Why Not Starting a Company Might be Your Biggest Risk
Starting a company today is easier and cheaper than ever before (cheaper technology, easier funding, etc.) while the down-site risks are limited (entrepreneurship is socially accepted, it is increasingly accepted even if you fail, because you learned a lot and showed pro-activity, you build a great network which you can leverage) and the upside potentially enormous (many entrepreneurs earn little, but some can earn multi-millions). Therefore, if you really love a topic you should start a company, because it makes you happy, potentially rich, and if it doesn’t work out then you can still work as an employee.
In the article, we will give an 1) introduction, 2) overview of Modern Day Entrepreneurship, 2) Statistics on Startups and Failure Causes and proceed with explanation of why are 3) Startups – Investment for Quality Self-Realization, concluding with a few different startup 4) Success Stories.
Starting a company is accessible more than ever before. Small businesses of diverse industries find their ways to the market. The high potential profit is leveraged by decreased failure consequences. Founding a startup requires reasonable costs – that is, the elements that drew the most money from the entrepreneurs in the past are now virtually free. The major benefit of the modern times is the online open market that enables entrepreneurs to advertise and form business and consumer networks without spending a fortune. Moreover, as information, communication and transacting continue to reach all corners of the world, the potential customer circles broaden to infinity.
The social opinion on entrepreneurship is immensely optimistic and positive. Both business people and the public want to see new innovative ideas and projects, new ways of doing things and are ready to give them a chance – whether by investment, sponsorship or purchase.
The marketing system integrates a personalized and qualitative approach rather than the chewed up forceful feeding with aggressive advertising campaigns approach.
The modern, entrepreneurial, way of running a business is comprised of setting building blocks for long-term success and as such incorporates in itself actually substance and hard work – and these give value to the owner and the business as well as the products and services offered.
The potential of exceeding profits of a nine-to-five job are enormous. While many startups have smaller revenues, many of them reach financial stardom in a brief period of time. In any case, owners are self-dependent, self-reliant and make all the choices for themselves and their business. This approach causes excitement over one’s profession, boosts creativity and productivity and leads to a life of achievement – because even failure is regarded as an honest pro-active effort.
OVERVIEW OF MODERN DAY ENTREPRENEURSHIP
Entrepreneurship (especially in the small business spheres) as a profession choice has flourished in the past few decades. Formation of this type of business management occurred as an effect and a possibility of technology advancements and the opening of the market, especially via internet. People of all races, sexes, social statuses and geographical locations now have an opportunity to own a business. In this section, we will browse through some of the elements that brought forward such development.
Capitalism has placed the market and the economy as the basis of modern society. Competing for consumers has become the modus operandi for business owners. In the first stages of capitalism and consumerism, companies who managed to attract and maintain a large amount of consumers gained monopoly over a certain niche. However, as the market began to open more with the development of technology – that is with the possibilities of managing, communicating, advertising and transacting online – a whole new world opened for business.
The market started to seek for and integrate with itself new ideas, products and services and diversified the demand and offer systems. The approach to economical spheres started to embody vast numbers of potential buyers with endless ways in which they can be targeted. Essentially, this means that everyone can become a successful entrepreneur. Entrepreneurship generated the risk taking policy that comes with starting one’s own business (that is, one can either succeed or fail). However, several other processes coincided with the thriving of small businesses and startups.
The cost of starting one’s own business is reduced significantly nowadays. In addition to various ways in which one can find investors – both corporate and individual (the so-called ‘angel’ investors), and sponsors, future entrepreneurs have a variety of funding in form of equity or loan at disposal. The rates of these loans are considerably lower than in the past. Such financial funding along with beneficial regulations that are put in practice in many countries make startups affordable for almost anyone (with consequences not too grave in case of failure).
Moreover, the accessibility of cheap resources for production, storage, and distribution of goods and services has diminished the costs of entrepreneurs significantly.
The advertising process has transferred in a substantial amount to the internet. Consequently, business owners can reach incalculable numbers of potential buyers through inexpensive (or free) media. Social networking has become a standard platform for creating wide circles of consumers. Through them, the entrepreneur communicates in order to provide information, sell and enhance his/her products or services.
Online payment systems have also contributed to the rise of entrepreneurs nowadays. This way consumers and entrepreneurs, as well as manufacturers and distributors, can be located literally anywhere in the world and take part in the global market.
STATISTICS ON STARTUPS AND FAILURE CAUSES
In this section, we will present and discuss statistical records on business formation, the success and failure rates as well as provide a basic examination of niches around which the entrepreneurial endeavors should occur.
Numerous statistical reports on startup success rate in different time intervals have shown that a large amount of new businesses fail in a five year period. Optimistic studies show that the percentage of startup failure increases to 50% over the course of five years. However, considering the fact that the amount of newly established businesses reaches almost 2 million annually only in the United States, the number of businesses that continue to operate is still considerable.
Additionally, success and failure rates vary in reference to niche affiliation. Niches in which a larger quantity of startups emerge present a stronger competition field for the entrepreneurs – there is a considerable number of quality products and innovative approaches need to be constructive in order to break to the market and maintain that position.
As we have stated, startups fail because they are not able to infiltrate the market, attract customers and because they are not able to sustain. However, all of these find their nucleus in either idea-related or management insufficiency and/or incompetence. Naturally, some causes are external and cannot be predicted or controlled. Nonetheless, as it should be in regards to living in itself, true entrepreneurs seek for answers from within, constantly waging on how to improve structures of production and management.
Idea-related and Management Failure Causes
- Ideas/products/services that are not a utility for consumers in any way – in other words, bad ideas that grow to be useless products or services
- Under-developed ideas/products/services
- Lack of a structured business plan and focus
- Inability to manage finances and finance books (taxes, expenditures, debts, record-keeping)
- Too much or too little self-investment in the business
More than 80% of failed startups did not succeed precisely because of these elements. Using a conscientious approach to your business will surely make an enormous difference in its success and longevity.
Sectors and Rates of Success
It is impossible to state which niches will guarantee success or failure of a business. The most important thing for a future entrepreneur is to construct a product or develop a service, examine it from all possible angles and proceed with it only if there is a strong belief in its utility and uniqueness. However, it should be noted that some sectors, particularly information technology, spur abundance of competition on the market. There is so much demand for products and services in the information industry that it is easier to find sponsors and investors, but it is also much more difficult to be differentiated as a quality investment in the oceans of others. This does not mean you should not endeavor in information technology entrepreneurship – it just means you will have to bring aces out of your sleeves to succeed. With niches that do not have as much competitive force you might be able to stand out in the market, but it might be difficult to find financial foundations necessary to place yourself on it. All this should not discourage you in your entrepreneurial quest. A building block of business formation is risk taking. These risk should not be embodied in slacking off with your project – they should be viewed as a leap of faith that what you have to offer is going to be recognized and acknowledged by the market and the consumers.
STARTUPS – INVESTMENT FOR QUALITY SELF-REALIZATION
Entrepreneurs are not faceless, corporative, profit-only seeking, merciless and empty business people. Entrepreneurs are defined as people who have a vision, are ready to invest time and resources in its development and hopefully receive recognition for it – profit in the financial as well as moral spheres. They are the artists of the business world – those who can balance out the two poles of a unity.
If you are growing affiliation for the idea of becoming an entrepreneur, you probably have experience in working for someone or something you do not care for, or have witnessed countless people who do so. The payments, in the majority of cases, suffice for the cost of living, but not much more than that. We rarely put the amount of work we do and the payment we receive for it on leverage, let alone include the folloring questions:
- How do I feel about the work I am doing?
- Do I care for this project?
- Am I following my inclinations, enhancing my existing abilities and developing new ones in a satisfactory amount?
If you have asked yourself these questions and have found the answers unsatisfactory, you should continue reading as we break through stages of new business formation.
Ideas and projects are important parts of self-realization of every human being. Little real contentment emerges from passivity and stagnation. If you allow yourself to investigate your creativity, you will probably find endless fields of ideas. If you incorporate these ideas into your inclinations, you can easily develop numerous drafts of potential business directions.
You should now be in the stage of intimidation. The fear of quitting a ‘perfectly good job’ for an uncertain future. The lack of belief in your abilities to produce something unique and worthwhile. The enormous black cloud of financial investment.
Anxiety in the course of life-changing decisions is understandable, but it must be surpassed. It is the same with everything in life – examine situation from all angles possible, distinct irrational fears from real perils, synchronize your plans with your wishes and follow them through.
After forming ideas and dealing with fears, you should consult with experts (or at least connoisseurs) of creating achievable business plans. They can be found online and in some business schools at no cost. Define your products/services, your target market, advertising and sales approaches and business milestones or objectives. You should predict approximate expenditures for production, marketing, taxes, payments and other.
Modern day entrepreneurship is accessible to almost everyone. Financial assistance can be found in bank loans with low credit rates, investment through numerous mediums (for example, crowdfunding) and sponsorship of affiliates (for example, receiving a sponsorship from a manufacturer whose services you will employ in return). You should present your projects and ideas to a multitude of potential financiers for your future business. At this point, you are still able to keep your steady job, and you are not making big risks by checking the value of the creative and business results you have come to so far.
Make a choice – but make it with a sound mind. Do not allow your fears diminish the quality of life you can lead. Entrepreneurship can bring financial security in a profession designed according to your preferences. Multiple studies show that productivity narrowly correlates with creativity and passion. If you want to become self-dependent make choices that will lead to it. Create your objectives and deadlines, choose your associates and employees, make your job your life’s work, achieve things that matter to you and develop. If you approach your business, consciously you will be able to stop merely existing and begin actually to live – which is comprised of actively participating in your life. Challenge yourself. If you fail, you can always start over – be it a new business or return to the safety of ‘regular’ jobs.
Even though there is a multitude of evidence for it, it still somehow slips people’s minds that success should be regarded as a long-term investment. Many owners manage their new businesses partially or superficially, targeting wrong customers, offering products or services which are not needed or wanted, failing to follow simple rules of success: dignity, passion, focus, networking and actually caring – for consumers and for the business. Here are some examples of first-time successful entrepreneurs and those had to try a bit harder but who succeeded nonetheless.
Adventure Life – Brian Morgan
After years of working and living in South America, Brian Morgan decided to enable travelers a unique experience of the continent. He founded Adventure Life as a platform for individual, insightful travel planning agency. He already had a substantial network of local associates who helped him design unique and preference oriented itineraries for is clients. The starting costs of his business amounted to mere 3000 dollars (for first brochures) and a laptop. By combining his passion with smart business management, Brian now owns an 11 million dollars worth enterprise.
Tarte Cosmetics – Maureen Kelly
A life-long cosmetic products junkie, Maureen Kelly, decided to found the Tarte Cosmetics and offer consumers insights from one of their own. She spent almost twenty thousand dollars to open her business and broke even five years later. Company’s revenue reached dazzling 12 million dollars in 2008.
The Walt Disney Company – Walt Disney
One of the creative geniuses of the 20th century started the Laugh-o-Gram company prior to his Hollywood saga. The business failed, and the owner was declared un-creative. His persistence and faith in his abilities resulted in the formation of one of the biggest mass media corporations in the world.
Huffington Post – Arianna Huffington
Arianna Huffington’s projects on online publications were rejected from more than thirty publishers. When she founded Huffington Post, the critics argued its quality and stated doubts about its future. However, the owner surpassed initial obstacles and grew the world known outlet online.
As it can be deducted from the article, starting a company is a risk in itself. However, the risk of failure is significantly (almost completely) reduced by the implementation of conscientious management. An excellent idea/product/service cannot prevail on the market without focus, determination, and a solid business plan. It is the same vice versa. Once the direction of the business you want to found and believe in has been set, you can set sails for an adventure of a lifetime. The experience is what matters the most, because, as we stated above, first-time failures can become an introduction to your great business success story in the future. Moreover, employment can be found if you decide that entrepreneurism is not for you, networks you have acquired will be your attribute and you will know that you tried – and living with regretful ‘what if’s’ is not quality living at all.