Monday Mornings with Madison

Best Advice for Entrepreneurs Starting a Business

Word Count: 1,718
Estimated Read Time: 7 min.

By most accounts, the economy is doing well.  Unemployment and inflation are low.  And, the new tax laws are definitely ‘pro business’.  Indeed, the 2017 Tax Cuts and Jobs Act (TCJA) now allows many
owners of small proprietorships, trusts and S corporations to deduct 20% of their qualified business income.  That tax plan also features an abundance of new deductions, tax credits and tools for entrepreneurs to use to reduce their tax burden.

There are other conditions also favorable to entrepreneurs.  David Pridham wrote in Entrepreneur Magazine in January 2018 that, “Venture capital investment in startups surged to its highest level ever — $148 billion in 2017.  And more than 40 VC-backed companies achieved billion-dollar valuations and joined the unicorn club that year.”[1] Also, there are other sources for business capital, including micro loans, SBA loans, and grants for women-owned and minority-owned small businesses.  Technology is also providing an assist.  With so many services available online through freelancers, companies can get services they need with little of the overhead that drained startups in the past.  Given the favorable landscape, it is no surprise that startups have soared in the U.S.

However, figures show that despite the favorable conditions, it is still challenging for new businesses to succeed.   There are roughly about 5 million businesses created every year.  However, only about 56% of all businesses launched in 2014 are still in business in 2019, just five years later.  That is a failure rate of 44%, and it varies by industry.

The top 10 factors that contribute to business failure in the U.S.[2] right now are:

Lack of market demand                                 42%

Ran out of capital                                             29%

Wrong leadership / staff                               23%

Beaten by the competition                          19%

Incorrect pricing / cost                                   18%

Product not user-friendly                             17%

No business model                                          17%

Poor / weak marketing                                  14%

Poor customer service                                   14%

Bad timing of product                                    13%

That said, there are five elements that most successful startups have in common:

  • Market – A solid market for the product/service
  • Disruption – The product or service is different in some way
  • Mentoring – Running a business requires knowledge about a great deal of things besides the product or service, including accounting, marketing, technology, compliance, taxes and much more.  Guidance is essential for startups.
  • Multiple Leaders – As the old saying goes, two heads are better than one.  Companies that have at least two founders increases the odds of succeeding significantly over those with just one founder.  Those startups are able to raise 30% more money and have 3x the user growth.  For example, Mark Zuckerberg was just getting Facebook off the ground in 2004. Short on cash, he gave Eduardo Saverin 30% of the company in order to get $15,000 of capital to pay for the servers to run Facebook. Shortly thereafter, Zuckerberg met Sean Parker, former creator of music website Napster, who became Facebook’s first President and introduced Zuckerberg to Peter Thiel. Peter Thiel, former PayPal CEO, then became the first big investor in Facebook with $500,000 of capital on a $5 million valuation. For Zuckerberg, finding the right partner was instrumental in raising the capital to take Facebook to the next level.
  • Grit – Dr. Angela Duckworth indicated in her book, Grit, that the secret to achievement is not talent, genius/IQ, or skill but rather grit.  She defined grit as a special blend of passion and persistence.  She found that grit was the greatest predictor in business success.

Based on that, here are some words of wisdom for those starting a new business, whether it’s their first business or the 51st.  (And, incidentally, people who failed at a business in the past are 30% more likely to succeed in their next business venture.  Walt Disney is included in that category.)

  1. “Look for the biggest problem and solve it because therein lies your greatest opportunity.”

    – Frits Segers

    The number one reason why businesses fail is that there is no demand for their product.  Don’t try to convince people to want what you are peddling.  Find out what people need and deliver that.  When you solve a problem, selling the product or service becomes much easier.

  2. “An original approach to executing ideas is critical in business.”
    – Tim Gibbon

    Almost 20% of all businesses fail because they were eaten or beat by the competition.  Thus, Tony Robbins was right in saying that “if you always do what you’ve always done, then you always get what you always got.”  While it is true that there is nothing new under the sun, what entrepreneurs need is not necessarily to be original but to take an original approach.  Dare to look at and interpret things differently.  That is what the marketplace needs… not replicas but a fresh take… a better way.  The biggest asset in business is in not being like everyone else.  So new business owners should not copy or covet.  Create and embrace a new idea… a new slant on a product or service… no matter how zany it may sound to someone else.

  3. “Our doubts are traitors, and make us lose the good we oft might win, by fearing to attempt.”  — William Shakespeare
    Stats show that 23% of all businesses fail because they do not have the right leadership and staff.  A big part of that is in having people with the courage, knowledge and drive to persevere despite obstacles, doubts and naysayers.  Though the Bard was not a business man in the traditional sense, he had to sell his words to make a living.  Today we might call him a Solopreneur.  But, what Shakespeare understood 500+ years ago and it is still true today is that there is little value in self-doubt.  An entrepreneur must recognize the value of what he or she is trying to create or do, and realize that a failure to see it through will have a significant impact.  Surely, Elon Musk refused to indulge doubts or listen to naysayers when he decided to launch a company mass-producing affordable electric cars or another whose aim was to colonize Mars.  Today, Tesla and Space X are doing what was thought impossible and insane just a decade ago.
  4. “Don’t worry about failures, worry about the chances you miss when you don’t even try.”
  5. Jack Canfield

    Ask for what you want.  Ask for the deal.  Ask for the contract.  Ask for the sale.  It never hurts to ask.  You may get a no 10% of the time, or 50% or 75% or even 95% of the time, but you will get a no 100% of the time if you never ask.

  6. “Your success will be determined by your own confidence and fortitude.”
  7. U.S. First Lady Michelle Obama

    Be confident — not craven confrontational or cocky — in asking for what you want.  You have a unique and powerful perspective to offer, and walking in that power means walking with confidence – not arrogance or fear.  It is easy to fall prey to fear for first time entrepreneurs, and just as easy to become arrogant for experienced entrepreneurs.  The key, then, is to find a healthy balance between either extreme.

  8. “It is the job of any business owner to be clear about the company’s non-negotiable core values. They are the riverbanks that help guide us as we refine and improve on performance and excellence. A lack of riverbanks creates estuaries and cloudy waters that are confusing to navigate. I want a crystal-clear, swiftly flowing stream.”
    Danny Meyer

    Establish your company’s values.  Determine what is fundamentally important to you and then make sure everything you do aligns with those values.  One of the most challenging things to do is to say NO or I’LL PASS.  Be willing to walk away from things that cease to align with the company’s values and mission.  Don’t waver, even if pushed, pulled or persuaded to change for the sake of the business’ expediency, growth, trends or success.  It is good to be flexible and open-minded about everything except core values.

  9. “Compromising is like standing in the middle of a railroad track. There is a person on one side of the track telling you to move off the tracks to the left, and a second person on the other side of the tracks suggesting you move off to the right. You could compromise and stand in the middle   — where you’ll get smacked by an oncoming train.”
  10. Jay Steinfeld

    There is no such thing as making a good deal with bad people.   No amount of wealth is worth compromises of character.

  11. You cannot stop the waves, but you can learn to surf.”
  12. Dr. Jon Kabat-Zinn

    In business, you will constantly face obstacles.  Market challenges.  Changes in technology.  Competitors.   Trials will hit like relentless waves striking the beach.  It is important to understand that there are things you can change and things you cannot.  You cannot control everything that comes at you, but you do have the power to control how you react to it.  When challenged, get help or seek advice.

  13. “A ship in the harbor is safe, but that is not what ships are built for.”
  14. John A. Shedd

    Over 65% of all businesses that fail do so because what they do or make is not a fit for the marketplace.  It doesn’t do what it was meant to do.  The price is wrong or is not user-friendly.  Or, it is not marketed in a way that appeals to the right audience.  Or, the business model does not make sense.  Be sure the product makes sense for the market… that it does what it is intended to do, is priced according to what the market will bear, fits into a business model and can be marketed in a way that makes sense.

  15. “Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.”

President Calvin Coolidge

And as Churchill once proclaimed, “Never, never, never give up.”  Perseverance pays.  Grit is the number one biggest predictor of success. So don’t give up in spite of the challenges and obstacles.

Some of this advice may sound cliché and obvious.  However, for those struggling to start or grow a business, these pieces of wisdom, shared by people who achieved success in their own professional lives, might just be exactly the words of insight and encouragement needed.

Quote of the Week
“The gig economy is empowerment. This new business paradigm empowers individuals to better shape their own destiny and leverage their existing assets to their benefit.”
John McAfee


[1] January 10, 2018, Pridham, David, Entrepreneurs:  Here’s Good News for 2018,  Entrepreneur Magazine,  https://www.forbes.com/sites/davidpridham/2018/01/10/entrepreneurs-heres-good-news-for-2018/#5fd157866659

[2] March 28, 2019, Matt Mansfield, STARTUP STATISTICS:  The Numbers You Need to Know, Small Biz Trends, https://smallbiztrends.com/2019/03/startup-statistics-small-business.html

 

© 2019, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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