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Should you start your own business?
Are you thinking of starting a business? Maybe you’re a biomedical researcher with an idea that could save thousands of lives. Or maybe you’re a baker who’d like to own her own bakery. Either way, the idea of creating something valuable and enduring through your own expertise and dedication is exhilarating.
Before you start out though, pause and think carefully. There are a number of factors to consider in starting a business. It’s not to say you shouldn’t make the leap.
Entrepreneurship is what drives our economy and makes us all richer from year to year.
But making a success of entrepreneurship is hard. And not all of us are cut out to be a startup founder.
The key question is: will it be the right thing for you?
In this article, I’ll fill you in on pretty much everything to know about starting a business.
You’ll need to leap from being a skilled employee to a business leader
Many startup founders have expertise they put to use working for someone else. At a certain point, they decide they would rather use their expertise to strike out on their own. Some people think they would make more money that way. Others would just prefer to be their own boss.
These are valid reasons, but they miss a crucial point.
The skills you use in employment are technical skills. You might be good at arguing the law, building websites, repairing gas boilers or cutting hair. These are valuable skills but they are very different from the ones you need to launch and run a business.
When you set up your own business, you become the CEO. You may not give yourself that title, but that’s what you are.
As such you need to analyse your market and your competitors, create a sound strategy, market your products or services, hire and coach staff, purchase supplies, manage operations, deal with contractors or agencies, control your accounting and financials and many other things besides.
You may have little or no experience in many of these other disciplines.
That’s not to say you can’t learn them – perhaps you can. If you can’t, or you don’t have time, you could hire other people to do them for you. But you may find you have little time left over to deploy the expertise that was your motivation for launching your business in the first place.
For entrepreneurs who launched their business to give free rein to their distinctive skills, this can come as a shock. Instead of spending their day solving client’s IT problems or buying and selling properties, they now spend it drawing up financial budgets and filing tax returns.
Here are some of the attributes you’ll need for success
You’ll need a range of personal qualities to transition from being an employee to being an entrepreneur. Some of these you can develop over time, but some are hard to learn. They are the attributes that entrepreneurs need to survive the bumpy road of business.
Here are some of the main ones:
Personal resilience and strength of character. Unless you’re lucky, you will face knocks and setbacks on your road to success. You need to have the grit and determination to keep going and find a way through whatever problems come between you and your goals.
Work ethic. Running your own business is very hard work. You must be willing to put in the hours to keep your clients happy. There’s nobody to fall back on but yourself. For a while, you’ll probably need to sacrifice your personal or family life to get your business off the ground.
Ability to learn quickly and adapt. You need a guiding vision of what you want to create with your business. But you’ll also need to learn as you go along. There will be things you can’t know at the outset and the world can also change in unexpected ways. So you must be willing to drop things that aren’t working and pivot to a new strategy if that’s what is needed.
Risk appetite. As a startup entrepreneur you need to be comfortable with risk. You must be able to take considered decisions, based on the balance of risk and reward, without full information. In other words, you must be able to take calculated risks rather than freezing and doing nothing.
Patience. Sometimes, things just take time to work. If you’ve evaluated a choice from all the angles and you’re convinced what you’re doing is right, you need to be willing to persevere until results come good. Nobody created a valuable business overnight.
The startup company failure rate is more than 50%
Unfortunately, most startup businesses eventually fail. That’s what happens when people try to do something hard – often it doesn’t work out.
A high failure rate is logical. If setting up a new business were easy, nobody would make any profit out of it. If something is easy to do, everyone starts doing it, the market becomes over-supplied, prices get beaten down and it’s impossible to make money.
Actually it’s not true to say that all businesses are hard to set up. Some businesses are easy to get into. They’re the ones to avoid. What you should try to do instead is launch a business that’s hard to do but where you can crack the code and make it work. That’s the way to make money.
So taking the right decision about what business to start is crucial to your future success. Take your time over it.
Of course, nobody thinks their own startup venture will fail. Even when they read the statistics about the startup company failure rate they think it won’t apply to them.
Yet the figures don’t lie, and they can be a bit daunting.
According to the UK’s Office for National Statistics, only 54% of businesses started in 2016 were still alive three years later.
According to the US government’s Bureau of Labor Statistics the three year survival rate for startups has been consistently around 60% and the five year survival rate around 48-50% (outside periods of extreme stress such as the financial crisis, when survival rates were lower). For the cohort of businesses launched in 2015, the three and five year survival rates were 61% and 50% respectively.
Why do so many startup companies not survive?
Here are the issues that are cited most often in surveys on startup failure:
Flawed business idea. In other words, there wasn’t enough demand for the product to make the business economically viable. This might be because the product wasn’t good enough, because the market was too small or for other reasons.
Excessive competition. Sometimes there’s lots of demand for a product but many competitors are pitching a similar offer. If you can’t make what you offer distinctive in ways that customers value, it’s going to be hard to survive.
Marketing failure. In this case, the product or service could have formed the basis for a profitable business. Yet the founders fail to market what they offer effectively and customers don’t hear about it or don’t purchase when they do. Common reasons include defining the target customer too broadly, failing to focus on the customer’s pain point and choosing the wrong channels.
Other execution failures. These include lack of a clear strategy to create a profitable business model, overwork due to failure to delegate, inefficient business processes, poor leadership skills and failure to take advice. Rushing to launch without adequate planning is a common factor.
Team problems. When a business is set up by co-founders they sadly sometimes fall out. Either the relationship breaks down under the strain of the workload or it turns out they have incompatible visions for what they want the business to achieve.
Financial problems. Startups that could have become profitable can run out of cash before they are able to reach breakeven. Sometimes founders lack the financial acumen required to put together a credible business plan. In other cases they are simply hit by an unexpected outside events that render their targets unachievable.
You can maximise your chances of success by creating a sound strategy for your business. That will require you to research your market thoroughly and come up with a product design that solves a customer pain point. Then you must test your product idea before launching to make sure it will satisfy your customer’s needs in ways that are distinctive and compelling.
Benefits of starting your own business
If your business succeeds, the most oft-cited benefits include:
Autonomy. You have the freedom to run the business as you wish, including everything from making your own hours to following your own instincts.
Prestige. You’re the CEO. If you’re successful your employees will respect you while outsiders will admire your achievement.
Money. You might make lots of it. And you don’t need to be a tech wizard to get rich through your own business. Up and down the country many wealthy people have made several millions from starting, running and selling very humdrum businesses.
Downsides of starting your own business
Even if your business takes off, there are potential downsides to consider:
Workload. Running your own business can be all-consuming. You might have got rid of your old boss, but now your customers are your boss. It may be hard to take holidays or even to switch off at the weekend. If something comes up, you need to respond.
Stress. Even successful businesses face setbacks from time to time. Sometimes suppliers don’t meet their commitments, staff resign, customers don’t pay you and so on. These events can be stressful, especially if they threaten the survival of your business.
Money. In a worst case, you might lose everything you’ve invested in your business. It may not even be your fault. Who foresaw events like the 2008-09 financial crisis and the global pandemic? Sadly these sent many good businesses to the wall.
Summary
So there is no shortage of reasons to start your own business. But there’s also plenty to think about before you take the plunge. Give particular thought to these questions:
Have you done adequate research on your business idea, your target market and the core skills you will need to succeed? Where are the gaps in your skill set (there will be some)? Have you identified what you will do to bring in outside help?
Are you confident you have the personal resilience to deal with the setbacks and stresses you may face? Have you tapped into all the available sources of help for startups? Do you have a strong support network of family and friends to help you through when times are tough?
Do you have a realistic idea of how long it will take for your business to reach break even? Are you willing to temporarily set aside the rest of your life and put in the hard slog you’ll need to get your business to that point? And do you have enough cash to fund your business and your living costs in the meantime?
If you can tick all these boxes, then good luck with your turning your idea into a profitable, thriving business.