Although going out on your own can be rewarding… it can be terrifying, especially considering that the success of startups may have been overstated in previous studies. In a 2012 Wall Street Journal article they share the following, “About three-quarters of venture-backed firms in the U.S. don’t return investors’ capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School.” The study was conducted using data from over 2,000 startups from 2004 to 2010. What about non venture capital backed new businesses? The SBA (Small Business Administration) states, “Seven out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more.” This information was based on the 2000 census. The good news is there are actions you can take to beat the odds.
How to Improve Your Chances
- Plan for the worst. Consider every negative scenario that could happen to your new business, ask other business people to share pitfalls, then form contingency plans.
- Have a business plan. Don’t fly by the seat of your pants and don’t rely on a plan that only outlines the big picture, have a day-to-day operational plan. Don’t put this off.
- Don’t count on profits right away. Be financially prepared to weather the storm even if it means taking very little or no income from the business.
- Don’t overspend. If the growth of your business doesn’t count on it—don’t buy it. Start with the basics—you can always upgrade.
- Don’t over hire. Eventually, as you grow, you’ll need to add employees, but at first it may be prudent to do it yourself, do without, or outsource
- Track your progress daily. Yes, daily. If you want to stay on top of your business, you have to know what’s going on before anyone else does. This might help, Do the Math.
- Limit debt. You need a line of credit, but you need to do everything within your power not to use it.
- Location, location, location. Whether it’s brick and mortar or online, having the right location is critical. If your target customer can’t find you…
- Gain knowledge and experience first. If you don’t know the business why do you think you can run it? I perform in a weekend band and can name at least a dozen small venues that failed because the owner never worked in the industry and didn’t hire someone who had.
- Do market research. Conduct surveys on social media, ask existing clients, seek out opinions from trusted friends then be brutally honest. Is there a niche market for your product or service?
If you’re ready to take on the challenge of guiding your own venture you can improve your chances of survival by using common sense, best business practices, and preparation. If you’re an entrepreneur and have survived, we’d love to hear what you’ve done to make it work.