The Business Development Institute

Challenges: What Are The Odds For Success

Consider the following: From the Ontario Government Web site:

The Odds of Success Starting your own business is risky. Of all companies started,

about a third fail within one year,

and half fail within two years.

80% fail within three to five years

Consider for a moment the following statistics from other sources:

1 out 3 businesses will close their doors within 6 months

3 out of 4 will fail within 5 years

9 out of 10 will eventually close

Now these statistics may vary depending on the criteria used to define failure. The point to be made here is that most business ventures do not survive.

How Do We Lower The Rate Of Small Business Failure?

This is a very difficult and complex question to try and answer. Unfortunately there is no simple and easy way to even approach the challenge.

To begin with, although certain schools of thought may advocate or highlight several basic reasons, such as an inadequate understanding of the business or lack of capital as the problems, there are many more variables that do play a significant role in the ultimate failure of the business. Since the business owner/entrepreneur approaches the creation of the business from a very personal vision, this in and of itself is probably the greatest single issue that should be addressed. Others agree that business failure is not generally a function of the business itself, but is a function of the person who owns and operates the business, and that the issue of failure needs to be dealt with long before any type of business programs or plans are considered.

It is in the creation phase where the seeds of potential failure are sown. This should be the starting point, in trying to have an impact on the statistically predictable failure rate that the new entrepreneur/owner faces.

It’s also true, that starting a business is relatively easy. Keeping it alive is the difficult challenge.

The Entrepreneurial Process

Consider for a moment how small businesses are started. Typically, once the individual is aware of where the opportunities are, and which of them they might be equipped to take advantage of, it is necessary for them to advance to a set of actions that are often referred to as entrepreneurial process. While the conditions under which people start or acquire businesses vary greatly, certain steps may be considered common to all. Importantly and necessarily, it is at this time that he/she must be prepared to ask themselves some very tough questions, some of which might be:

Do I really want to start or own a business? What are my real reasons for considering going into business? The motivation and commitment must be strong enough to sustain you when the excitement of the startup has passed, and the everyday grind begins.

Is there a product or service that fits my talents or desires? How should I address the opportunity? About 65% of new businesses are startups, 30% purchases of existing businesses, with the remainder inherited, promoted or otherwise brought into ownership. About 11% of the businesses operate under a franchise name.

Am I ready yet? Why do you think so many new business founders tend to be younger? Perhaps it is because they have enough experience to be confident, yet are still flexible enough to take some risk. What is your notion of an entrepreneur; born or made? Is it for you? Can you identify what additional skills or knowledge would increase your readiness.

How about women and minorities? Are there are additional considerations relevant to their chances of success. Why is it more difficult for them? Are they dealing with their perceptions and is there a "confidence gap?" Do they have to be "better" to make it, or is entrepreneurship the only true meritocracy? Is any disadvantage only at startup?

Do I have an adequate support structure? If you have a spouse, or are relying on some other form of family support, make sure that they understand the sacrifices involved and the pressures these will put on relationships.

Can I place developing this business over other interests and goals for the foreseeable future? Am I willing to take on the personal demands of entrepreneurship? For example, can I work a full day as an employee of another firm, and then work at my coffee shop evenings and weekends until it can support me full-time? There is more to life than work, and maintaining a balanced and healthy lifestyle can be a challenge for the self-employed.

Can I muster the resources to make the venture a success? Do I respond well to continuous pressure? Once I make the venture a full-time pursuit, can I live without a regular paycheck, a predictable work schedule, and for a while without vacations and other benefits? Even after startup, business concerns seldom end when you lock the door at closing time. Am I prepared for the possibility that I might lose my money and property, and damage my health and self-respect?

Resources

There are all kinds of resources associated with business startups. All levels of government, recognizing the important role that small business plays in the job creation market, try and provide support and assistance, in the startup phase. However, what is a business owner supposed to do, when the business is running into difficulty and trying to survive? There are plenty of generic resources available to guide the business owner/entrepreneur towards starting his business. But when it comes to a business that is failing or in trouble, many agencies, whose reason for being is to support small businesses, often find themselves helpless. They are equipped to help start-ups, not businesses in trouble.

Also generic solutions do not provide much help for the specific problems that business owners run into. Where does the business owner now turn for help?

In spite of their desire to do so, most outside agencies cannot affect real change in an individual business for several reasons. First, business failure cannot be overcome short of day-to-day corrective involvement in a venture. Most agencies are not prepared to do this. Second, by reason of personality, entrepreneurs and other types of people, generally do not perceive the world in similar ways. Third, the help is mostly being focused on the wrong problems.

So for a moment, consider the paradox. We have government agencies, banks, educators, friends and family all around, but really no one to help. To try and rely on the same sources for assistance that the large corporations use is out of the question. The cost is too prohibitive. Thus we’ve created the ultimate dilemma. Do we carry on for a few more days, weeks, months hoping that things will improve, or make that courageous decision to close?

Where Can Entrepreneurs Go To Try And Improve Their Chances Of Success?

As stated previously it is imperative to acquire the necessary knowledge. Although it won’t be easy, the foundation on which to build a successful business depends on the ability of the entrepreneur to have sufficient relevant knowledge to nurture and grow the business. Avail yourself of the help that exists in the marketplace, and get the professional assistance that will help you develop the proper strategy for your business. In doing so however, be sure you avoid some of the pitfalls of some of the questionable programs that are offered in the marketplace. In his book GROWING CONCERNS, published by the HARVARD BUSINESS REVIEW, the author David E. Gumpert cautions the business owner about quick fixes and questionable practices. He suggests avoiding some of the following claims, which are usually signs of a program with questionable quality:

"We have a battery of psychological tests that will predict whether you are an entrepreneur and whether you will succeed or fail." Such tests have never been validated; in fact, they may be misleading.

"We'll package and prepare your business plan." This is a route to avoid at all costs. It is easy, convenient, and fast, but it misses the entire point of the exercise, which is to help you yourself gain command of the intricacies and interrelationships of the components of your plan.

"We can raise the capital you need fast." Again, carts perform best behind horses; there are no 90-day wonders that last.

"We'll structure the deal so that you’ll be liquid in three or four years." Such promises are clues to naiveté and greed on behalf of the "helpers." Successful ventures usually take eight years or so to become solid businesses.

"First, let's incorporate so that you'll be protected." This reasoning is faulty. Prematurely locking into roles, stock ownership, and legal boundaries can seriously cripple your ability to form a realistic, motivating structure for your team.

Whatever the ultimate choice of “modus operandi” of the business owner, it is imperative that the business owner not lose sight of the odds against his/her success and select the most appropriate assistance possible.

It has been said, business is a jungle and only the fittest survive. Can you assure yourself of survival? No you can’t. But you can go a long way towards preventing failure.

How? By recognizing that you’ve got to become knowledgeable. By acknowledging your own limitations. By seeking the professional assistance you need. Look for the type of turnkey Business Development help that would harmonize with your desires, and create the capability to diminish the probability of failure?

Seek out a credible turnkey business development program