Fear of failure is one of the most common reasons that people do not start businesses. But is this fear justified?
My first business lasted only three months, long enough for me to learn how difficult it would be to make money designing and printing t-shirts with slogans. Four years after starting my second business, a real estate company, I was in deep trouble. It was a day-by-day struggle to keep the doors open. But three years later the situation was completely reversed. My business lasted for 20 years until I sold it when I joined the navy.
Business consulting firm Fundera indicates 50% of small businesses fail in the first five years. Less often cited is the countervailing data that 35% of businesses are still around after 10 years. In other words, if you make it past the first five years, you have a 70% chance that you will still be in business five years later. Much better odds.
The Big Picture blogger Barry Ritholtz notes there is a difference between a voluntary closure and a failure. While the Census indicates over 90% of businesses fail, Dun & Bradstreet notes that only 10% of business closures are due to bankruptcy. While this does not mean that the other 80% do not have financial challenges, it does indicate that the business owners were able to work out a solution on their own terms.
A glance at the most common reasons for failure shows most relate to inexperience or insufficient or bad financing arrangements. Note that the second issue is often caused by not understanding the true requirements of a venture. As well, lenders want to see a track record.
How do you overcome fear of failure? See it for what it is: an intuitive sense that you lack the knowledge and experience to succeed. How do you overcome it? Here are the steps:
- Get a list of the skills you need to run a business. I will be posting one next week.
- Inventory your skills. Be honest. If you are not sure whether you have a particular skill talk with people who do and assess yourself in comparison to them.
- Identify gaps. For example, if you do not know about bookkeeping where can you get this knowledge? How about the free videos online that will teach you to use QuickBooks.
- You do not need to be an expert in everything. Keep in mind proficiency is the goal. In many cases, you can buy the expertise you need, especially in administrative matters.
- Think of yourself as an entrepreneur rather than being wedded to a specific idea. In this way, the failure of a particular business becomes just a step leading to your eventual triumph.
Viewed this way, your surest road to success is to get started.
There is no better way to learn entrepreneurship than doing it. Make your first venture small, part-time, requiring little or no start-up capital. If it takes off, wonderful. If not, you have gained a lot of knowledge at a low cost.
As an entrepreneur, whenever I make a mistake I compare the loss to the cost of the Wharton Business School. Currently, at $93,000 annually, think about how much experience you can buy yourself before you would have spent the equivalent of the two-year program.
Question – What holds you back from starting a business?
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