Every day, people across this country decide that they are going to give up their nine to five and start a business. Our society champions the entrepreneur—that remarkable figure held up as an example of all the promise and potential that lies within us and can be unlocked in a country that serves as a beacon of freedom and economic opportunity.
But a word to the wise: starting a business is no simple feat. The remarkable successes of icons such as David Smith, Mark Zuckerberg, Oprah Winfrey, or Richard Branson are the exception and not the rule. In fact, the vast majority of businesses rarely make it past five years.
That is not to say that people should find discouragement in setting out to test the waters of entrepreneurship. For many, it’s a rewarding path that teaches them as much more about themselves than being subservient in already established businesses.
I have been an entrepreneur for more than 25 years. It’s been a road to financial independence, allowing the opportunity for me to seize greater control of my personal schedule and destiny. Here are a few things to keep in mind when first embarking on the trail of entrepreneurship:
Manage your expenses, and do it well! Flushed with cash and sometimes intoxicated by the excitement of new ventures, many new business owners often make the mistake of spending money quickly in order to get the business off the ground, develop marketing materials, purchase equipment, etc. To the greatest extent possible, you must relentlessly manage those expenses. Market forces will ultimately control your ability to turn a profit, but the one area on your balance sheet that is totally within your sway is the amount of capital you rid on expenses. As with your body, live lean and you will feel healthier.
Be creative in finding your niche that separates you with uniqueness from any potential competition. For the areas where you might excel but lack experience, don’t be afraid to bring in expertise for lending advice or even introducing into partnership. Think about it, 50% ownership of a company worth $10 million is far better than a 100% stake of a failed idea.
Capitalize the company appropriately at it’s provenience through developing a business plan that thoroughly emphasizes validates profitability. Do not make the mistake of assuming you will automatically become more profitable simply by expanding.
It is imperative not to rely too heavily on a handful of customers. Especially in a service-based business, you can expose yourself to tremendous risk in becoming too heavily dependent upon a single sales demographic. Even though those customers may seem stable at the time, there is no guarantee they will remain in your market for long. Even if you are doing an excellent job in providing top-tier service, situations change, budgets can suddenly be adjusted and companies can make decisions to head in other directions. If you are reliant on a small number of clients then the disappearance of one will consequently deliver a devastating blow.
In building contacts be sure to actually spend time with prospects via genuinely building an acquaintance with them, so far as to certify the hiring of the right man for the job as it were. This is especially critical in the early stages of business development.
In entrepreneurship you should strive to continuously stock your pipeline with new prospects. To avoid being caught without any customers you should be constantly working to line up new prospects while simultaneously servicing the customers you already have. This can be one of the trickiest balancing acts performed by a small company, especially in the case of one that is in still in their start-up phase. While the cost of acquiring customers is always higher than the cost of retaining them, the time to dig your well is before you are thirsty. This principle of preparedness is necessary not only in business but also in everyday life.
Be sure to brace yourself for turbulent times. The media paints a distorted picture of what success looks like. For a handful of companies, which really only represent a miniscule fraction of the top 1 percent of businesses, growth is explosive and off the charts. For everyone else this line doesn’t look like to be climbing higher on a chart, but more so favoring that of a roller coaster. For nearly every new business there will be dramatic ups and downs, especially in the earlier years of the business. Entrepreneurs will learn very fast whether or not they have the pertinacity to stomach the unavoidable downs that could potentially punctuate the gains.
Make no mistake about it, there is opportunity available to those willing to take a leap of faith and go it alone. The key is to know what you should expect before you take a leap with your new enterprise. Prepare yourself. Don’t look back. Try to enjoy the ride and try to avoid the killer mistakes that can cause a crash landing.