“I have not failed. I’ve just found 10,000 ways that won’t work.” – Thomas A. Edison
Who is an Entrepreneur? What is a Start Up? What Does it take to be an entrepreneur or start a new venture?
Entrepreneurs are the engine for growth of the world economies, the risk takers without whom we wouldn’t have all the businesses (both for profit businesses and social entrepreneurs, whether for profit or not) that are global or local household names like Google, Facebook and Uber; as well as the not so well-known but nevertheless, thriving ones, who are providing great products and services the whole world over. Being an entrepreneur however does not come easy and the high mortality rate can be a deterrent to all but the seemingly ‘foolhardy’.
Different research reports over the years have shown that between 70% to 90% of start-ups fail within the first three (3) to five (5) years, some industries more so than others. Whichever way you look at it, this mortality rate looks grim, but no true entrepreneur has ever given up starting the next venture because of these grim numbers. What distinguishes one from the other however is how well they learn from their failed ventures and adapt to ensure success in the next one.
In the school of entrepreneurship, the lessons are learnt from both the success and failures, but more so from the failures than the successes, and there is an abundance of failed cases to learn from in that regard. This reasearch by Forbes identified four (4) reasons why the 10% succeed as:
- Perfect Product or Service
- Vigilant Team that does not ignore anything that affects or can affect the company
- Fast Growth that capitalizes on opportunities identified quickly
- Adaptable team or one which knows how to recover
When you compare these four success factors with the reasons for failure such as this ongoing post mortem report by CB Insights, and that of Tech.Co the principal reasons that start-ups fail or succeed can all be accounted for under five main catalysts as perfectly captured in this video by this serial entrepreneur, Bill Gross.
The five main reasons accounting for both successes and failures from the foregoing are:
- Timing – Whether the market is ready for your product or service
- Team and Execution – Quality of the team and how effectively they execute and adapt
- Idea – The quality of the business idea
- Business Model – The robustness of the business model and ease of scalability and adaptability
- Financing – Ability to Secure Funding Needed in timely manner
One school gets it wrong and fails and the other gets it right and succeeds. The first three are not surprising, but surprisingly, it seems more companies fail because of their business models rather than lack of financing, but upon careful examination you realize that that should be about right, because if your model, which is primarily your strategies for capitalizing on the opportunity to generate returns is wrong or not adaptable, your financing sources will also quickly dry up because investors will not see how you will reward them for taking risks with you.
Under all these broad headings, there are a myriad of specific causes from, not scaling effectively to hiring mistakes, legal issues, competition to product viability and pricing issues. Although there is no guarantee of success in this incredibly deadly journey of starting a venture, doing your home work well and revising frequently can effectively increase your chances of survival, and that all starts with:
- Planning Effectively
I do know so well, the exhilaration that accompanies the conception of a ‘seemingly’ great idea that you believe against all odds will be your ‘golden parachute’ to retirement; and so after slaying the naysayers with your exuberant energy, you call up a couple of like-minded friends, agree on a business name, register your business, employ some staff, start advertising like hell was about to freeze over and watch the cash roll in. Right?
WRONG! This is the first critical stage of your journey. To build a successful and enduring business or venture takes careful planning and research to ferret the exact problem, your solution, the target market and their needs, your competition, operating landscape, etc and decide the most appropriate way to serve that need in a way that sets you apart from your established competition and is sustainable and adaptable.
This stage includes; evaluating your idea’s viability timing and feasibility, evaluating your chances as an entrepreneur, building a business plan, crafting your products and delivery models, initial market testing, etc.; including, your scaling models and time frames. If the activities in this stage are not executed effectively, it increases the chances of failure in later years.
- Executing Consistently
This is where everything comes together and can go wrong. Here you will be implementing the plan and strategies, monitoring and measuring performance to inform modification of plan, products or services and strategies. When execution fails, the business will eventually fail, regardless of how good the plan was and how experienced the people are. The key is to start scale effectively, monitor and adapt as conditions change.
There is nothing wrong with dreaming big, because without that big picture and dream, the venture has no future. The problem is in the details. Proper planning and effective execution sound simple enough but encompass a wide range of areas to consider. But when these are accomplished successfully, they help your realize your dream and allow you to grow your business and maintain brand distinguishing principles at a level that does not eventually kill you, because believe it or not, rapid unplanned growth can kill you. And history has thought us that depending on your size at the time of fall, you may not rise again.
It all starts with assessing the viability of your idea before you jump aboard the entrepreneurial train. We will look at how to do that in the next post.
I would love to hear from you about your intentions to become an entreprenuer, your successes, pains and challenges as one. Please do send in your comments and questions.
Image Credit: Copyright: tashatuvango / 123RF Stock Photo