Do you want to start a business? Do you know what it takes to become a successful entrepreneur? Find out how top startup owners went through the wringer and came out triumphant on the other end. You will find out the reasons entrepreneurship is so difficult, and how you can overcome them.
Dropping everything and jumping into the world of entrepreneurship seems like a great idea. This is especially true if you have been in a regular job for a few years, and particularly if you feel you are in a rut.
Starting a business sounds exciting, but like in any good story, the excitement comes from overcoming barriers and entertaining the possibility of failure. Entrepreneurship is a good story, but it does not always have a happy ending.
If you are thinking of starting a business, you should be aware that entrepreneurship is not easy. Why is entrepreneurship so difficult? The road is so full of pitfalls that roughly 50% of new small businesses fail within five years.
Those flip-coin odds might not seem so bad, but are you really willing to take your chances? You can do something to nudge them a bit in your favor. Here’s a roadmap to entrepreneurship that might help you chart your course, courtesy of real entrepreneurs who have been there and done that.
What is Entrepreneurship?
This is the $64,000 question and the answer is deceptively simple. According to Investopedia, entrepreneurship is the “process of setting up a business.” Okay, cool.
However, the better question might be, “what are the characteristics of an entrepreneur?” Investopedia puts it in an interesting way: “an individual who creates a new business, bearing most of the risks and enjoying most of the rewards.”
Right off, you see the juxtaposition of “risks” and “rewards,” and that is at the core of entrepreneurship. Almost to a man (and woman), the real entrepreneurs who provided insights into this issue point out that entrepreneurs must be willing to take on a lot of risks.
“They have got to be willing to try something and take a risk, “says Business Bro Podcast host Hernan Sias.
Mixtape CEO and Founder Joel Johnson muses: “You have got to have a little daring in you because you’re stepping out into the unknown.”
Erik Perkins is with Perkins Builder Brothers, a contracting firm in North Carolina that also has a resource-rich channel on YouTube. He sums it up quite neatly: “An entrepreneur has to have a very good risk versus reward part of their brain operating very well. They’re very skilled at looking at a risk and evaluating the reward compared to the risk. If you’re good at that, you will make tons of money, but if you’re bad at it, you will lose tons of money.”
Matt Decoursey, serial entrepreneur and Startup Hustle TV podcast host, ticks off a whole list of characteristics that make entrepreneurs seem like a paragon of all virtues. He ends up with an observation: “A successful entrepreneur is not afraid to take a chance. They are often overachievers. They aim to be exceptional.”
Why is Entrepreneurship so Difficult?
There are many reasons why a business fails. In most cases, however, they are due to three things: unrealistic expectations, cash flow problems, and poor marketing.
It can be tempting to blame external factors for the failure of a business, but it often boils down to having unrealistic expectations. Most first-time entrepreneurs tend to have those.
CBD manufacturer KC Hemp Co. Founder and CMO Heather Steppe thought it would be simply a matter of if you sell it, they will buy it. “I thought we were going to come up with this great business, and we were just going to be kings of CBD in Kansas City and make all this money.”
InnovateHer KC Founder and CEO Lauren Conaway says, “My expectations as a new founder were things were going to be a lot easier.”
When expectations are not met, it can lead to frustration and a disinclination to try harder, and the business fails. Entrepreneurship requires a lot of hard work and perseverance, but in many cases, still results in failure.
Kyle Steppe, Founder & COO of KC Hemp Co., describes the work involved. “Building something from the ground up is like putting a thousand-piece puzzle together, but you only have a couple of pieces to start [with]. You almost have to go out and find these different pieces everywhere. They’re not all sitting on the same table.”
Matt says, “With GigaBook, we thought that we would be done building our minimally viable product in six months. I look back at that and laugh now because it took two and a half years to generate one dollar in revenue.”
Heather believes that “Failing is success. Every time you fail, you’re that much closer [to success] and entrepreneurs, especially good ones, understand that.”
Managing expectations can go a long way towards changing the mindset, preparing for possible bumps along the way, and making success much more possible. Forewarned is forearmed, after all.
Cash flow problems
According to a 2016 study by US Bank, poor cash flow management is the top reason 82% of small businesses in the US fail. It isn’t even about whether a business is profitable or not, because profit is not the same as cash flow. Put simply, cash flow is money on hand, and most businesses cannot continue to operate without that.
Erik knows this in a very practical way. “We’re probably owed a hundred thousand dollars at this point by the bank on this project and haven’t gotten anything, so the struggle is real. I mean, we’ve been doing this for decades, we’ve got a huge waiting list of people, and yet sometimes our bank account hits negative numbers still. It’s crazy.”
A delay in payments is a common scenario for many businesses, not just startups. It is something that you have to be ready to manage. Startups are especially vulnerable to this, however, because expenses tend to outrun receivables at the start of a business. You are still building value, so you need a cushion.
When making a business plan, it should include how you plan to keep the cash flowing for at least six months. One option is to take out a loan or find an investor, which can work in the short term. However, throwing money at this particular problem will not always solve it. If you are unable to manage it properly, you will end up right where you started.
To get the education you need to make a success of your business, you should connect with startup accelerators, also known as incubators. Heather explains: “[A] startup accelerator is a program for established businesses to help them scale. Sometimes they’re given money from people in the accelerator, but the idea is to take the business you have and grow it.”
Her company KC Hemp benefited from this. Together with Kyle, they applied and were accepted at a local incubator in 2019. It really propelled their business forward through funding and networking. “We went from white labeling other people’s products to manufacturing our own products.”
Heather and Kyle are also looking at working with startup accelerator Marknology, which specializes in guiding Amazon retailers under the stewardship of Andrew Morgans. Andrew points out, “Amazon is based around an algorithm…built for buyers, the customers. It’s not built for the sellers, and that’s why Marknology has had so much success. [It] is essentially helping sellers because of the difficulty there.
Startup accelerators and other organizations like it can mentor rookie entrepreneurs in the right way to manage cash flow and a business in general if you can get in. That can be more valuable currency than cash. Lauren, for example, provides this type of support for women in Kansas City through InnovateHER KC.
“If you belong to an industry that is predominantly male, it’s sometimes difficult to find female mentors who understand your journey. We are able to help women connect with each other, strengthen each other, amplify each other’s efforts, and work together for our collective success.”
While InnovateHER does offer financial support for its members, her main focus is social entrepreneurship, which is a kind of currency. She builds communities to support members, and she does this through extensive marketing, which brings us to the next reason why entrepreneurship is so difficult.
People like to think that marketing is more important now than it was in the past, but it has always been the main driver in any business. Creating awareness for a brand and business is the only way you can succeed. Without marketing, no one is going to buy into it, no matter how fantastic your product or service is.
Marketing is a complex undertaking on which many would-be and even seasoned entrepreneurs spend too few resources. Granted, there are a lot of moving parts to it. However, if there is one thing that any entrepreneur should do, that is to focus on online marketing. Social media is particularly effective in today’s marketplace because it tends to be organic, though it is not a standalone solution.
Hernan got a reality check when a guest at his popular podcast channel pointed out he missed becoming famous because he was not spending enough money on marketing. “…we spend very little to like no money in promoting our show. Everything we’ve done, we’ve grown organically… after that, you better believe we’re gonna start allocating probably quite a ton of money going into our marketing campaign.”
This particular episode of Startup Hustle TV was redolent with insights and may be summed up in one sentence: Entrepreneurship is not easy, but with the right mindset, connections, and work ethics, the rewards are high.
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Want to know how you can succeed in entrepreneurship? Learn from the real-world experiences of entrepreneurs on Startup Hustle TV. The program showcases the industry’s top startup owners as they share their expertise on how to run a business and deal with all the challenges that come with it.