Whether I’m attending our Entrepreneurs Conference or addressing a business trade association, I am inevitably greeted by a large group of entrepreneurs, many who claim to have invented the next big thing. Or I am approached by a huckster involved in so many different schemes that his or her convoluted pitch makes my head hurt. After having hundreds of such conversations over the years, I can predict with great certainty which will have staying power versus which won’t even make it out of the starting blocks.
More and more people have embraced entrepreneurship as a means to build wealth. Although these figures don’t account for the Great Recession, the recent Survey of Business Owners by the Census Bureau revealed that the number of black-owned businesses grew by a whopping 60% between 2002 and 2007. Anecdotally, I have met legions of would-be entrepreneurs who are launching ventures due to the weak economy or unpredictable job market. Some have been forced to create new businesses to make a living while others who are unsure of their permanent employment status have started “side hustlesâ€ to protect personal cash flow and develop multiple income streams.
I applaud this new burst of business ownership. However, you must understand the risks of starting, growing, and sustaining an enterprise. According to the Small Business Administration, roughly 90% of businesses fail in their first year. And the No. 1 reason most are unsuccessful is the owners’ lack of experience.
Too many entrepreneurs establish outsized notions of developing gargantuan enterprises with Ferrari-like speed: 0—60 mph in less than 4 seconds. Nor should anyone believe some gimmick will transform them into instant millionaires. They’ll have better luck playing the lottery. Such thinking will set you up for failure.
Even though you may think big, you must act small to achieve your goals. I’m not telling you to downscale your long-term aspirations but to right-size your current operations. Here are a few simple but powerful rules I suggest you follow:
Stay focused on one enterprise. If you meet a prospective customer or angel investor and begin discussing two or three different companies you operate while fumbling around for multiple business cards, you’ve just missed potential opportunities. You should be able to describe your business clearly and succinctly to anyone in the length of a 15- to 30-second elevator ride. The inability to do so means you’re not giving any one business enough attention and leaving money on the table to boot. As for that prospective client or financier, the old clichÃ© still holds true: You only get one shot at making a first impression.
Take the slow and steady approach to growth. Building a lasting enterprise is a step-by-step process. Too many business owners conjure up products or services and then fall so in love with their own concepts that they want to take them national. To do so takes time, money, infrastructure, and employees. A better tack is a steady focused approach that enables you to effectively manage financial and human resources. By staying small, you’ll be able to develop a practical budget, gradually expand operations, and take the necessary time to perfect your business model.
Concentrate on service, not gimmicks. I once used a car service where the owner arrived in a car decked out with flashing lights and honking horns. I immediately shared with him that his vehicle was inappropriate and he would lose me and others as clients. Not surprisingly, his response was “my car is flyâ€ and that it distinguished his company from the competition. Several years later, after watching his business decline, he’s finally taken my advice to brand his business through timely, dependable customer service. You must build trust by knowing and fulfilling the needs of customers and position your company as being invaluable through the management of expectations and over-delivery of services.
The bottom line: Launching and running a business by adhering to these tenets can translate into longevity. Give yourself adequate time to thoroughly learn your business and make the necessary adjustments. Acting small will put your company on the path to achieving your big dreams.