There’s an oft-repeated statistic claiming that half of all businesses fail in the first year. That’s a myth. But the truth is not a whole lot more soothing. Fully 50 percent of small businesses fail in the first five years, according to the Small Business Administration. To survive, a new business owner needs to avoid some of the common blunders known to derail many an entrepreneurial dream. Who better to learn than from those who have failed?
“When aspiring entrepreneurs listen to people who have successfully or unsuccessfully weathered those storms and dealt with those blows, that's when the real lessons are learned – from people in the trenches who have fallen as many times as they've succeeded,” said Scott Gerber, a serial entrepreneur and syndicated small business columnist, whose forthcoming book, “Never Get a ‘Real’ Job: How to Dump Your Boss, Build a Business and Not Go Broke,” is all about what he learned from his failures.
Gerber and small business consultant Denise Beeson offer a few tips on how entrepreneurs can prepare to make the “largest investment” of their lives.
Don’t forget to have a reserve fund: Emergencies happen. Money put into a reserve fund can pay for unexpected expenses. “Also, when opportunities occur, that reserve fund can provide additional capital to buy inventory, raw materials or hire labor,” Beeson said.
Stop trying to be original: “Every aspect of a business does not, and should not, be revolutionary or unique,” Gerber said. “I always say, those that set out to revolutionize the wheel will be run over by it.” Entrepreneurs need to stick to the basics and learn to be unoriginal in some ways in order to become profitable, he said.
Don’t base your business model on the belief you’ll get funding: “No one will invest in your idea,” Gerber said. “Nowadays, no one is looking to invest in an unproven, revenueless startup. Investors only want to put money into proven businesses with real clients and real revenue with strong, proven managers. Your business needs to get to that point before you seek any sort of investment dollars.” Gerber suggests focusing on generating revenue and profit instead of seeking outside funding.
Don’t sit around and wait for customers: Set aside a portion of the day to sell. “A business will not be successful unless prospecting for new clients occurs daily,” Beeson says. “The market is dynamic so clients come and go. The sales activity should be a part of each day.”
“Too many aspiring entrepreneurs believe they can just launch their business into the world and from that day forward they will be on the road to easy street. It just isn't so. Markets change. Demand changes,” Gerber said. “And an entrepreneur's world changes – almost entirely – on a nearly daily basis.”