If somebody told you airplanes had an 80% chance of falling out of the sky, would you ever get on a plane? Probably not. And yet, people enter the business world every day, confident that they’ll be among the 20% of new businesses that survive past the first year. And when they discover they’re actually in the 80% that fail, they’re often left wondering what makes those who succeed different from those that fail.
If you’re brave enough to dive into the world of entrepreneurship and business ownership, then it’s important to know what sets apart the successes from the failures. Here are four major differences between the two. Hopefully, this knowledge can help you to be among the 20% that succeed.
Every entrepreneur has to consider startup costs for their business. But one key difference between the winners and the losers is that the winners take a more reasonable approach when estimating those costs. Entrepreneurs are confident by nature, and that confidence can sometimes lead to overconfidence, which causes many first-time business owners to underestimate the costs of initial production, and overestimate how quickly they’ll start generating a profit. This can lead to rapid business failure as unexpected expenses arise and new business is slow to come. Soon, those initial funds run out, and the business is forced to close.
If you want to improve your chances of success, try to take a step back and consider your startup costs from a more logical standpoint. Consider every potential cost that could come your way, and then add a buffer for unexpected expenses like failed prototypes and refunds to unhappy customers. Venture capitalist Sam Hogg suggests entrepreneurs “raise twice the money they think they need, and plan on it taking twice as long as they expect.”
If you plan for a few failures upfront and make the necessary financial adjustments to accommodate those failures, you’ll increase your chances of long-term success.
Entrepreneurs who hold out for the “big fish” or “the right client” are much more likely to fail than those who land clients quickly. When you’re first starting out, you can’t pick and choose who your clients are. You need to start getting business and start building a reputation in your industry as quickly as possible.
So do everything you can to land a client as quickly as possible. A successful businessman and entrepreneur Tai Lopez explains, “The best way to win clients is through friends, family, and referrals. If someone has never worked with you, they’ll be risk-averse to hiring you.” Leverage your connections to get those early clients, even if they’re not a “big fish” for you. Lopez adds, “Secure one or two clients and ask them for written or video testimonials. Success stories prove your credibility to other potential clients.”
If you land those early clients quickly and earn their loyalty, they’ll spread the word to their business connections. You can also ask them for online reviews and referrals, which will help you find more customers online. Eventually, the big fish will start coming to you.
In business, just as in nature, those who fail to adapt will die. You might think your product is cutting-edge now, but that can change in the blink of an eye. The successful entrepreneurs are the ones who do two things: (1) monitor market trends, and (2) adapt to those changing trends. You must always be ready to pivot and implement changes quickly in order to keep your business afloat in a world filled with ever-changing technology and consumer expectations.
And that doesn’t just apply to market changes. It can apply to internal changes in your business, from suppliers that can’t meet your demand to business partners that want to bow out of your endeavor unexpectedly. While things like this can throw you for a bit of loop and certainly make things difficult for a time, a successful entrepreneur is the one who finds a way to work through the changes. When these changes arise, you must face them head on and adapt quickly if you want to be among the few successful individuals who make an attempt at entrepreneurship.
Passion doesn’t just keep relationships alive. It can keep businesses alive too. Starting a business takes a lot of work and dedication. The long hours and frustration can really tax you if you’re not truly passionate about what you’re trying to achieve. Staying passionate about your business can help you through those rough first years, and will be contagious for anyone who comes on board with your business. And passionate employees can really help to drive your business forward.
So, before you even begin your business, ask yourself if you’re truly passionate about what you’re doing–not just about the idea of starting a business, but about the actual work that you’re doing. If you’re only passionate about the romanticized version of starting a business, you’ll be sorely disappointed in those first years, when you’ll likely be working long days and making very little money. But if you believe in the work you’re doing, you’ll be more likely to push forward.
While endless factors can influence the success or failure of your business, implementing these three things into your business efforts can help give you the extra edge you need to be among the 20% of new businesses that survive past that first difficult year.