STUDIES show that a high percentage of people who open new businesses do so because they are frustrated with their current job. They’ll jump into any business venture that comes along without first checking it out. Ninety percent of this group will go out of business in their first year…
Every year, hundreds of thousands of dreams by way of new businesses are started. Most of these businesses are expected to fail, some will struggle along, and a few will thrive.
As I mentioned in my column last week approximately 80% will fail in the first 2 years and 96% of ALL startup businesses will fail within 10 years. The road ahead is tough and challenging.
Which ones thrive, and why? The reason some businesses experience consistent sales and profit growth from the start is not because they had a lot of money at the beginning. Their fast growth can be attributed to the fact that they started right and followed the most fundamental elements in managing a new business.
In every instance, the visionaries either had or acquired the experience and knowledge they needed to startup and run the business. They recognized what their weak points were, who their direct competitors in their chosen industry and they put in time and effort and invested in studying the market environment. Using these information and their networks, they subsequently established alliances, and acquired the skills they needed to start their company off right.
They also understood how the various parts of the business fit together to form a total structure and knew that if one part was missing, the total structure would break. For example, they knew that a successful sales plan is directly dependent upon support from the marketing and promotional plans, and that the strategic business plan acts as the glue that holds all the functional plans together so that they work in concert.
I have outlined several time tested guides for new entrepreneurs. It is my hope that by enumerating the minimum start up elements below, the new venture can be guided, move forward and hopefully defy the odds of being part of a bigger percentage of failed businesses.
Your Big Idea and a Compelling Story
26,000 new products and brands are introduced every year. Everybody has one, and most of them never get implemented. The successful entrepreneur starts with a basic idea. This idea is first tested and screened to determine its staying power. The fundamental questions must center on these issues:
Is the idea required by the market?
Is it distinct?
Is it sustainable?
Will it be profitable?
As a mentor to so many businesses, I have experienced mistakes after mistakes by founders in going forward with their ideas mostly by “gut feel” on whether or not the business opportunity seemed exciting.
Be Bold, Innovative but Pay Attention to Detail
The opposite of creativity is rigidity. Entrepreneurs are not rigid in their thinking. If you cling to the old ways of doing things because “that’s the way we have always done it,” you’ll never come up with the new solutions that are demanded from today’s businesses. To test your creative ability, practice finding ways to tie together seemingly unrelated ideas. In short, develop the ability to connect the dots starting with embracing the big picture without neglecting the minute details.
Introduce Science in Your Concept
Science provides the numbers. And numbers don’t lie. Whether these are research of target markets or your profit and loss reports, you must have a clear understanding of what it is you are trying to achieve and be able to identify the obstacles that stand in your way.
Your Romance with Marketing and Sales
Any business venture is highly dependent upon the character, vision, personality, skills, and experiences of the entrepreneur. It all begins with the entrepreneurial energy to launch a business, but the entrepreneur needs to prepare well across all fronts. No matter how much vision an entrepreneur has, he will struggle to land any customers if he is not skilled at sales and marketing. As Peter Drucker once said “The purpose of Business is to Create and Keep a Customer”
Formulate a Business Model and a Business Plan
An opportunity consists of several important components such as the target industry analysis, the financial, operational, product or service sales strategies, tactical campaigns, promotions initiatives and customer related programs. These key components have several characteristics that have a significant impact on the prospects of the business. In the absence of a business plan, start up businesses will have a very difficult transition from birth pain moving to the growth curve.
Prepare Resources and Raise Working Capital
The resources required for a particular venture may vary widely, but one should at least consider family, employees, partners and working capital. The latter is the fuel that the business needs to run on to get started until it reaches breakeven. Many high-quality businesses fail because they were not sufficiently capitalized.
Connect the Dots
After reflecting on what really defines entrepreneurial success -- what determines the success of a business venture would entirely depend on the following formula: Founder + Big Idea + Business Model + Resources + Opportunity = Success!
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Prof. Soriano is the Turnaround Advisor of wongadvisory.com and the Chairman of the Marketing Cluster at the Ateneo Graduate School of Business. For comments please email writer at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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