So many people tell me they want to start their own business. I get letters every week from people wanting my advice around this topic. A recent poll says that 55% of millennials want to go into business for themselves. I admire people who have that entrepreneurial spirit and want to take control of their future.
But when I respond to this question when asked, people think I am a downer because I am rarely encouraging. Maybe it is because I know the stats on how few of them will succeed. I know because I can read, use a search engine and am a realist. By the way, depending on whose research you want to go with, somewhere between 33-50% fail in first two years and somewhere between 60-90% are history at five years. And don’t say, “Yeah, but I won’t be one of them!” Really? They probably all said that. So let me ask you, “Why won’t you?” Don’t answer yet; read the rest of this first.
To begin with, very few people will actually start their own business. It is a dream but will never become a reality for most. Why? Laziness. Most folks are great at dreaming about what they want but when it comes to putting their butt into gear and actually doing the work, they sit down and turn the television back on and realize that job they have where the check shows up every other Friday isn’t so bad after all. So the years go by and nothing in their life changes.
But that is for the people who don’t start their own businesses, and I want to talk about those who actually DO start their own business. Why do so many businesses fail? You can do a Google search and in a few seconds read dozens of articles on why businesses fail. Do that . . . but do it after you read what I have to say.
Why do most businesses fail? Lack of preparation.
Answer these questions:
- Do you have real-world, hands-on experience in running a business, or are you just convinced you can do it?
- Have you read a book on how to start a business?
- Have you taken a course on marketing or advertising?
- Do you know how to hire, fire, train and manage people?
- Are you under-capitalized? Do you even know what that means?
- Do you know what a balance sheet is, or what your real expenses will be?
- Do you know what your break-even is, and what you are going to do when you are short and what you are going to do with the profits?
- Do you know the survival rate of businesses that do what you do?
- Do you know the importance of customer service and how to deliver it?
- Do you know how to sell?
- Do you know what sets you apart from your competitors?
- Do you even know if there is a need or market for your product or service? Are you sure? Before you answer that one, what analysis have you done? Just because your BFF and your sister-in-law said they would buy from you, it doesn’t mean there is a need.
Or are you opening your business based on your passion for what you do or your desire to be your own boss? If that is your delusion, you will soon be disappointed. And you will be broke and discouraged and right back where you started only in much worse shape. Wiser, but broker.
Open a business because you provide a needed service and because you solve a problem, and then only do it when you are prepared. Don’t let passion (defined as an “uncontrollable emotion”) be your guide. Logic, money, research, skills, preparedness and market need should instead be your determining factors.
And be clear about this: regardless of what some coaches and MLM companies might tell you, some people are not meant to be in business for themselves. Not everyone is cut out to be an entrepreneur. In fact, ask the MLM folks to show you the stats on how many who start, actually stay. And ask to see real numbers on how much money they really make. MLM is like everything else; it looks great from the outside but the reality is, very few make any real money. Sooner, rather than later, you will run out of friends to sell to. Then what will you do? Spam people’s threads on Facebook? That is your marketing plan?
This is reality: Some people are much better off having a job, working for someone who knows how to run a profitable business. That is nothing to be ashamed of, but something to be very proud of. I am sick of the concept that working for someone else is “settling for a job when you could be living your dream of living life on your own terms.” For almost everyone whose dream it is to go into business for themselves, that dream can quickly become a nightmare. And no one who does make it will tell you they live life on their own terms. To be successful in business you will live your life on the terms of your banker, your suppliers, your employees, your customers, the government and the economy. Get real before you start telling people to become an entrepreneur. Usually that is the worst advice you can give someone. Most people want and need a job. There is much more freedom in working for someone else than in owning your own business. So if you are that person (and most are) who is happy to go to work and do your job, then be thankful that you have one, and give it your best every day. Few things are more honorable.
Finally, before you think about going into business I want you to answer in detail and on paper each of the questions I asked above. I want you to examine yourself. I want you to be brutally honest with yourself about your skills. I want you to know the value you bring to the marketplace and to actually know the marketplace. And I want you to remember the words of Dirty Harry: ” A good man knows his limitations.”
Now, after reading this, answer the question I asked earlier: “Why won’t you go out of business like the majority of people who do? What makes you different? How prepared are you?”
Larry Winget – the Pitbull of Personal Development