The odds of being a successful entrepreneur are favorable the first couple years but decline precipitously in succeeding years. There are reasons for these failures, including poor location, too much competition and choosing the wrong organizational structure. But there also are ways to improve your odds of succeeding in a business and to create your own lengthy career.
Odds of Succeeding
Seventy percent of new firms survive for the first two years, according to the U.S. Small Business Administration, or SBA. Those odds fall to 50 percent after five years and 33 percent at 10 years. If your business survives 15 years or longer, you have a 26 percent chance of enjoying success as an entrepreneur.
Why People Fail
One of the main reasons businesses fail is a lack of capital. Many people finance businesses with their own savings. When the money runs out, they have no more money to put into their businesses. A successful business requires lots of capital. If you start a business, you need to purchase or manufacture products, advertise and pay your employees. Therefore, determine the best financing options in advance. Apply for a small business loan. Ask a colleague who has access to capital to go into business with you. Other reasons your business may fail are: a lack of experience, poor inventory management and overestimating your sales potential.
Choosing the Right Business
You can enhance your odds of succeeding as an entrepreneur by choosing the right business. Turn a favorite hobby into a business, or sell a product or service in which you have lots of knowledge. Choose your products through a wholesaler such as the National Association of Wholesaler-Distributors, or locate products through an association. The Gale Encyclopedia of Associations is a helpful resource. If you are offering a service, choose one that's in high demand. Working couples need people to care for their dogs or clean their houses. Businesses need office and window cleaners and marketing consultants. Start a business based on the experience you gained working for employers.
Steps to Success
To further ensure your success as an entrepreneur, write a business plan. A couple of major components of a business plan include market analysis and marketing, according to the SBA. Market analysis includes studying your competitors and products they offer, and determining whether there's room for another seller. You also need to know your target audience and the advertising media that are most likely to reach them. A target audience is the people who are most likely to buy your products, and audiences are identified by gender, age, income or occupation. Additionally, create a competitive advantage by differentiating your business from others. Offer better customer service than others in your industry, for example. Focus on a particular niche of business customers, such as small manufacturers.
- U.S. Small Business Administration: FAQs: Frequently Asked Questions
- U.S. Small Business Administration: What are the Major Reasons for Small Business Failure?
- Business Know-How: Four Reasons Why Small Businesses
- Entrepreneur: 25 Common Characteristics of Successful Entrepreneurs
- U.S. Small Business Administration: Create Your Business Plan
- Entrepreneur: Target Market
- Entrepreneur: How to Find Product Sources