If you want to be in business for yourself, congratulations for having that entrepreneurial spirit. But before you dive in you should know a statistic. 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 of 10 entrepreneurial businesses will fail within their first 18 months of existence. Research also says that 30% of all start-ups’ will continually lose money and that only 9% have a chance of surviving 10 years.
So, with this knowledge, 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, then listen up. Over the years while working with literally hundreds of business startups, I have compiled a short list of five absolutely necessary considerations in order to beat the odds and have a chance at building a thriving business.
- RESEARCH BEFORE YOU JUMP: Before you take the plunge and start pumping all of your money or someone else’s money into your project, do some research on the industry you’re about to enter. I’m talking about looking into the industry that your business fits into. You need to understand what’s happening with It and what opportunities, roadblocks and warning signs there might be. The three toughest categories to crack are,
- Independent Restaurants: 60% failure rates. Owners are often skilled at their craft but not at business
- Retail Stores: 80% failure rate for retail clothing stores. This is largely due to poor management, fierce competition and poor marketing
- Direct Sales businesses: No matter how enticing the pitch, only 20% of retail products are purchased through direct sales reps. 99% of direct sales reps will also suffer significant financial losses.
- NEVER DECIDE WHAT YOUR POTENTIAL CUSTOMER WILL AND WON’T LIKE: You should 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 exclusively know what your potential customers want and that they will buy what you think they want is a very dangerous mindset indeed. Smart and successful entrepreneurs will tell you differently. I learned one very simple exercise early on in my career that 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 person 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 then we would ask, “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 skill will make you a great businessperson. The two skills are completely separate. So always identify your strengths and weaknesses early and be honest with yourself. If you know that you’re not good with paperwork or numbers, hire an assistant and an accountant. If you know that you’re not a great leader of people, hire a strong 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. Ask yourself 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 your customers 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. If you can’t answer the question, it’s time to 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 the hard questions about the viability of your new business to be; how you plan to sell and market it; who might buy your products and services 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 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. There is no sense in wasting your time and money when you can do some research and make a better decision. It’s never too late to set yourself up to beat the odds.