Jimmy Buffett’s hit song, The Weather Is Here, Wish You Were Beautiful, starts off with his band members demanding things from him. “Where’s my per diem? Where’s the keys to the rent-a-car? Jimmy, Jimmy, can I open the show in Atlanta please?” He then offers a warning to his listeners, “Don’t ever start a band!”
Buffett’s warning is perfect.
He reminds us that most people only see the glamorous side of making music. This applies directly to business start-ups as well. If you look at how entrepreneurs are portrayed, you would think starting a business is fast, easy, fun and everyone makes a lot of money.
The truth is, creating a successful business is extremely difficult. According to the U.S. Bureau of Labor Statistics, about half of all new businesses will fail in the first five years and only a third will survive 10 years or more. This data suggests you are more likely to fail than succeed in your new business venture.
Knowing failure is almost inevitable, why even consider a business start-up? Why leave the comfort of a good job to pursue a risky venture? For one thing, it is one of the most rewarding challenges a business leader can undertake. The odds are stacked against you and it requires your absolute best effort to succeed. It’s also yours. You can shape the vision and culture to reflect your personal values. You will sink or swim based on your own actions. For many, that is reason enough to dive in.
Having recently started a new business, Peak Demand Inc., I thought I would share some of the lessons I learned in the past year. Creating a successful business is difficult but you can make it easier on yourself if you consider these five important points:
Check your motivation. Examine the reasons why you want to be an entrepreneur. If you want to start a business just because you hate your job, you’re probably going to hate this job too. What’s your passion? Is it a lifelong dream? Are you trying to get rich quick? Are you trying to solve a problem in an industry? Do you see an unmet market opportunity? Being an entrepreneur is a 24/7 thing so choose something you love doing and can make money doing it.
“Never start a business just to make money. Start a business to make a difference.” Marie Forleo
Understand your skills and experience. This is important. To be successful on your own, you need to be so good at something that people are willing to pay you to do it. If you’re in your early 20’s and starting a life coaching business, don’t be surprised if you struggle to find clients. You haven’t had enough life experience yet. Also, consider your competition. Are you better at doing something than the other players in the market?
“Revenue is vanity. Profit is sanity. Cash is reality.” Greg Savage
Have a solid plan. Create a business plan that will stand up to the scrutiny of a bank or private investor even if you are self-funding the start-up. Review your plan with respected colleagues and listen to their advice. Spend a significant time on the cash flow projections. You will likely need more cash than you think, so be very conservative.
Hire the right team. I wrote about this in an article called The Secret to Building an Unstoppable Team. To build a successful company, you need a great team. Look for individuals with complementary skills sets, those with a high level of competency, people who have proven themselves under pressure and have a “mission first” mindset. A bad hire will hurt a big company but it will be a disaster in a small company.
Build a support network. Building a successful company requires a strong network of support resources. Connect with other entrepreneurs in your area to seek advice. You will need a banker, a lawyer and an accountant as a minimum. You will also likely need marketing support for your brand identity and website. Look for resources who specialize in supporting small businesses.
Prepare to strap in. Starting a business can be a long and difficult process. Getting customers to understand your value proposition and recognize your brand won’t happen overnight. It can be an emotional rollercoaster with extreme highs and lows. If you prepare yourself and your family mentally for this journey, it will make the ride more enjoyable.
Starting a company has been one of the hardest but most rewarding experiences in my business career. Like many, I ignored the warnings, the statistics and the naysayers and dove head first into start-up life. If you are thinking of joining the ranks of entrepreneurs, carefully consider the six points above. The better prepared you are, the more successful you will be. So, go ahead…start a band!
What do you think? Are there other factors to consider before starting a company? Why do so many small businesses fail? Why is start-up life glorified? What has been your start-up experience? Let me know in the comment section below.