It breaks the heart of my entrepreneurs to confirm that startup businesses usually succeed as much as they fail. According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn. Entrepreneurs know about failure, they make mistakes, pretty stupid ones at times. At the same time, though, they have been fortunate enough to succeed a few times, too.
This is a hard and bleak truth, but one needs to meditate on these dose of reality every now and then. Cold statistics like these are not intended to discourage start-up entrepreneurs, but to embolden them to work smarter and harder. Ultimately, a business fails because it runs out of money.
But there is a multitude of reasons why this can happen. From management teams, business models, access to markets, finance, ideas, timing and the capabilities of the entrepreneur themselves, all these are factors that can influence the failure of startups. Is the product perfect for the market? Did the entrepreneur ignore anything? These are some of always some of the questions to be asked as they can become the keys to success or failure.
Passion plays a large portion in the feat of any business. An entrepreneur with inadequate passion will surely find it difficult to work continuously for 10-14 hours a day without the possibility of vacation or leave and a lot of stress, tension, employee problems or demands, misplaced cash, bank loan turndown and frustrations from other angles. Thus, one must be passionate enough about the idea.
Startup businesses usually succeed as much as they fail. This is a common fact that is known to many consultants, trainers, and entrepreneurs. Some statistics even suggest that the failure rate for new startups within the first five years is as high as 50 percent. No wonder some entrepreneurs know and advise that business failure should be handle as a milestone on the road to success. Here is where the issue of learning from one previous mistake is used as an experience that will be used to manage their next ideas in a profitable and sustainable business.
Wise people learn from the mistakes of others, such that they get the knowledge without all the pain and suffering that should have come with it. From the experience and training of great entrepreneurs and mentors, they have come to conclusion that lack of a written plan is one of the causes of failure of startups. The discipline of putting your plans in black and white is the preeminent way to make sure you comprehend how to transform your idea into a profitable business.
Never go into a business without a known and well layout robust revenue model. Even if the business is non-profit oriented, revenue (or donations) needs to be generated in order to offset operating costs. Even if you have an idea that can solve the entire world‘s hunger and your customers have no money to pay, the business will eventually go down the drain very fast.
Let me call your attention to the fact that not every good idea can become a blockbuster business. Just because you passionately believe that your product or service is great, and everyone needs it, doesn’t mean that everyone will buy it. There is no substitute for market research, written by realm experts, to supplement your informal pool of friends and family.
Well, having ideas is never enough, just like the saying that if wishes were horses all will surely ride one. Thus, know from the word go that ‘your idea alone is worthless’. It is about refining it, with some toolkits, some of which will be discussed later in this series and it should be executed with determination and willingness to carry out the execution and ability to make hard decisions and take risks.
You must also note that deliberately jumping into a market that is crowded is a sure way to failure because there might be too much competition for you to handle. Having no competitors they say is a red flag; it may signify that there’s no market — but finding ten or more with a simple Google search means your area of interest may already be a crowded space. Remember, ‘sleeping giants can wake up’ . So do not underestimate those big companies in that industry.
You need to register for patents, trademarks and copyrights, as well as enlist non-compete and non-disclosure agreements to protect trade secrets. Intellectual property is also often the largest element of early-stage company valuations for professional investors.
Ensure that your team is not an inexperienced one. Investors fund people, not ideas. Funds are available for experienced people that have proven themselves in the industry or related industry. Thus, you might need to find a partner who has “been there and done that” to balance your passion and bring experience to the team.
In my interaction and training career, I have come across a lot of people with ideas but complain about being underfunded. Let me put it across to you that you have to know and must not underestimate other resources which include: industry contacts and access to marketing channels, all which may be more important for certain products.
Experience has repeatedly shown that the most common cause of startup failure is that the entrepreneur just gets tired, gives up and shuts down the company. Despite setbacks, many successful entrepreneurs kept weathering the business storm on their vision until they found success.
In the article “How to decide if Entrepreneurship is Right for you,” Colleen DeBaise describes the commitment entrepreneurs must make to their business as follows:
“Starting a business is a lot like becoming a parent. Not only do you have to prepare for your start-up emotionally and financially, but you also have to be committed to its constant needs until it is mature enough to hum along on its own. And even then (much like a child) it will always need you in some capacity, no matter how old it gets.”
For those who weigh the two angles of the issues and you are still convinced that starting a new business is a right choice for you, then you will want to consider the following tasks:
- Hang out with people interested in entrepreneurial ventures.
- Read extensively about entrepreneurial efforts in newspapers and other magazines alike.
- Join the entrepreneurial network, talk to people. Get on a mailing list from major accounting firms, law firms etc.
- Read biographies, not only of today’s entrepreneurs, but of those who have innovated in the past. Ask what traits the person had that enabled him/her to succeed. How did the person handle failure?
Above all, constantly plumb the soul and consider self-motivations .