Over the years I have had the privilege of working with many different businesses of varying sizes and industries and I’ll let you in on a little secret…they are not as different as you might think. Take away a few zeroes or some industry specific language, and the drivers for success are pretty much universal. So what I am about to tell you applies to all businesses and in particular start-up businesses.
The Numbers
I am a numbers guy, so I will begin with a few. Depending on what and where you read you will find the following statistics:
50% of businesses will fail in the first year
80% will fail in the first five
96% will never reach $1 million in revenue in a year.
Not very encouraging.
These businesses were started by passionate entrepreneurs who put in long hours and painstaking efforts. However, in the end, 80% will walk away from their dream and 96% will only be marginally successful. Why?
Reason #1, They forgot who was king.
Cash, greenbacks, clams, dough, dead presidents…whatever you call it, cash is king. The sad truth is that many businesses are doomed from the start because the business began without enough capital to survive.
The main mistake is that the business only has enough funding if everything goes perfectly. But everything never goes perfectly…businesses are cyclical, costs overruns are normal when starting out, and it takes time to get the word out. Before long, the owner is digging into personal funds earmarked for something else and well on the way to increased stress and decreased credit scores. The lack of capital starts to limit spending decisions. Key purchases, personnel hires and marketing spends are all passed on because there is not enough money to fund them. In the end, the business fails not because the business model was flawed but because there was not enough cash to execute the plan.
Reason #2, They need their vision checked
Most people that start businesses fall into two categories: worker bees or big idea machines.
The worker bee usually starts a business that resembles their previous job or perhaps is something that they like to do and are already good at. The problem with worker bees is that they are nearsighted. They started the business hoping for an idealized version of a job they like to do, but did not factor in the infrastructure necessary to make it grow. In the end, they create a job that was like their previous job with one important difference…it is much harder.
The big idea machine on the other hand sees the big picture with hundreds of employees, multiple offices, big national write ups and industry changing business practices. Their shortcoming is that they are farsighted. From day 1 they go to work on complex messaging, large partnerships and expensive initiatives. The employees of the business try valiantly to implement the ideas which are really suited for a mature company with thousands of customers. Before the business even has a chance to do any of these initiatives well, the big idea machine is already touting the next greatest idea. Ultimately, the company ends up doing nothing very well and frustration overtakes everyone involved.
Know your destination, what you want your business to eventually become and then define how you are going to take a meaningful step towards that goal in the next 90 days. Why do you think new Presidents get so much accomplished the first few months they are in office? I believe it is their 100 day plan, a plan that focuses on things that can be successfully completed. If only the President would continually implement 100 day plans over a 4 year term, imagine how much would get done!
Reason #3, They don’t fail enough
This may seem counter-intuitive, but bear with me. Failure is part of every business, so it is best to embrace it from the start. Too many entrepreneurs are afraid to fail and as a result end up failing only once and then its over. They wait too long and bet too big. A business should be constantly learning about its customers, testing new things and pushing the envelope. Understand that small failures are inevitable, but total failure is not an option. As the saying goes: Fail Fast, Fail Often, Fail Cheap. Do not wait for perfection, get to market and start tinkering (messaging, pricing, offering, servicing).
Avoid these three pitfalls and you will be well on your way to creating a successful business.
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