According to the GEM Global Report, an almost mind-numbing 100 million businesses are started around the world each year. That’s about three every second, or one every five seconds if you limit the number to only United States-based startups. About 90 million of those fledgling businesses will, at some point, wind up failures.
The risk behind starting your own business is well-established–and likely widely feared–in the entrepreneurial world. Everyone who has even considered starting their own business probably has one statistic rattling around in their head day in and day out: 90 percent of startups fail.
The number of Silicon Valley unicorns that are dead or dying grows daily. But among those 100 million startups a year that come into existence, 10 million stick around. For every 10 Groovesharks of the world, there is a Pandora or a Pinterest. There is success to be found in the world of startups, you just need to know how to approach it.
1. Know your Market
Based on an analysis of startups after their downfall, a lack of a market need was the number one reason for failure. Nearly half of the businesses examined were doomed from the start, having developed a business around a product or service that no one needs and no one wants. It’s no coincidence that the first step in establishing a business is often the identification of a need. If your audience doesn’t need your product or service, why would they invest money into it? So while there is always that lingering question that asks what “needs” do we as a society not even realize we’re living without, the opportunities to introduce your audience to a need are few and far between.
2. Approach With Passion
A solid foundational understanding of your market will get you off the ground, but when it comes to growing and maintaining a business, a leader without passion is a leader set up to fail. Some of the biggest business failures in recent memory can be at least partially blamed on the lack of passion and real, honest belief in the company’s success and mission. In short, if you’re not passionate about what you’re doing, entering each business negotiation with a positive attitude and the intent to succeed, you’re doing nothing but setting yourself up for failure.
3. Build the Right Team
The saying goes that a chain is only as strong as its weakest link. Hiring a team to back you when starting your new business shouldn’t be an afterthought. The employees that will be working below you can make or break your earliest successes. Instead of offering jobs to your friends as a favor, or searching for employees just to fill shoes, entrepreneurs need to create a team that works cohesively, effectively and is willing to put in the extra hours to ensure the success of the brand. Be sure to identify what positions need to be filled, whether it’s customer service, public relations or a marketing team, and make the correct hires.
4. Nail the Timing
This one might not stick in the heads of young entrepreneurs as easily, but when starting a business, timing can be everything. Bill Gross, a startup guru of sorts, gave a TED talk regarding startups in an effort to determine what factor mattered the most in determining the success or failure of a business. If you refer back to just a sentence or two prior, you may be able to figure out that Gross determined that it wasn’t the name of the business, the funding, the plan or the team that caused businesses to fail, it was timing. If you’re too far ahead of your time, the technology or society’s adaptability to your product might lag behind. On the other side of the coin, if you’re too late, competitors might have already captured the market. As Gross said in the conclusion of his talk, “look at whether consumers are really ready for what you have to offer them.”
The potential to flounder and flop is always on the table when you’re starting your own business. By understanding your market, building the right team and timing your launch appropriately, you can avoid falling into the same trap that 90 percent of entrepreneurs before you have succumbed to. As Bill Gross put it in his Ted talk, “I think startups can change the world and make the world a better place.”