Five Keys for Building a Successful New Business
By Martin Brown
There is a long held myth that new businesses fail at a rate of ninety percent. That number has become so ingrained in our thinking that it is small wonder that most of us run in the opposite direction at the mere suggestion of starting our own business.
If you’re a single-minded woman who is determined to launch your own business venture, however, take heart: the odds are a lot better than you may think.
In truth, this failure rate, based on bankruptcies and business closures, is more in the range of five percent. Additionally, many of these closures are the result of people who have retired, moved, or closed their business for a variety of reasons not related to the success of the business itself.
The vast majority of new small businesses start out as sole proprietorships in which the business creator is the company’s one and only employee. The impetuous for these startups is the desire to work for one’s self, as opposed to serving at the whim of an employer.
As examples, I’ll tell you about two good friends: Angela, who started a successful alternations business fifteen years ago, and Holly, who started her own travel agency fourteen years ago. Both worked for employers in their respective fields and both eventually struck out on their own. They have both been successful, and today make a comfortable living. Neither of them has ever taken on employees preferring to pursue their fields of interest as solo-practitioners.
One day they both hope to sell their businesses, the largest asset of which will be the client base that they have built. They may or may not succeed at doing this. But it is important to note that they have both achieved their primary goal to make a reasonably good income and to be self-employed.
If five years from now each one decided to take an early retirement and simply walk away from these ventures, some numbers cruncher would list these endeavors as failed businesses, but that is not at all true. Why? Because the business met the goals and expectations of their owners.
Misperceptions about small business failure rates are also greatly influenced by individuals pursuing entrepreneurial opportunities in volatile fields, such as retail, restaurants, and high-tech. Whenever you are meeting a need that is strong today but may not be viable tomorrow, you’re walking an economic tight rope. That brings us to…
The five keys for business success
1. Be honest with yourself: Are you an entrepreneur?
What is your tolerance for risk: low, moderate, or high? We’re all different and we all have different levels of risk that we find acceptable. If, for example, Middle Eastern food was all the rage, are you ready to bet that trend will last more than just a few years? The same can be true in retail, and particularly true in high tech, where today’s social networking is yesterday’s Widget.
If your tolerance for risk is lower, what are safer more conservative pursuits that may interest you? Doing alterations work, tax consultancy, tutoring service, may be less adventurous but desirable to those who have the needed skill set and want a lower risk level providing a service that does not go in and out of style.
2. Learn as much as you can about your industry before you take the leap with your new business.
Talk to people who currently operate their own businesses, especially those businesses that are similar to your area of interest. This will allow you to get an honest understanding of the resources necessary to make your business a success.
3. Do the numbers, and keep to your budget.
A staggering number of businesses have been lost on the rocky shores of inadequate funding, known in the world of finance as “under-capitalization.” You can debate endlessly the psychological underpinnings for this. Most likely it occurs because we all tend to focus on the best-case scenario, as opposed to the worst case. Donald Trump, a man who knows a thing or two about success and failure, famously said, “I plan for the downside, the upside takes care of itself.” A deceptively simple point, but well taken. Suppose you need 12-months to reach your first profits, rather than six. Do you have the reserve capital to make it that extra distance? Being able to assess those issues objectively is essential to creating a success.
4. Be willing to accept sacrifice as part of your ultimate commitment to success.
Think of it this way: You don’t build a house without inconvenience and a degree of discomfort. Starting a new business involves more of a sacrifice than many people are willing to accept. If you have to have a paycheck after a week’s worth of work, being self-employed is not the right fit for you. Business people understand that there are weeks that you will make less than you hoped, and hopefully weeks where you will make much more than you anticipated. Many of us welcome the later, but won’t accept the former. Rewards come to those who sacrifice. Knowing and accepting that reality going into the process increases greatly your chances for success.
5. The power of positive thinking is often a key factor in making the difference between folding and holding on.
At some point, just about every new business owner will find herself facing a series of insurmountable challenges. How you react during these times of trouble will often make that critical difference between failure and success. Entrepreneurship is fueled by the power of positive thinking. Beware if you don’t think you have that positive drive within you. Success is not the result of negative energy. It’s a direct result of a can do attitude.
Ultimately if you see life as a challenge waiting to be met, starting your own business might be one more great adventure in a life well lived.
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