The dream of launching a business runs deep in the American psyche, but more often than not, those dreams go bust. Half of new U.S. companies fail in their first five years, according to Gallup. Expand the timeframe out to 10 years and the failure rate reaches 70 percent.
In a way, I don’t find that surprising. The skills it takes to start a business aren’t necessarily the same as those it takes to keep that business afloat. What is surprising, though? In the U.S., more businesses are now being shut down (470,000) than are being started (400,000).
That tells me that many entrepreneurs have the gumption to take that dramatic first step of creating something, but too many lack the perspective to reflect on what’s needed for the next step.
Entrepreneurs often make five mistakes that threaten to put their businesses at risk.
But after the startup phase, the company steams into the growth phase, becoming more complex and more vulnerable to industry and economic trends. At that point, an entrepreneur’s insistence on autonomy can hinder the company’s ability to respond quickly and intelligently to challenges it faces. In the growth phase, you simply can’t do it all, and it’s foolish to keep believing you can.
As you grow your company and enlarge it to meet new opportunities, you must also build in accountability. Systems need to be put into place, and people, too. The entrepreneur needs to know the employees and where their strengths lie to put them to good use.
The Small Business Administration has estimated that up to 60 percent of businesses owe their demise to a lack of cash. Other sources have this number as high as 90 percent. When it comes to financial leadership, it is what entrepreneurs don’t know that they don’t know that will multiply the risk in their business exponentially.
Sure, entrepreneurs are to be celebrated for their guts and desire to innovate. But when a serial entrepreneur habitually and almost obsessively looks for new sandboxes to play in, what happens to the existing company or companies often isn’t very good.
My advice is to set aside your probably abundant self-confidence and take stock of what you know, what you’re good at, and what skills you still need to master in your leadership role.