there is an element of having to work within a community or build a community. I’ve talked about this so many times on the podcast, because I strongly believe that fostering solid community is one of the most important things we can do.
As an adult, some of my closest friends have come from my business community, and I want to give our children the same opportunity to build community at a young age. As an example, our oldest son is writing a kids’ cookbook with some of his friends (who are children of business friends of ours).
Our world is increasingly digital, so this community is even more important but often even harder to find. In my own experience, I’ve had to create the community at times when it wasn’t naturally there, and business can be a great shared interest as a starting point.
How the Business Incubator Works
Now that I’ve explained all the reasons we wanted to have a business incubator for our kids, here’s a basic overview of how it works:
We work with the kids to come up with a viable idea. We won’t think of ideas for them, but help them think of things they are interested in, problems they see and can solve, and ways they could do something in a new or unique way.
They don’t have to have a business that makes a lot of money, just one that is profitable, so it could be something small to start with. So far, even though they aren’t at the ages to have to start businesses yet, they’ve started local businesses, blogs, and even written the cookbook I mentioned above (coming soon!).
Create a Business Plan
Once the kids think of an idea, they have to work on a business plan. It’s a short summary of what they plan to do and how they plan to do it.
This includes the mission and purpose of the business, who the customer is, how the business will serve the customer, the costs and projected income, the marketing plan, and the goals of the business.
Talk Investing (If Needed)
If their business idea has a start-up cost that they can’t fund on their own, we then talk about investing. We have guidelines for how we will invest in our kids’ businesses and how much. Though hopefully much less stressful, they get to “pitch” us for their business much like a company would on Shark Tank.
Learn Legal and Tax Implications
At this point, we work with them to research the legal and tax implications of their business idea. Do they need a corporate structure of some kind? How much will they need to set aside for taxes when they start making a profit? What do they need to track to make this easier?
They get to attend and ask questions at meetings with our lawyers, bankers, and accountants to learn the ropes as they go. In fact, even before they start their own businesses, we let them tag along to our meetings with these professionals so they can start to understand these systems (since we had to learn much of them as adults).
Tracking the Business
At this point, we help the kids learn how to track the business income and expenses though simple spreadsheets or Quickbooks. This is a crash course in accounting, and I’ve found that actually managing a business taught me so much more than any class about businesses ever did.
Through this, we help them generate profit and loss statements and determine if their business is profitable.
Responsible Saving, Giving, and Investing With Profit
At the point at which the kids start generating a profit, we also start to teach them our own personal systems for saving, giving, and investing. We set up extra accounts so money automatically flows into them to save, give, and invest each month. This automates our own personal savings and also makes sure that we are setting aside money for these things before it ever hits our own personal accounts.
How We Lead Up to It
This isn’t just something we introduce for the first time when they are teenagers. Learning about business, finances, accounting, economics, and entrepreneurship has been a part of their childhood, and we’ve found a few things especially helpful in teaching these lessons:
- TED Talks: Most mornings, we watch several TED talks with our kids, upon the advice of podcast guest Naveen Jain.
- Access to continuing education and resources: Education isn’t something that just happens in school. We value life-long learning, so giving our children access to continuous educational resources is a priority. We use everything from Code Academy so they can learn to code, Udemy for all kinds of new skills, and courses on how to start a blog if they so desire.
- Free time and boredom: We believe that children are born natural learners and we try to make sure our kids have lots of time to explore their own interests, try projects, and be creative long before they start a business.
- Prioritize reading & learning: Over the years there have been many books and podcasts that have influenced our way of thinking, so we encourage our children to read and listen to similar things which can help expand their outlook and world view. A few of these books are Rich Dad, Poor Dad, and The Four Hour Work Week, podcasts Smart Passive Income, and Akimbo.
Our End Goal
While they’re children now, our goal of parenthood is to raise healthy, balanced, kind, creative, and successful adults who can adapt to whatever life throws at them. The type of learning environment we’re fostering works very well for us and our kids, but it may not be for everyone. Personalities, experience, skill sets, and financial means can all dictate how someone implements it in their own life, and mileage will vary.
What do you think? What important skills do you work to pass on to your kids?