Note this article also appeared in Entrepreneur Middle East and can be viewed here.
It has never been easier to become an entrepreneur. But are you ready?
Modern technology has connected us to the point where it is feasible to run a startup business with no office space or full-time staff – maybe even alongside a full-time job in the early stages.
And tools that once required major investment and specific expertise – accountancy packages, customer relationship management systems and the like – are now readily accessible and available for a small monthly fee. Plus, thanks to the rise of the gig economy, advice, information and extra resources are often only a quick Google search away.
This lowering of barriers to entry is reflected in the number of entrepreneurs that are giving it a go across the business world. In recent years record numbers of new businesses have been launched in both the UK and the US, while here in Dubai nearly 27,000 new business licences were issued by the Department of Economic Development (DED) in 2016 – up from 23,000 the previous year.
In recent years record numbers of new businesses have been launched in both the UK and the US, while here in Dubai nearly 27,000 new business licences were issued by the Department of Economic Development (DED) in 2016 – up from 23,000 the previous year.
However, lower barriers to entry don’t automatically improve your chances of success: far from it. What’s more, all the business tools and IT connectivity in the world won’t help if the entrepreneur at the centre of the operation isn’t fully prepared for what can be a long and lonely journey on the road to success.
In both the UK and the US roughly half of new businesses fail within five years. So as an entrepreneur how do you give yourself the best chance of being on the right side of that split? Let’s look at the top five pitfalls – and how to avoid them.
1. Not being open to new ideas: It’s a common misconception that making the transition from employed work to entrepreneurship simply means taking what you already do for a company, as an employee, and doing it for yourself instead. Would-be entrepreneurs understand that they’ll have additional tasks on their plate – accounting, admin, marketing, etc – but may also assume that their ‘day job’ is going to stay roughly the same.
If you have this view, then think again before going it alone. Not only is much of your time in the early days likely to be spent away from your ‘core job’ – as you simultaneously take on the new hats of chief salesman, admin assistant and CEO – but as your business grows you may find yourself doing something different entirely.
When a business expands, it takes on a trajectory of its own as markets, trends and consumer needs change around it. Entrepreneurs must be adaptable and receptive to those changes, and prepared to take new directions as their business evolves. Back in 1984 no one at Apple would have guessed that the company would become the largest phone manufacturer in the world – but the business evolved radically with changing markets and its customers’ changing needs.
Eric Ries – author of bestselling book ‘The Lean Startup’ – believes that most startups actually need to change course before they enjoy success. So, if you want to be one of them, you’ll need to know how to adapt your business to changing conditions – maybe radically.
2. Not prepared to take responsibility: As the legendary American entrepreneur and author Arnold H. Glasow put it, ‘A good leader takes a little more than his share of the blame, a little less than his share of the credit.’
From time to time in a new business things go wrong. People make mistakes. How you deal with this will go a long way to determining the success of your business.
Researchers from the University of Southern California (USC) found from an experimental study in 2010 that when people blame others for their mistakes, they learn less and perform worse. This problem is magnified when blame becomes embedded in the culture of an organisation. If you’re the kind of leader who lays blame at the door of others when things go wrong, or fixates on whose fault it was rather than rectifying the situation and learning from it, you’re unlikely to make a success of your time as an entrepreneur.
Researchers from the University of Southern California (USC) found from an experimental study in 2010 that when people blame others for their mistakes, they learn less and perform worse.
The USC study called this kind of behaviour ‘blame contagion’. Employees who see their boss passing blame are more likely to do the same thing themselves, with the result that no one in the company is or feels accountable.
So, as an entrepreneur, when you hit bumps in the road, you need to be offering solutions, not accusations. The buck stops with you. Take responsibility for your mistakes.
3. Being satisfied with your current job: In many years of working closely with entrepreneurs, I’m yet to meet one that actively enjoyed working for someone else. And would-be entrepreneurs aren’t the easiest employees to manage. The desire for ownership and autonomy over your business is a great quality for an entrepreneur but not usually compatible with a traditional office environment.
Often, future entrepreneurs clash with their managers rather than being prepared to tread the party line or to wait patiently for the next pay rise or promotion. A 2015 paper published by the UK Government’s Department for Innovation, Business and Skills found that dissatisfaction with current job is one of the key tipping points that pushes entrepreneurs to go it alone.
So, if you don’t feel that dissatisfaction or sense of frustration at the lack of autonomy in your current role then perhaps you’re not yet cut out to be an entrepreneur and would be better suited to staying where you are – at least for now.
4. A low stress threshold: The life of an entrepreneur is a stressful one. The isolation of working alone – coupled with long hours, multi-tasking and daily decision making – can take their toll on your mental health. Then there is the added pressure of having others rely on you, as from the moment you take on staff you’re responsible for their livelihood as well as your own.
Such is the weight of the burden that a 2012 Gallup Wellbeing poll found that 45% of entrepreneurs report being stressed – while another study by researchers at the University of California and Stanford University found that 30% of entrepreneurs identified as depressed.
Trying to improve your stress management skills at a time when – as a new entrepreneur – you’re already under a lot of stress is a bit like learning to swim when you’re already drowning. So what can you do? Aside from taking time off – which can be tricky when you’re in the midst of launching a business – finding routine and order can go a long way to helping. As then-President Barack Obama said when asked how he deals with the stresses of his job: ‘You need to focus your decision-making energy. You need to routinize yourself. You can’t be going through the day distracted by trivia.’
Managing stress is a big part of securing entrepreneurial success and it pays to be aware of your own capacity to do that before you take the plunge.
5. Fear of failure: A recent survey conducted by Towergate Insurance in the UK found that almost 60% of employees had ideas about running their own business, but that only a fraction were likely to turn their idea into reality – with fear of failure being a common factor holding would-be entrepreneurs back.
But what of those that go for it? Do they not have those same fears? The difference is that the successful entrepreneur knows how to manage those fears – and knows how to accept that failure can be just another turn in the road, rather than the end of it.
The difference is that the successful entrepreneur knows how to manage those fears – and knows how to accept that failure can be just another turn in the road, rather than the end of it.
In fact, according to economists at Stanford University and the University of Michigan, failure can increase the chances of later success. They found that not only were entrepreneurs likely to be more successful at the second time of trying but that success rates actually increased in correlation with the number of ventures that failed. These findings would come as no surprise to Virgin CEO Richard Branson, a man who knows a thing or two about entrepreneurial success. Speaking on the subject of failure Branson says: ‘Few first ventures work out. It is how a beginning entrepreneur deals with failure that sets that person apart. In fact, failure is one of the secrets to success, since some of the best ideas arise from the ashes of a shuttered business.’
We can’t all be Richard Branson. But we can look at the characteristics of him and people like him who have made success of their entrepreneurial lives, and assess ourselves against those characteristics. This will at least help us understand our own chances of success as entrepreneurs if we take the plunge.