At HRmarketer, we get the opportunity to work with a lot of startups in the human resource supplier community. And throughout my career, I have been involved in the startup of four businesses - including a new division within a Fortune 50 company, a failed dot com, a highly successful employee benefit firm and of course, Fisher Vista, LLC / HRmarketer.com. So I have a real admiration for entrepreneurs. But the odds are against entrepreneurs. New businesses suffer a disproportionate failure rate in both boom times and bad. The U.S. Commerce Dept. says that of every 10 small businesses, 7 will survive their first year, 3 will still be going after 3 years, and only 2 will remain after 5 years.
So why do so many new businesses fail?
People a lot smarter than myself have conducted a lot of research to answer that question. But I don't think it is all that difficult of a question to answer. The most common reason, I believe, is the company's leader. Not everyone is cut out for starting and leading a business. In fact, I remember attending a garage.com event where a leading venture capitalist explained what they looked for when investing in a startup. They made an analogy to a race track where the marketplace was the track, the product was the horse and the company's leader was the jockey. Ideally, they wanted to invest in a company with a great product in a growing market with a great leader(ship). However, they would settle for a good product in a good marketplace with a great leader. But they would never take a great product in a great market with an average leader. (Incidentally, you never want to settle for a great leader with a bad product in a bad marketplace).
Anyway, I saw this online quiz titled "Are You Ready to Be Your Own Boss? Granted this quiz is primarily for small sole proprietor businesses and yes, they are very trivial questions but they do begin to address some very critical points about starting your own business (regardless of size) - time, costs and revenue.
With that in mind, I came up with my own rules for starting a business that incorporate these important concepts. I call them the "three truths". They can also be applied to the launching of new products within an established company.
Three Truths of Starting a Business (or, launching a new product):
1. Determine how much it will cost – double it
2. Determine how much time you’ll spend on it. Double it.
3. Estimate how much revenue you’ll make the first year. Half it.
Still want to do it?
Posted by Mark Willaman
Labels: entrepreneurs, leadership, startup