Did you know that 60% of small businesses go under within the first three years of business, with two-thirds failing within the first 10 years? Those grim failure statistics seem so overwhelming, that some might say you’d need to be an absolute fool to start a business today.
But entrepreneurial dreams are hard things to neglect (thankfully).
So many eager beavers take the leap from worker to entrepreneur, in spite of the odds. Businesses who succeed can expect to lose money the first year, start to break even the third and finally turn a profit in year three.
That’s 36 months of a lot of hard work just to get to a place where you’re finally making something. Thank God for passion and perseverance. It’s at this three year mark when your business finally starts to run more smoothly.
Why do so many startups fail?
For starters, passion doesn’t translate into sound business practices. You may be great at what you do or create, but that doesn’t mean you are great at running a business. Without having the basic fundamentals needed to run your business, it’s going to be tough. That’s why it’s imperative to conquer the ‘Laying the Foundation’ part of the Trailmap to Success.
Just like building a house, it all begins with the foundation. Without solid footing, you’ll struggle. So take your time to carefully plan every aspect of your business before taking the plunge.
Success is not an accident.
You may be asking yourself: where do I begin building my foundation?
First, before launching the business you are passionate about, you should do a lot of planning and pondering.
In studying businesses that have succeeded and those that have failed, the difference is planning. According to George F. Brown, CEO of Blue Canyon Partners management consultant firm, “Successful business leaders don’t go to work every day expecting a new adventure. They have a plan and know what to do. Over and over, in small businesses and large ones, I’ve seen the benefits of careful planning and the disasters that can result from a failure to plan,” he says.
In other words, you need to determine your vision.
Lack of vision is one reason for failure.
When your business vision is clear and concise, you won’t get stuck in the conundrum of working your tail off and not making any progress. The vision serves as the cornerstone of your foundation.
Consider things like the type of culture you want to create, the brand you want to build, the type of employer you want to be (if you want to even have employees), the type of customer you want to serve, the contribution you want to make to your community, etc.
Have you crafted an executive summary/business plan for potential investors? What’s the size of your market? Who actually is your customer (have you created a persona?) and what drives their purchasing decisions? Who’s the competition? Do you have mentors? Can you partner with experts? How can you test your idea? Where will your leads come from and how will you nurture them?
Lack of funds is another big reason for failure.
What are the financial risks involved? How are you going to fund your business? To determine how much cash you’ll need, develop a cash-flow statement that estimates your expenses and income. Be sure to research actual business costs rather than estimating or guessing based on your own personal experience as a retail customer. Be prudent and spend judiciously; limit your need for cash by avoiding long-term commitments, e.g. long-term leases. Can you (really) tolerate the financial risk at this time in your life?
Bootstrapping is definitely doable, but remember that it’s also challenging and stressful and exhausting pinching pennies all the time. It also slows growth, because there is definitely some truth behind the old adage: it takes money to make money.
Asking these questions will help you maintain focus when you do launch. Your company mission and vision is the biggest picture for your company — the why behind what you do. When evolving from employee to entrepreneur, you get a clean slate to design your role and decide which directives to pursue, so enjoy the period of creation and dream big.
Also, check out 50 Tasks in 90 Days to Start Your Business which details many foundation-building tasks required for constructing your dream business.
What makes your business unique?
Are you giving your prospect a reason to change his or her buying habits and choose you over a competitor? It’s not only what you sell, but it’s also the experience you create. Be original. Play into buyers’ emotions. How are you solving their problem? How can you make their life easier? How can you save them time/money?
Once you can legitimately solve the problems your prospective customers face, you’ll be that much closer to success…and sales!
Bottom line is that you must put in the effort on the front end to create a vision and lay a foundation if you want smooth sailing on the back end.
So suck it up. Do the work. Put in the time. Get ‘er done.
This foundation helps you stay focused, on track and climbing up the mountain of success. You’ll be glad you did when you hit the first of many bumps in the entrepreneurial road.
Live and Learn.
We’d love to hear your perspective!
How did you launch your business: with or without laying a foundation? How did your foundation help you succeed? Can you give an example of a problem encountered that was easily solved by having your foundation in place? Let us know; please leave a comment below.