Key Factors for Successful Entrepreneurship
When it comes to research on entrepreneurship, few organizations do more of it than the Kauffman Foundation. For a just-released study called Making a Successful Entrepreneur, Kauffman surveyed 549 company founders of successful businesses in high-growth industries to determine the factors that influence the success or failure of startups. The key success factors, it turns out, are "prior work experience, learning from previous successes and failures, a strong management team and good fortune." Let's look at the highlights one at a time.
1. "Nearly all of the company founders surveyed - 98 percent - ranked prior work experience as an important success factor, and 58 percent ranked it as extremely important." This seems obvious, but it's surprising (some might say alarming) how many people start businesses without any relevant prior experience. I have known people who were laid off from their jobs and felt forced into entrepreneurship and then failed because they had no models for success. That doesn't mean people with no applicable experience shouldn't become entrepreneurs. It just means they need to realize the gap they must fill and that they take their deficiency seriously.
2. "Forty percent cited lessons learned from failures as extremely important." There's the Catch-22. You may have to fail in business before you can succeed. If you haven't started a business before, you have to learn how to fail without catastrophic results. That could mean knowing when to shift strategies or when to abandon an investment. A lot of startups these days are "solopreneuring" ventures with one full-time employee, the owner. But it's very hard to play all the positions on a team. Knowing how to outsource and develop a virtual team is a critical skill if you're going to build anything that scales beyond what you can do yourself. No matter how great your idea, you will be inherently limited if you do everything yourself. From the start, find other people to do things you don't absolutely have to do. Find a virtual assistant, outsource telesales to qualify leads, get your CPA's office to do your bookkeeping. You focus on the things that only you can do, such as getting new sales.
3. "For 73 percent of the entrepreneurs surveyed, luck was an important factor in success." There's truth to the adage that some people make their own luck. There's lottery ticket luck, then there's entrepreneurial luck. Ask any successful business owner what was the luckiest thing that ever happened to them in business that allowed them to be successful. I guarantee you that the "luck" was manufactured with a lot of intention.
4. "Professional networks were important to the success of their current businesses for 73 percent of the entrepreneurs. In comparison, 62 percent felt the same way about personal networks." Again, no entrepreneur is an island. Knowing people is critical. How many people have you reached out to and tried to help? Learn how to network and extend a hand to others. Earn some karma credits and you'll find the path much easier when you need a hand.
5. "Only 11 percent of the first-time entrepreneurs received venture capital, and 9 percent received private/angel financing. Of the overall sample, 68 percent considered availability of financing/capital as important." Message: if you think you're going to get formal private capital (venture, angel, private equity), chances are you are wrong. You will probably need financing from a good old bank, or with help from the Small Business Administration (SBA), or from your parents, siblings or others. How do you feel about asking people, especially people you know, for money?
6. "In identifying barriers to entrepreneurial success, the most commonly named factor - by 98 percent of respondents - was lack of willingness or ability to take risks." Knowing a calculated risk from a foolish one is a very important skill. When you prepare to take a business risk, are you the type who gets caught up in the moment with your gut feeling and goes for it, second mortgage and all? Or do you study the situation fully, wallow in the numbers, make sure you have thought of everything that can be anticipated, and then make your move?
7. "Other barriers...were the time and effort required (93 percent), difficulty raising capital (91 percent), business management skills (89 percent), knowledge about how to start a business (84 percent), industry and market knowledge (83 percent), and family/financial pressures to keep a traditional, steady job (73 percent)." Wow, why does anyone start a business? Even really successful people cite massive obstacles and difficulties. All the more reason to believe that should you go entrepreneur, there is nothing else you would rather do.