According to the U.S. Bureau of Labor Statistics, approximately 20% of newly started businesses fail within the first two years of operation, 45% fail within five years, and 65% fail within ten years. Only 25% of new businesses survive for more than 15 years. These statistical patterns have remained relatively stable since the 1990s, with little change over time.
There are many ways to look at this conundrum. You can view it through the lens of a tough economy, ineffective entrepreneurial education, or a weak mindset. In this article, I focus on the latter and share how to cultivate the right business mindset and show that it is a powerful tool for building a sustainable business. To do so, I teamed up with Nick-Anthony Zamucen, serial entrepreneur and CEO of Best Option Restoration.
Building the right perspective
The idea stage of starting a business is exciting. As entrepreneurs, we often get carried away with the vision of what we want to build and how we want to build it. But frankly, it's unexciting, so we rarely stop to think about the realities and potential bottlenecks. But according to Samsen, this is where many of us go wrong:
“When I talk to aspiring entrepreneurs with business ideas, they often have big dreams but short timelines,” Samsen explains. “Their analysis of the industry's potential is often very incomplete. You hear things like, 'If we can get 25 percent of the market share, we'll be huge,' but they want to achieve that in two years and don't realize how hard it is to gain even 1 percent of market share. It's essential to do your research, respect your competitors, and think in years, not months. In business, things never move as fast as you'd like. I see people putting together 1- to 3-month pro formas and already being cash positive. If it were that easy, everyone would do it.”
It is easy to make predictions before you start, but in business, most challenges are unexpected and unpredictable, especially for those who are inexperienced. Challenges are bound to come, so it is important for entrepreneurs to develop a strong mindset that will not give in to challenges. Experienced entrepreneurs believe that the reason many entrepreneurs fail is because they are more or less shocked by the difficulties they face while trying to achieve their goals.
Redefining “Shoestringing”
“It's scary to hear stories of people trying to start a business on a shoestring,” says Samsen. “Most of the time, it doesn't work out because, like any business, there are always unexpected expenses that come up.” Any business needs capital to get up and running, but many entrepreneurs seem to overlook this basic requirement in their bid to get by on a “short budget.”
“What does a shoestring budget mean to you?” asks Sumsen. “You might not have the budget to rent a corner office space or for flashy expenses, but you still need enough capital to run the key aspects of your business: acquisitions, staff salaries, marketing, sales, etc. A shoestring budget doesn't mean blind trust that things will work out.”
Starting a business on a shoestring means starting a business with only enough capital to run its essential operations while sacrificing other aspects (desirable, sometimes even essential) until the business achieves reasonable profitability. This definition entails that a business needs to ensure it has sufficient capital, which in turn requires a clear picture of what is required for the day-to-day running of the business. Wearing rose-colored glasses is dangerous in business and is almost always a shortcut to failure.
Redefine failure and embrace flexibility
Sometimes things don't go as expected and you have to suddenly move on to a different path. Nokia started out making toilet paper rolls and Samsung set out to make grocery stores. It may sound silly, but these companies have one thing in common besides the fact that they both make mobile phones: they're still around.
Challenges only lead to failure when entrepreneurs see them as the end of the road. To develop a zero-failure mentality, you must redefine what failure means to you. Of the 25% of businesses in America that last more than 15 years, many no longer exist in their original form or offer the same services they did when they started, which shows that flexibility is a key weapon in an entrepreneur's arsenal.
“As people in the creative industries like to say, sometimes you have to kill your babies,” Samsen explains. “That baby could be the original idea you had, the city you first wanted to be based in, or the concept that your business vision was based on. To survive in business, you often have to kill one or more of those concepts. And many entrepreneurs hang on to those concepts and end up sinking with the ship.”
In fact, the most successful entrepreneurs have failed before. But they realize that when difficulties close one door, another one often opens. Flexibility allows an entrepreneur to pivot from one product to another, from one location to another, or from one strategy to another, even if it seems difficult. The goal is to not give up and keep redefining your business until you find a successful version.
A zero-fail mentality doesn't mean you'll never fail. It means not accepting failure as the end of the road. It means anticipating and dealing with challenges and being well prepared before embarking on your business-building journey.
