So you are looking to start a new business. Good for you. It is great to see that the spirit of entrepreneurship is still alive and well. Now, you need to ask yourself a very important question: How long do you want your business to be around? I’m not being facetious. Over half of all new businesses last for less than five years. In case you do make it that long, you should know that less than a third make it ten years. If you want your new business to last longer than that, you are going to have to do something different than the average entrepreneur.
Here is at least some of what it is going to take:
An Implementable Plan
There are a lot of people with a lot of great ideas and grand visions out there. But none of those grand visions amount to an implementable plan. To be sure, most of those people have some kind of a plan. But there is a big difference between having a plan, and a step-by-step implementation plan.
Just because you’ve bought a new computer and specialized software does not mean you are able to implement a productive workflow. Many software providers are well aware of that, and go the extra mile to make sure you are able to implement your plan.
A good example of this is Procore software implementation. As a part of the onboarding process, they:
…identify your business’ key metrics for success with regard to construction management software. [and] …train the key users within your organization. Training is accomplished either in person or via teleconference, and live sessions are supplemented by online videos available for review.
If your plan cannot be implemented, then it really is not much of a plan.
A Clear Reason for the Customer to Choose You
Forbes offered “Five Reasons 8 Out Of 10 Businesses Fail”. The failure rate they quote is questionable, and ultimately meaningless. All businesses fail over a long enough time span. But when over half fail in five years, there is a problem. The first three problems identified in the article could be combined as one: Entrepreneurs fail to make a compelling case why consumers should choose them over the other company they are already using.
According to Bill Gross: one of the more prolific entrepreneurs,
You need to make sure your product is 10x better than that of your competitors.
Being a little better is simply not a compelling reason to switch. Consumers do not switch brands lightly. You can release a product that is a little better than the one they use. So what? The company they like will also release a product that is a little better than what they use. Steve Jobs used to describe new products as being five years ahead of the competition. Consumers have to believe that you are offering something that they want, and can’t get anywhere else. Without that, there is little reason for your business to exist, at least, as far as the consumer is concerned.
A Profitable Business Model
Twitter is a prime example of a successful looking business that has yet to make any money. According to the Economist:
So far, however, Twitter is a more important cultural force than a commercial one. It remains unprofitable according to general accounting principles, and this is not expected to change until at least 2017
For years, Twitter lived off of venture capital. Now, it is living off of investors who are hoping against hope that one day, Twitter will start making money. You cannot survive like that. You have to have a product or service that you can lease or sell for more money than it costs you to produce. At the end of the day, you have to sell something for money. Whether it is a product to customers, or customer data to advertisers, you have to sell something for a profit. Otherwise, you are not really in business.
Ultimately, what you want from a business is a good return on investment. No business lasts forever. A five year business can be considered successful if it made you money. Go into it with an implementable plan, a reason for customers to choose you, a profitable business model, and realistic expectations, and you’ll do just fine.
Featured image credit: Concept of fast business with running businessman/ShutterStock