The Road to Entrepreneurship...

According to the U.S. Small Business Administration (SBA), a third of all start-up fail within the first two years, and almost 60% are doomed to fail by their fourth year. These numbers probably are not a shock to you as the failure rate of new businesses is widely publicized. I think, to intimidate first time entrepreneurs.

Anyway, why is the failure rate so high?

I know! There are too many “unfit” entrepreneurs entering markets for the wrong reasons. They are drawn to entrepreneurship by the perceived image of the entrepreneur - a rich, famous, smart individual who stands out as hero in our society for coming up with businesses that revolutionize our world - Steve Jobs, Jason Calacanis, [insert admired entrepreneur here]. Such entrepreneurs are most likely doomed to fail thereby skewing the overall failure rate. Note that I use the term “unfit” here to refer to people who, while may be good at the technical work they do, are NOT good at creating, running, or growing businesses.

Imagine this very likely scenario:

You are a great developer working for a big software company. One day, you catch the bug - [see my earlier post on this] - and you decide that you are done wasting your time working for someone else. You could be making a lot more money and be happier working for yourself! So you quit your job, go on your own and start you own software development company without any regard as to how to create a business. All you know is that if your employer can do it, so can you.

Unfortunately, this scenario is how most small businesses get started. Businesses are created without any regard for industry or market needs, without a marketing strategy, without a sustainable revenue model by “unfit” entrepreneurs.

But after 6 months or so, you realize that you are not only doing all the software development work that you are so great at, but you also need to take care of the “books”, tend to customer inquiries, promote your business etc… Suddenly, you are now working harder than you ever have before and the happiness and riches that you dreamed of are nowhere in sight. Like most people, you want your life back! So you close up shop.

You, my friend, have just contributed to the failure rate!