The Art of the Start – Steps to Take to Ensure ‘Start-Up’ Success
- Apr 14, 2020
Many natural entrepreneurs have visions of starting a successful business. Unfortunately, less than 14% of new businesses actually survive. In this informative podcast, we discuss some of the most important steps to take to ensure that your new business can grow and thrive, providing a lifetime of personal and financial rewards.
Matt Kerzner: Welcome to our podcast for Generations in Family Business, which is part of our EisnerAmper podcast series. I'm your host today, Matt Kerzner. I'm a director in the Center for Family Business Excellence. And joining me is Lisa Stewart, who is the principal in charge of the center. We are going to have a conversation on startup businesses today. Welcome, Lisa.
Lisë Stewart: Hi, Matt. It's so nice to be here talking about one of my favorite subjects, because we do an awful lot of work with privately owned businesses. And I have to say, and you and I have had this conversation many times, if they'd done some of the things that we're talking about in the startup phase, it would make our jobs much easier. So I'm glad we're talking about it.
Matt Kerzner: 100% agree, Lisa. And I'm just going to jump right into the first question and let's start this dialogue. So why are startups so challenging and so many fail?
Lisë Stewart:That's a good question. And I think that for a lot of people when they start a business, they're so excited. They've got this great idea and they finally think, oh, I can be my own boss, I can make a lot of money. This is going to be fantastic. And they're just so filled with hope. And then they really get into the whole business cycle and they find that a number of things happen. One, it just doesn't work out the way that they thought it would. So, many small businesses or startup businesses are grossly undercapitalized so they don't have enough money to keep it going. The second thing is finding really good talent, people to be able to help them is very difficult. And then just the really long hours. And then to be able to sell that idea or concept to other people. So we know that statistically only about 14% of startup businesses ever really survive. So it's really tough out there. You've got to have a tremendous amount of resilience and you've got to do some really important planning along the way.
Matt Kerzner: Yeah, I 100% agree with what you just said. I always, what I tell people and they always come forward to me and saying they're interested in starting up a business, the first words I always say is, okay, how many hours do you think it actually takes? What time should you start and actually end your day? And true entrepreneurs actually say, nope, we rise up to fall down. That's our hours. So I mean, when you're starting a business, they just think it's the opening. I'm going to turn the door, customers are going to come in at eight o'clock and I'm going to lock the door at six o'clock, but that's not necessarily true, is it Lisa?
Lisë Stewart:No, not at all. Not at all. It's a hard slog. But there are a lot of really great ideas out there and a lot of people who are very excited about this opportunity. So, I think the more ideas that we can share with them so that it can make that path a little less rocky, it's a very good thing.
Matt Kerzner: Excellent. So what do successful business owners do differently?
Lisë Stewart:Well, first of all, they start with a plan. So it's one thing to have a really good idea. The other challenge is to try to put that really good idea in writing. Get it down on paper, start out by thinking about what is the end result, what is it you're really trying to achieve here? What does excellence look like for you? And then to try to understand what kind of help or support do you need in order to bring this idea to fruition. So for example, it's understanding part of it is the financial implications. How expensive is this going to be? How am I going to fund this really great idea. Am I willing to go out and tap friends and family on the shoulders to be able to try to get some help in order to be able to fund this?
Lisë Stewart: But it's also about surrounding yourself with talented people. Reaching out and getting advice from people that have already done this before. There are some wonderful organizations available. The Small Business Development Center, the SCORE, the Society of Retired CEOs, other organizations that can help you to understand what are the questions that I should be asking? What should I have in this plan? What are some of the risks that I need to be concerned about? And how do I begin to take this idea to really be able to push it for in a way that's logical? So, good ideas need a lot of support in order to bring them to life. The other thing that I think is really key is involving the people who are going to be directly impacted. For example, if you've got a family and you're expecting your family to be able to adjust their schedule or to help you in some way, you've got to have a real conversation about this, because every business owner knows that his or her business decisions impact the family around them. So involving people in that conversation I think is really key.
Matt Kerzner: Yeah. People don't see it, but my head is nodding big time yes here because you are so correct. But Lisa, that was a lot for our listeners to hear because it is a lot of information. What would be the first advice that you would give or the center would give to somebody that calls us up and says, I have a great idea, I want to start a business, but I don't know where to go?
Lisë Stewart:Right. So number one, write down in your own words what that business actually is. What is your product? What is your service? What is your intended target market? And so on. Who are your competitors? If you could go out to say the Small Business Development Center's website or visit one of their local offices and get a copy of a business plan, take a look at what would go into a regular business plan. There's also some fantastic books that are available. How do you write your first business plan? This is a great opportunity for business owners to truly refine that idea and understand what it's going to take in order to be able to make it successful.
Matt Kerzner: So when does a business know that they have passed through the startup phase? That they just learned how to start a business, they're working the business, they're putting a lot of sweat equity in it. So they pass through the startup phase and are starting to really rock and roll. When does that happen?
Lisë Stewart:Well, I think that there's a couple of things that need to happen to be able to do that. One, they've got the right people on the team. And these are not necessarily in order of importance or even in order in terms of when they're going to happen. But you've got to have at least the right people either directly on your team as in you've employed them, or perhaps they're on your advisory team. So you might have found some really smart people who are willing to share their ideas and experience with you. So you've got to make sure that you've got the right people there. Once those people are involved and they have totally bought into you, whatever your mission, or your vision, or your direction, your key goals for the company, that's key. The second thing is you've got to make sure that whatever product and services that you're offering, no matter how great it is, that you have a market for it.
Lisë Stewart:And so, being able to go out and secure that market, make sure that you've got customers, that they understand what the benefits of your product or service really are, and that most importantly they are willing to pay for it. Because a lot of people, again, may have a great idea and they may find lots of people who say, oh yeah, that's a great idea. But are they willing to part with their cold hard cash to prove that it's a great idea? And so, we've got to have consistent cash flow. That is one of the things that really kills a lot of businesses. And then finally you've got to start to ensure that you have money in the bank. In any business, you're going to find that things go wrong, problems arise you didn't expect, the cost of goods is higher than you might've thought, a supplier raises your prices, whatever it might be.
Lisë Stewart:You've got to make sure that you've got a nest egg in order to get through the most difficult parts. What we find with most small businesses is the business itself is living paycheck to paycheck. So making sure that you've got that nest egg, you've got the right people, you've got customers who want to buy whatever you've got to sell, you're signing those contracts and you've got that sense of stability. Then you know you've passed through those wobbles enough to be able to start that next funder stage of business, and starting to really build it and to take advantage, to leverage what you've done so far.
Matt Kerzner: That's great. So Lisa, during the, we'll call it the startup phase, and again that could be a year, that could be three years, there's really no timeframe and every business is a snowflake. But what would be a recommendation for a business owner to kind of look in the mirror, reflect how they're doing, and really look at the deliverables that you just mentioned and say, how do I measure that I'm doing well, or do I need to take a step back to reevaluate what I'm doing?
Lisë Stewart:I often recommend that business owners decide for themselves what constitutes success or excellence in their business. So for some business owners, success is, it's monetary. It's how much money that they're actually bringing in in terms of what they're selling. So if they've set themselves a goal, say to bring in $250,000 in year one, or in year two, or whatever it might be, it's reaching that monetary goal. For others, it might be more of a market goal that they've got their product in a certain number of stores, or they've been able to reach a certain number of customers or clients in some way. So it might be that type of a number. For others, it may be that they're able to produce a product or a service in a certain amount of time. So I think that every business really needs to determine what are their factors that constitute success or excellence. Write those down, make sure everybody in your circle understands what those are and that you're all working in the same direction. It may be different for different companies, but I have to say in the end, cash is kind. If we're not profitable, if we're not bringing in, if we can't support the business itself, then you're going to hit that wall.
Matt Kerzner: Lisa, thank you so much for coming here today and thank you for listening to Generations In Family Business, Past, Present, and Future. We look forward to have you listen in on our next EisnerAmper podcast.
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- The Art of the Start - Steps to Take to Ensure ‘Start-Up’ Success
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