Entrepreneurs without money (IV). Why do entrepreneurs fail?
Wishing you a beautiful coming weekend! What about enjoying a bit of nature tomorrow and Sunday? What about taking the time to plan to go for a walk and a picnic? What about preparing some sandwiches, snacks, fruit, and water? It doesn´t cost you anything. The majority of the parks are public and free. Otherwise, you can also plan for a picnic in your backyard, on the beach, around a river or lake, etc. Just try to go out, leave your smartphones and tablets at home, and enjoy the weekend with your loved ones. Grab some fruit and veggies, pack a couple of blankets, a basket, plates, glasses and bowls, napkins and a small knife. Call your friends. Or simply go with your partner and kids. It is still summer time. Promise to me you will try to enjoy nature more and more. Your brains, muscles, and health will thank you forever.
Let´s go to our today´s theme. Why do entrepreneurs fail? Even the most reviewed startups with venture capital investments fail. In a study by Statistic Brain, Startup Business Failure Rate by Industry, the failure rate of all U.S. companies after five years was over 50 percent and over 70 percent after 10 years. Even if we have not reviewed the stats of this source, failure is inherent to start-ups. Why?
If you wish to download the last slide in PDF, click here: Eliescalante Juillet 2018 Entrepreneurs without money.
Let me share with you my personal answer. This is an idea we have elaborated through the recent Volvo Ocean Race 2017-2018. We believe entrepreneurship projects or startup companies fail simply because we start them when we are not ready. Point. We are rushing to set them up, and we do not take our time to prepare ourselves for the entrepreneur journey. The entrepreneur journey is a strategic decision for our life. As much as we choose what career to pursue, we also have to do strategic choices in relation to the entrepreneurship path. To become a successful entrepreneur is one of the hardest choices. It is easy to be employed and receive a monthly paycheck in comparison to start your own company. In consequence, if we decide to hone the entrepreneurship race, better we prepare ourselves for it. We need a certain type of skills that we have to learn academically and by experience beforehand. Probably the best age to start a company must be around 50 years old. That give us 25 years of previous experience, accumulation of mistakes and wisdom (as employees of several firms). I think we can build wisdom in 25 years after we finish our undergraduate studies. Entrepreneurship has to be seen seriously, and it must be a journey choice for life. To start and run a company well, when we are not ready, is like to die before being born. In order to create a good business model, we can´t think in short terms. Sometimes it takes more than a decade just to build a good business model and adjust the sails of value propositions accordingly given the new demands and the new contexts with the new emerging technologies rising every day. Even if your start-up is not about technology, with the Industry 4.0 context, it will need technology to compete. And this is crucial to learn how to set up businesses in this new context. When validating your strategic model and value proposition, be sure, it will take a while to understand your potential clients and create the demand that your company needs to start generating cash flows. Just when the needs and wants of those clients will be met, they will decide to buy your products and services. It takes many years and patience. Then, from the point of view of resources, capabilities, and partners, it takes several years to find the right partners and the right people who will ignite the energy, passion, commitment, and money to our endeavors. Many ventures start with the wrong stakeholders, with the wrong team and because of the wrong reasons. That is why they fail. There are many articles about why startups fail. Google them. But today, let me share with you an infographic which is complete in relation to start-ups’ failure reasons:
In our fast lifestyle, we have been educated to think about an idea, act on it, get debt to accomplish it, try to sell it and if it doesn´t work, kill it and dispose of it to the garbage. No one has taught us that we need to think in having our own money in our pockets before starting our businesses. We believe the business idea is enough to begin a startup. Wrong. Without doing the right preparation to start something, we run to look for debt, crowdfunding, venture capitalists, our parents’ money or assets (which is insane-do not use your parent´s money to lose it). That is not God´s way to start a serious business for our life. Remember: The World Bank advice: Don´t ask for money from other stakeholder sources (debt or equity) if you don´t have between 25% to 40% of your company or project total value in cash in your pocket.
Our products and services are a mirror-mirror of what we are. We have lost our true identity of patience and remain calm when becoming entrepreneurs. We are rushing all the time. We do not test pilot projects correctly for prospective real demands, and we are not thinking of businesses for 100 years life-span. We are thinking about how to do well to sell our business from day one. It is not good. It is not our fault. The system rewards this way of life. We have been living a cycle of the rushing of what´s next all the time. We have inherited and embraced the thought that uncertainty is something normal, and we thrive for it. The idea of not knowing what will happen is the norm when we can make the efforts to decrease the risks of our entrepreneurship attempts. Creativity is not enough if we don´t try to prepare ourselves well.
If we wish to become “successful” entrepreneurs, let´s prepare ourselves for it. It takes time, endurance, character, to build emotional intelligence, patience, our own savings, previous experience, tons of mistakes, choosing the right team as much as the right stakeholders, but more importantly, it takes wisdom (more than knowledge). Let me finish by writing what I told to my beau Alejandro Guillermo Lozano Artolachipi, 17 years ago: we are running a marathon, not a sprint. Thank you for reading!
Disclaimer: All the presentation slides shown on this blog are prepared by Eleonora Escalante MBA-MEng. Nevertheless, all the pictures or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated.
Leave a Reply