The start-up journey can be a roller coaster experience for new entrepreneurs. Here are 5 major areas that new entrepreneurs need to look at to manage the ups and downs of a new business, based on my experience training 18 groups of start-up business owners and mentoring over 3,000 entrepreneurs and would-be entrepreneurs over the last 9 years.
Why are there bumps along the path?
Starting and growing a business means stepping out of your comfort zone to try new paths. In my experience there are 5 major ways that new entrepreneurs can struggle with as they start a business:
- Lack of start-up research about the market for your product or service, your target market and what it will take to start a business (and the rules!)
- A limited savings buffer, to weather the initial roller coaster of cash flow.
- Lack of coaching or reliable peer mentoring. A start-up raises lots of questions. Without an expert to turn to (someone who keeps up-to-date), some entrepreneurs make it up (“it seems logical”); depend on their gut; depend on Google; or ask people they know – even if they don’t have experience).
- Developing an entrepreneurial mindset and the motivation to propel you forward. When you start a business your confidence is tested and self-doubt can rise to the surface.
- Breaking new ground: This is a journey of learning when you lack business ownership experience. Learning is critical and your employee experience may not cut it.
Did you research your start-up?
When I see future entrepreneurs with business plans that are not completed (or not completed well) it’s obvious that often even the key factors are overlooked in the excitement of starting a business.
Take your product or service as an example:
Say you know what kind of business you want to have and the products/services you would like to offer…
- What problem or desire will your product/service solve?
- And who are the clients who want this solution?
If you don’t know your product BUT you know the people you want to serve:
- Have you determined the problems or desires you will solve?
- Have you developed a product or service to do that?
Is there demand for this kind of business? (In other words, do enough people have an issue/desire for which your product or service is a solution?
Tip: Beware of a solution that has no demand! Although it seems counter-intuitive, and new ideas or products seem like a good idea, the first one to market has to educate that market about their solution. That usually takes much longer at higher marketing costs than a product with proven demand.
Do you know what is involved in producing your product or service? Will your budget handle it?
How will you deliver your product? In person? Online? Through subscription? One-off?
How will you market your product/service? (When your potential clients need your product/service – where will they find out about it?)
What will you need to have in place to be ready to start?
- We lovingly refer initial cash flow as “the financial valley of death” –in the first year of business
- You are going to spend money to set up your business but sales are often sparse while you learn to find and sell to your potential customers.
- When you have learned what works, you will start making more money…
BUT… how are you going to eat in the meantime?
- How much cash is enough? It will depend on a number of factors, e.g.
- Have you put aside enough savings to support yourself for 6 – 12 months (understanding that the first year is usually very lean)
- Do you know how much money you need to start up your business?
- If you need to… can you maintain an income source while you start-up? (That is, and still have enough time and energy to launch your business while you continue a job?)
- Can you manage your household costs based on the earnings of a partner (or are you to sole earner in your family?
TIP: Before you leave a job and if you own assets, arrange a line of credit. Don’t use it until you need it – but your credit rating as a new entrepreneur will often not allow you to take out a loan or line of credit until you can show several years of success in business.
Do you have a mentor or a coach?
When you head off into the unknown, it’s helpful to take a map and a compass with you to stay on point, and go in the right direction. If you have never started a business, how do you know what that direction is?
You don’t know what you don’t know in so many areas of operation that are outside the field you have focused on as the core of your business. It is those areas that can trip up new entrepreneurs.
Coaching programs like Grow Vantage are unique in that they provide a combination of good information (straight from the mouths of successful entrepreneurs!), coaching on demand and peer mentoring. Mentorship can be part of university programs, and form an important part of serving start-up entrepreneurs at city/provincial supported business centres. Why? Research studies show that it makes a difference.
In the absence of mentoring, entrepreneurs can meet uncertainty with logic (that sometimes doesn’t apply)
When faced with a new challenge, new entrepreneurs often make it up; guided by logic or advice from people they know. That can have consequences: some good, some unexpected. For example, what may seem logical to a new entrepreneur may be unacceptable to the expectations of a federal tax department.
Do you have an entrepreneurial mindset?
Mindset is a critical factor in achieving success. Successful entrepreneurs have a mindset that contributes to growth. New entrepreneurs may experience challenges to this mindset:
- Fear of failure: Our culture doesn’t support “failure” as “learning” and yet, the most reliable way to learn to try – and when we don’t succeed – to learn from our mistakes. (One of my favourite quotes from Abraham Hicks is: “When a little child who is learning to walk falls down, we don’t say: “Get up you little dummy”. We know that this is how he finds his balance [and learns to walk]”
- Fear of success: Something that we don’t often talk about but entrepreneurs can ask themselves… is what happens if this all works? Will I be able to handle it?
- Carol S. Dweck, Stamford University, and author of Mindset identifies the characteristics of a Fixed compared to a Growth mindset. The latter allows people to focus on the process and continue to try, versus suffer when a goal isn’t immediately reached.
- There are a myriad number of personal vulnerabilities that can surface when people are challenged by new and demanding situations.
What do you do about this?
There are three strategies that are helpful:
- A coach or accountability partner who can help give you perspective, if you falter
- Educate yourself on mindset and expectations of what it will take to be successful
- Don’t go on this journey alone. If your partner is not supportive – find someone who is.
What do you have to learn?
Knowledge helps improve your odds of success
- There is a lot of information on the Internet, although there are many different ideas and opinions online, with information that is often more theoretical than practical.
- You can take courses.
- You can find a mentor or coach who has valuable business experience to help guide you.
- You can and should learn from your own experience as well.
All of these steps give you more information than you had when you started out. Our bias at Grow Vantage is to learn from actual entrepreneurs who have been in your shoes. There is no substitute for real world experience from someone who has conquered the ups and downs!
Your employee experience may not cut it:
- You might have been in charge of an entire project from beginning to end as an employee, and that is great experience, however an organization supplies other staff for knowledge and support (e.g. financials, marketing, distribution, or legal). At first you may be on your own.
- In your business: Do you have others to bounce ideas off? A more established company has a few more hands. Again, start-up entrepreneurs are often on their own.
- As an employee, if your project doesn’t work out, in most cases, you will still get a paycheck. In your business, that doesn’t happen if your idea doesn’t bring in revenue.
- How deep are your pockets? Maybe not quite as deep as those of an established company.
It takes time to learn anything new. And practice to establish business patterns that work! But the only patterns you know as a new entrepreneur are those you’ve read about or have been told about. Most of what you will have to do is new.
Here are some more guidelines:
There are skills entrepreneurs have to learn to survive and thrive. Later you can hire for missing skills. But as the “engine” of your business, there are needed skills a business owner has to have:
Early stages of business require thoughtful experimentation. “Throw stuff against the wall” is
a piece of advice I often give to new entrepreneurs – with one addition: When you try something out or throw it against the wall – pay attention to what happens afterwards!
Looking for patterns is the key to learning: Testing a pattern will confirm whether or not you keep doing it
Do more of what gives you results – and avoid what doesn’t.
- Avoid getting stuck on an unproductive idea that you really want to work!
- Get traction: Keep track of your efforts, reinforce what works, avoid what doesn’t
Depending on your ability to learn, the ups and downs you experience in year 1 can last through year 2 and maybe longer. When we train entrepreneurs our mission is to prevent or lessen craziness and develop stable patterns in marketing, sales and business growth.
The faster you learn, the faster you will grow
Accept and embrace that you will make mistakes
There are other obstacles apart from these 5 areas of skill development of course. Article after article lists many things that are critical skills new entrepreneurs should develop to succeed in their business.
Whether or not you think you’re prepared, this is new territory. You are having experiences you’ve never had, and expectations you haven’t yet had to fill. In fact in most cases they are so far from your experience – it is no wonder there is little or no point of reference as you launch your company. The question is then, if your employee experience does not prepare you for being a business owner, how can you prepare yourself?
Have a question? or a comment? Please let me know