5 tough lessons every successful entrepreneur has to learn12 March 2018 Category :
Entrepreneurs are thriving. That’s especially true in the UAE, where there’s a real push to attract the best from all over the world, give them a platform for innovation and disruption, and help them shape the world over the next century. According to MAGNiTT, in the first half of 2017, 27% of investment deals in the UAE were at seed stage, showing active investment in early stage startups.
Yet while your entrepreneurial dreams may have been boosted by hearing many success stories, there are always things you won’t have heard. I’m talking about the lessons that those who’ve already made it don’t really want to share – for fear of embarrassment or scaring away those following in their footsteps.
Learning about these hard truths is essential for new company founders if they want to avoid becoming a startup fail statistic. So here are five of the biggest lessons a budding entrepreneur should learn, and how to use them to build a stronger business.
1. You will struggle within the first year (so do your homework): Entrepreneurs have to be optimists to believe they can go it alone in the business world. But the cold hard truth is that far more startups fail than succeed, with the most dangerous period being the first 12 months.
There are numerous reasons why. A study conducted by CB Insights found that 42% of startups failed because there wasn’t a market need for what they were offering. While up to 29% said they ran out of money (see #2, below), a further 23% said they didn’t have the right team, and 14% said their marketing wasn’t good enough.
A study conducted by CB Insights found that 42% of startups failed because there wasn’t a market need for what they were offering.
The lesson to take home here is that most of these issues can be prepared for and avoided. Investigating market need, especially, is an essential step every entrepreneur must take before starting their journey. Occasionally a business will supply an innovative product that the world didn’t know it needed, but it’s far safer to identify upfront the gap in the market.
We would suggest testing your product or service first on a small scale, with as few overheads or long-term financial commitments as possible (for example, selling in a pop-up shop before investing in a high-street store). This not only gives you the chance to make sure what you’re offering is good enough for market, but also allows you to scope out the perfect price that brings in the most customers while making the most money.
2. Money will almost certainly run out (so be prepared): If you’re setting up in a big city like Dubai, you’ll be encouraged to enjoy everything it has to offer, both personally and with your business. Yet entrepreneur lesson #2 is to rein in that spending immediately.
As mentioned above, a huge 29% of startups ended because they ran out of money. That’s in addition to 18% who said that pricing and cost issues caused their failure, as well as 8% who said they couldn’t get financing or investor interest. In a separate study, the Association of Chartered Accountants suggested that as many as 82% of startups failed because of poor cash flow management.
Starting a business from scratch, breaking into a market and finding a paying audience takes time. Do your figures first to work out the fixed and variable costs of operating your business, and therefore when you will reach your break-even point (ie, the point at which your income covers your outgoings). Then you should be able to calculate whether you’re financially prepared to cover your funding requirements (and any extra spending) until you reach that point. The good news is that setting up in a free zone brings significant tax breaks – an expected rate of 5%, compared to as much as 27% elsewhere.
3. You’ll grow to hate being your own boss (if you want to be successful): One of the perks of being in charge is that you’re able to steer the business in any direction you want – and you usually get to reap all the rewards yourself.
But wait a moment: one particularly hard lesson for entrepreneurs to learn is that being your own boss means you’re now in charge of everything. If you’re an expert in sales, you need to handle accounts and tax. You might have a passion for your product or service, but you also have to find and persuade strangers to pay you for it. And to do that you’ll need a website, which means you’re about to embark on a crash course of web design and copywriting. Because the fact is, most startups can’t afford the additional cost of outsourcing all these tasks.
So before you start, ask yourself whether you can work outside your comfort zone. Fortunately, there is a great deal of expertise at hand in the UAE to guide you. The free zones in particular cater to specific industries, offering ready access to knowledge and invaluable collaboration opportunities. The point here is to make sure you think carefully about which free zone, if any, you are setting up in to take full advantage of industry-specific expertise.
4. You must admit your weaknesses (to fulfil your potential): One of the worst traits an entrepreneur can display is a stubborn inability to recognise their imperfections. As we saw in #3 above, you have to recognise that you won’t be able to do everything perfectly – even those parts of the job that you love.
The ability to understand and admit where you fall short is essential. In fact, many of the most successful entrepreneurs will only develop some of the key business skills later on. Back in 2013, TTI Success Insights shared the results of a study called The Skills Most Entrepreneurs Lack.
Unsurprisingly, in traits such as persuasion and leadership – things we think of as ‘typical’ entrepreneurial traits – the test group they used scored highly. Where they fell down were in empathy, planning and organisation, and self-management.
What we can take away from the above is that the ‘lack’ of certain skills in the early days can actually work to an entrepreneur’s advantage. After all, to start up a business you need primarily to be persuasive, single-minded and blaze your own trail. It’s later on when you’re thinking long-term that you will need to develop the ‘softer’, or more strategic skills. So don’t be too tough on your perceived ‘weaknesses’.
It’s good practice to periodically take stock of yourself. By this, I mean breaking down the work you’ve done and reflecting on where things might have gone wrong and/or where you could have done better. It also means listening to others (especially customers) when they provide feedback or advice.
5. This is the hardest thing you’ll ever do (and you may fail – but do it anyway): If you’re thinking that being your own boss means less work than a regular 9–5 job, you’re in the wrong place. Starting a business will take up your whole life, especially if you’re setting up in a high-energy city like Dubai where it’s easy to get caught up in the exciting, but intense, work ethic. Even if you’re not working 24/7, your brain will be constantly switched on, thinking about the business.
Starting a business will take up your whole life, especially if you’re setting up in a high-energy city like Dubai where it’s easy to get caught up in the exciting, but intense work ethic.
It can be hard, and there will be times when you’re unhappy. Even when you’re finding success, the crests will be followed by dips in fortune, and despair can easily set in. But that’s okay. It’s natural and you have to learn to ride those waves without any sense of shame if things go wrong.
In fact, learning to not only deal with failure but turn it into a positive is a vital lesson for any would-be entrepreneur. In their book, Trailblazing in Entrepreneurship: Creating New Paths for Understanding the Field, Dean A. Shepherd and Holger Patzelt looked at how failure itself can actually benefit you if processed correctly. ‘Handling failure may help entrepreneurs develop coping self-efficacy, emotional intelligence, and other sources of resilience. These resilience sources (and self-knowledge of them) are likely to impact on subsequent entrepreneurial thinking.’
So we’re back to our old friend emotional intelligence: Remember how the study in #4 suggested this is a trait many entrepreneurs may lack initially?
If you haven’t been put off by these hard truths – good! You’re already entrepreneur material and you’ll see setting up your new business as an exciting challenge. Because even though there’s a lot to sacrifice, the rewards are more than worth it. You will have more control over your career, getting to dictate the terms of your company. And, most importantly of all, you should now be working in a business in which you believe.
But remember: for the best chance of success, not only do you need to face those truths we’ve discussed, you also have to learn the lessons behind them. Prepare ahead of time, understand what to expect and you’ll be well on the way to maximising your business potential and the profits that go with it.
Virtuzone Mainland is dedicated to helping clients open a company on the UAE mainland, providing advice and assistance with every aspect of the company formation. To set up a consultation, please call us on +971 4 457 8200, or click here.