Every entrepreneur has dreams of success, taking the industry by storm or changing the world with an inspiring product or service. The ideas brought forward by eager and creative minds are often great and do have the potential to bring business dreams into reality, but, unfortunately, even great ideas tend to fall flat before ever getting off the ground.
Hearing the failure rates for new businesses can be depressing — 30% fail in the first two years, 50% by five years, and 66% by ten years — but understanding the odds and recognizing the pitfalls can be the key to surpassing the stats. Here’s what you need to make your dreams a reality and hedge your bets toward success on your journey as an entrepreneur.
Understand the Value of Hard Work
Hard work is consistently at the cornerstone of success. This seems to be common sense — a good work ethic is important in virtually any career path — but working hard in your own business isn’t always the same as putting in a strong effort in a traditional day job. It’s true that Americans work 25% more hours than those in other nations, but spending more time at work doesn’t always mean working hard.
As an entrepreneur, you don’t have support staff or a safety net. Even high-pressure roles like chief executive officers don’t have to balance the plates of high-level tasks with day-to-day operations, managing P&Ls as well as paying the bills and cleaning the store. Being an entrepreneur is hard, and assuming it won’t be is among the biggest pitfalls facing those with big dreams. You have to work hard, putting in the time and the effort, to cover all of your bases and inspire successful results. Smarts alone won’t cut it.
Hard work also involves knowing what it takes to start a business. Do you understand accounting basics, marketing staples, financial analysis, or how to negotiate with commercial real estate agents? While jumping in with two feet is always a good idea in theory, you need to know the basics to make your work worthwhile.
An Appropriate Amount of Patience
When you have a great idea, the temptation to go from zero to sixty in no time is overpowering. All of the excitement that comes with a fledgling business and the big dreams you have for it drives a temptation to charge ahead, but this can inadvertently mean taking on more than you can chew. Too much, too fast can result in risky choices, preventing a strong foundation for your business.
Achieving your dreams takes time. The little steps required to launch a company can’t happen overnight, so you need to be patient while getting things moving forward. You don’t need a physical premises right away or to start hiring employees before moving into production; instead, finding the right pace for your intended progress is key. After all, 69% of new businesses start at home — not in a fancy storefront before the time is right.
Moving too quickly can lead to errors, too. When all your focus is on marketing while big problems are mounting on your balance sheet, you may find yourself in hot water. Give yourself time to handle every element of your fledgling company properly and don’t let overzealousness take the place of responsibility.
Thorough Industry and Market Research
You have a great idea — but is it really a great idea?
Not every business idea is destined to make it. This isn’t overly harsh — it’s just reality. Some industries have higher success rates than others; for example, the net profit margins in accounting and tax prep companies dwarf those of beverage manufacturing brands.
Before taking your business to the next level, be sure you’re truly on the right track. Without adequate market study, you may find yourself poised for failure before you even get started. You need to know about the current economy in your area, the market saturation, and any other stats that may be relevant to your chances of success in your chosen field.
Doing research shouldn’t stop with the economy. Without knowing all there is to know about the field you’re planning to enter, you’re reducing your chances of making it. 11% of small businesses fail because of a lack of experience in a chosen line of goods or services, so if you don’t have a practical background, make plenty of time to do your due diligence.
It may be tempting to charge ahead with an idea, even if the odds aren’t in your favor, but this isn’t wise. Your dream of a successful business can still be achieved, but entering into a field with a low net profit margin without any experience isn’t the way to go about it. Try to stay away from what’s popular, too; a trend may be a flash in the pan that vanishes in months, but something you’re truly good at has staying power.
Ignoring Financing Requirements
Starting a business isn’t easy, and it usually isn’t affordable, either. While some companies cost less to start than others, a financial investment will be required to bring your ideas into fruition. 82% of new startups are funded by the entrepreneur him/herself, friends, or family, and 77% rely on personal savings to get things off the ground.
Starting without a plan for funding can be a death knell for any business. Whether you have enough saved to set the framework, have generous friends and family, plan to secure a loan, or wish to pursue outside investors, you need to know where the money is coming from, and how much you need to ensure a solid base.
If you’re working to sell a product, be aware that research and development will not be a cheap process, so jumping in without a good idea of what to expect is likely to bankrupt you early on. Do your due diligence and carefully calculate R&D estimates.
You’ll also need a plan for cash flow. How long will it be before you can start generating revenue? What’s your backup strategy in case going to market takes longer than you anticipated? 82% of businesses that fail do so due to cash flow problems, so have a strong financial strategy from the start.
Partner Up If Possible
Entrepreneurship is a hard climb, but it’s easier if you don’t have to do it alone.
The natural instinct for many entrepreneurs is to do things solo. It’s true that adding another person into the mix can take a careful balance, particularly if things start to slide, but two heads can truly be better than one.
If you’re new to entrepreneurship, working together can increase your odds. Starting a new business takes significant time, energy, money, and work, and it’s easy to make mistakes when you’re still learning the ropes. With two people involved in launching a company, it’s both easier to strategize and more likely that nothing important will get lost in the shuffle. With one person focusing on R&D while the other takes the lead on marketing, for example, it’s possible to make more progress without cutting corners.
Working with a partner can also alleviate financial pressures; with two pockets to pull from, it’s simpler to collect the capital needed to invest in business development and everything that goes with it. Studies show that two founders can raise 30% more money, gain three times the user growth, and are 19% less likely to scale too early. Don’t bring on just anyone simply for the sake of a partner, but if you have a viable option, strongly consider the option.
Know What You Don’t Know
All the knowledge in the world can’t prepare you for everything entrepreneurship has to offer. Books, seminars, and anecdotes can all help, but until you’ve lived it, there’s no way to know what bringing your dream to life will take. And even if you’ve done it once or twice before, there are still plenty of challenging situations you will undoubtedly encounter during the process.
Part of being a good entrepreneur involves staying humble. Even if you have business degrees, decades of on-the-job experience in the field you are attempting to enter, and advice from a great mentor, there will always be new things to learn and new challenges to overcome. To truly be effective, you have to accept that you don’t know everything and you never will. Every day is a learning experience — and unless you’re willing to learn all of the many different ways there are to swim, you’re going to sink. Approach situations with humility, and take every event that arises as a chance to grow. Don’t bristle at criticisms or feedback from others, either. Instead, carefully process the advice you’re given, and use your reasoning skills to determine whether taking action is the right decision.
Achieving your dreams as an entrepreneur takes significant time and effort, but that doesn’t mean that your aspirations are out of reach. The right knowledge, awareness, understanding, patience, and humility can make all the difference in preparing for you for the journey ahead. It’s always possible to make your dreams a reality — but you’ll never know for sure unless you try.