If you are a business owner, or are considering to become a business owner, you have probably heard the statistic of only 10% of small businesses make it 5-years. After hearing such a statistic, you have to ask yourself, “Why do so many people want to start a business, if the failure rate is so high?” Or maybe a better question is, “Why is the failure rate of business start-ups is so high?” The blog post I am writing today will address why I believe most small business owners fail. Or, should I say “give up”. You see, “failure” implies that someone is earnestly trying to do something, and they fall short. I submit that most new business owners fail to prepare to start and run a business. And those that do manage to get started are plagued by fear of failure until this fear of failure becomes a reality of failure.
I want to highlight three attributes of running a successful small business that catch most rookies off guard:
One of the most common was a new business owner fails is lack of PREPARATION. Could you imagine deciding you want to run a 26.2 mile marathon today? You put on your best tennis shoes, and some sweat pants and just start running. What do you think will happen? Well, if you are as good of shape as me, you will be breathing heavily after about 1/2 mile and say, “there is NO WAY I can run 26.2 miles!”. And you’ll quit.
Practice: Starting and running a business is no different. We have a lot of information available on the internet to educate people on marketing, sales and all sorts of things designed to help you learn how to run a business. However, just like running a marathon, you have to actually do business on a small scale, if you hope to grow a business on a large scale. It may not be a surprise to you, but the best preparation to start your own business is being employed in a business management capacity for someone else. Preferably, in sales, marketing, management, operations or some key role in a specific industry.
Think Differently: Think like a business person. In business there is one simple concept to understand, “Give something to get something.” Oddly, many new business owners I talk to, don’t get this simple concept. They want customers. The want money. But they don’t understand they have to provide a beneficial product or service; and they need to attract people to buy their product or service. Instead, they decide to do something they like to do; and expect people to pay them for their service.
Knowledge: The final area of needed preparation is academic. In other words, you have to learn the jargon of business and understand fundamentals of Marketing, Sales, Finance, and Operations. You don’t need an MBA (Masters of Business Administration); but you do need to understand some of the basics that will apply to your particular business. A Business Coach, Consultant or SCORE (Service Corps of Retired Executives) may be a great resource to bring you up to speed on the knowledge you need for your particular business.
Lori Greiner of Shark Tank fame said, “Entrepreneurs are willing to work 80-hours a week to avoid working 40-hours a week.” If you think that your day-job is too hard; If you think that your not getting paid enough; If you think that your boss is giving you vague instructions…. you are probably not ready for the harsh reality of owning your own business. There is a type of discipline that is required to get up every day; work your tail off and not know whether or not you will get paid; and then somehow maintain the strong will to do it again tomorrow.
Long Hours: Speed is the key to starting up a company that will succeed. This means that you will put in long hours to try to get new customers in the day time; while producing the foundation for your products or services at night to give to willing clients. This means that, at least at first, you will be doing the work of multiple people. So, if you are turned off by long hours at your day job, chances are owning a small business is not your thing.
Low Pay: Most startups will require sweat equity to get going. That means that you have no money at first… so you will be working for quite a bit less than minimum wage. So, if you thought you were not getting paid enough in your last job, try working for a year to build up a backlog of customers while paying money out, instead of earning one penny.
Confusion: Most customers will not tell you what they want and how they want it; so you have to ask them. You have to then somehow create a product or service that is unique and captures the allure of these prospective customers in order for your small business to survive. So, if you thought that your boss was not clear enough to you as an employee, your brain will have to work overtime to figure out what your customers will pay you a lot of money for.
The challenge with starting and running a business is that you have no guarantee that all of your hard work will result in you being paid at some point. In fact, it isn’t rare that new business owners go broke trying to start a business because their investments don’t work. In order to be successful in business, you have to BELIEVE, sometimes against the odds, that you will succeed in your business. This doesn’t mean to be pig-headed and ignore wise advice; but it does mean that you need to have faith that your business will work. You may invest 80-hours on a marketing campaign that is a complete dud; and then wake up the next day ready to tweak your campaign and get right back in the game until you succeed in attracting customers. Some want a guarantee of income for their work. You just won’t find that in the small business ownership role.
As a business coach, I offer programs that will help my clients produce an amazing amount of wealth for themselves and their families. However, the key is that they have to “do the work”. I am surprised by how many will procrastinate or put off the hard work of starting and growing their businesses. If you want to do the work, I’d love to help you. Please fill out the contact form below, if you want my help.
Note from the Author
My name is Jeff Schuster. I am a certified Life and Business Coach serving small business owners, corporate executives and others who want to transition from “expert” to “entrepreneur”. I have been a small business owner for most of my 30-years in the workplace. I grew an energy efficiency and renewable energy engineering and construction company from nothing to over $10-million/year and sold it in 2013. I now help other business owners make amazing progress toward their own dreams of business ownership independence and success.