The Bureau of Labor Statistics reports that 20% of all new businesses fail within one year. Extend that to five years, and fully 50% will have vanished. The No. 1 reason most start-ups tank is lack of capitalization and starvation for cash flow.
Rounding out the top three reasons businesses fail is poor leadership and an inability to adapt rapidly to change.
But there is a more comprehensive reason businesses fail that does not show up in hard statistical analysis. It’s the fact that some newbie entrepreneurs simply were not ready to take on a start-up.
First-time business owners find that they got themselves into something that was a lot more difficult than they expected it to be. Others quickly lose the passion they thought they had after they get bogged down in the “boring” nitty-gritty details of getting basic business done.
Thus, if you’re contemplating a new business, ask yourself if you are truly ready to handle what it takes to get through the inevitable tough days ahead — because they will certainly accompany the heady thrill of building a successful enterprise. How do you really know if you are ready?
Do What You Love and the Money Will Follow
The aforementioned “passion” for your business idea is critical. You must have a genuine love for what you plan to do. As we said, many people find that the passion fades — sometimes rather easily — once the going gets tough. However, those who command a genuine, true-to-the-bone passion for their venture will be able to ride out the dark days.
You Have a Solid Plan — In Writing
Often cited in the top three or four reasons for business failure is the lack of a formal, written business plan. It must be more than some back-of-a-napkin scribblings. A formal business plan spells out a strategy in detail, with specific timelines and sharply defined goals. They also crunch numbers, including financial forecasts. If you don’t have a business plan, you have a plan to fail.
You Are mentally Prepared to Handle Failure
Every successful businessman and businesswoman have one thing in common: The ability to keep their confidence intact even when they fail spectacularly. They have the fortitude to “get right back up on the horse” after getting thrown off hard and painfully.
If you have that “I never quite” moxie, you’re ready to start a new enterprise.