It’s the statistic that no one wants to pay attention to. It’s that extra long hair coming out of your nose that everyone sees but everyone wants to ignore. Bloomberg reports that 8 out of 10 entrepreneurial businesses will fail within their first 18 months of existence. Research also says that 30% of all start-up will continually lose money and that only 9% even have a chance of surviving 10 years.
Honestly, do you still want to be an entrepreneur and start a new business? If the desire to build and own your own business still burns within you, there here are a few ideas that might help you beat the odds.
- RESEARCH BEFORE YOU JUMP: Before you take the plunge and start pumping all of your (or someone else’s) money into your project, do some research on the industry you’re moving into. I’m not talking about researching your business idea initially; I’m talking about looking into the industry that your business fits into. Understand what’s happening with it and what the opportunities, roadblocks and warning signs might be. Smallbiztrends.com say that the three highest risk business categories are:
- Independent Restaurants: 60% failure rates. Owners are often skilled at their craft but not at business
- Retail Stores: 80% failure rate of retail clothing stores are largely due to poor management; fierce competition and poor marketing
- Direct Sales businesses: No matter the pitch, only 20% of retail products are purchases through direct sales reps and 99% of direct sales reps suffer significant financial losses.
- NEVER DECIDE FOR YOUR POTENTIAL CUSTOMER WHAT THEY WILL AND WON’T LIKE: You can never be so enamored with an idea or so convinced that you can make it work, that you don’t ask the market what it wants. Being in the mindset that you know what your potential customers want and that they will buy what you have is a very dangerous mindset indeed. Smart and successful entrepreneurs will tell you differently. One very simple exercise that I learned early on has without fail allowed my startups to roll out stronger and be profitable faster. We always created or acquired a list of each and every potential customer that we could find. Then I would, with the help of whoever I could get, called every manager or owner on the list. Our telephone script was based on the idea that we were a new company about to enter into their industry. We were not calling to sell them anything but we were doing a simple two question survey. We would then ask them (our future prospect) “What do you love about the vendors you work with?” And….”What do you hate about the vendors you work with?” We would then let them talk and they would absolutely tell us what we should do and shouldn’t do to get in their door and eventually sell them. Our marketing plan and our business plans were always adjusted to the requirements of the market.
- BEING A GOOD TECHNICIAN DOES NOT MAKE YOU A GOOD BUSINESSPERSON!: Just because your business idea is based on something that you know how to do and are really good at it, does not mean that that enthusiasm will make you a great businessperson. The two skills are completely separate. So always identify your strengths and weakness early and be honest with yourself. If you know that you’re not good with paperwork or numbers, hire an accountant. If you know that you’re not a great leader of people, hire a manager. If you’re not a good salesperson, hire one. Unbalanced experience or a lack of managerial experience usually leads to a level of incompetence that could drive your business into the gutter.
- CREATE AN ABSOLUTELY CLEAR AND POWERFUL VALUE PROPOSITION: You must know what your Unique Value Proposition is without a doubt. What truly sets you apart from all other competition? What is it that you or your product does that you can do faster; cheaper; stronger; with additional quality, and more profitable? How can you save the customer time; money and efficiency and all the while improve the quality of their life? Once you have these things identified then apply the “Acid Test” questions. State your value proposition one by one and ask yourself “SO WHAT?”, “WHAT’S IN IT FOR ME?” Believe me your prospects will be asking these questions. And, if you can answer the question. Start over!
- WRITE A COMPREHENSIVE BUSINESS PLAN: No matter how small your start-up is I always strongly recommend that you write a business plan. Even if nobody sees it but you, write it. The Business Plan process forces you to ask yourself hard questions about the viability of your idea; how you plan to sell and market it; who might buy it and on and on. Don’t argue on this one. Just do it. It will be worth your time! And by the way, if you would ever want to raise some money for your business, it will be required.
There are plenty of other things that you can do to avoid the pitfalls of an entrepreneurial start-up, but these five will get you started. If you’re stuck give me a call or write. I can help. This is what we do for entrepreneurs at Grow Southwest, and we’re open for business.