The COVID-19 pandemic inspired many would-be entrepreneurs to take the leap into starting their own small businesses. The flexibility of being one’s own boss is certainly an exciting prospect, but it is essential to understand the risks that also come along with forming a startup. Studies have shown that about 90 percent of startups fail, so fledgling entrepreneurs must learn these lessons to give themselves the best chance of ending up in that coveted 10 percent of successful businesses.
The Challenges of Raising Capital
First, one must realize that raising capital is a full-time job, on top of the already full-time job of building your company. It’s a tricky cycle: you must focus on raising funds so your business can succeed, but if it isn’t on a trajectory towards success, it won’t be easy to raise funds. As such, entrepreneurs should expect to put in long hours in the early stages of their startup, as they must take the time to both raise funds and perfect their product or service.
It is also crucial that startups begin the hiring process even before raising capital. While doing so can be costly, it also has several benefits to your business in the long run. For one, having an exceptional team of talent behind your company could attract even more investors. And once you do get your funding, you don’t want to waste valuable time and money stalling until you find the people who can bring your vision to life.
Many entrepreneurs fall victim to the myth that startup success can only come from people who have already successfully run businesses. While it is true that those with prior experience are generally more likely to succeed in creating a startup, their success rate is still surprisingly low—coming in at only around 30 percent. The truth is that legwork is more critical to success than your experience. If you put in the work, and it shows in your results, you will get the funding you need to be best set up for success in the long run.
Finding Long-Term Success
However, it is essential not to make mistakes once you’ve gotten past the initial hurdle of securing capital. A fast-growing startup can rapidly grow beyond the abilities of its early employees. Entrepreneurs must not be afraid of making the difficult decisions that come with running a business. Loyalty is great, but your business needs have to come first; if that means letting go of someone who was an early part of your company, but no longer offers the value you need, you must accept that.
Entrepreneurs should also bring on advisors who are smarter and more experienced than they are. It can be easy to get caught up in a startup’s early success, but the bigger challenge is making that success last and turning your startup into a business with longevity. The strategies that caused your business to initially skyrocket likely aren’t sustainable long-term, and it takes someone with business experience to guide you towards the practices that are.
Startups can take advantage of the several business accelerator programs offered by established companies or entrepreneurs with years of experience in starting, funding, and scaling businesses. These programs provide the resources and mentorship necessary to position new companies for success. Although there are no guarantees of success in business, having these people in your corner is a great place to start and will minimize your risk of failure.
New entrepreneurs should also understand the challenges of running a business that they may not have seen from the employee side. Two common issues presently plaguing businesses are supply chain issues and talent shortages. With the increased number of startups entering the market, there has been an extraordinary amount of strain on the existing supply chain, and more job openings than people to fill them. Startups must be prepared to approach these challenges in the current market or risk failure.
Nevertheless, the most pivotal thing a startup can do to ensure its long-term success is to focus on the customer. Although a significant portion of your funding will come from outside sources in the early stages of your business, the ultimate goal is for your startup to be able to sustain itself on its income. To ensure that your income is steady, ensure that your customers remain happy.
Building a startup isn’t easy—more work goes into success behind the scenes than anyone will ever see on the surface. Still, if an entrepreneur is willing to put in the work and can use the resources at their disposal to get the right people into their corner, they can end up in the 10% of startups that succeed, rather than the 90 percent that don’t.