Hooray! This week, we celebrate the 10th anniversary of Thinkergy. Most start-up never make it through the roughs and troughs of their first decade, and we feel very grateful to have survived. Nowadays, many consider leaving the rat race to start their own business and become an entrepreneur. Do you know in earnest what you’re up-to? Please allow me to share with all wanna-be-entrepreneurs ten entrepreneurial lessons from a lucky survivor.
1. Know that the odds are against you. We all heard the success stories of celebrated entrepreneurs such as Steve Jobs or Richard Branson who created glamorous business empires out of nothing. But we don’t know the stories of all those many, many entrepreneurs who failed with their start-ups — due to the survivorship bias that we also talked about in the last column. Statistics on business failure rates show that roughly half of the companies don’t survive their first five years, and that 70-90% don’t make it to end of their first decade.
How can anybody dare to enter the entrepreneurial business given this odds? Well, all start-up entrepreneurs believe that their case is different, and that they will be among the survivors — a bias that behavioural psychologists call “Positive Illusions”. Let’s acknowledge it: We’re much more likely to fail than to succeed with a new entrepreneurial venture. How to sanely deal with this uncomfortable truth?
2. Confront the facts yet have faith. In his book Good to Great, Jim Collins identified a useful and apparently paradoxical practice that most of the featured top-performing companies maintained: Honestly confront the brutal facts of your current reality, yet always have faith that things will turn out well in the long run. Adopt this practice as you start and build your venture.
3. Improve your odds of getting lucky. Given the poor odds of your start-up surviving its first decade, you need more than a great business idea and sufficient personal, social and financial capital to succeed: You need to a lot of luck. Heed to the advice of Thomas Jefferson: “The more I do, the luckier I get.” Then, get ready to “work your ass off” in the coming years and even decades.
4. Deeply love what you do. Can you imagine yourself to happily working hard day-in, day-out in a venture that doesn’t enormously excite you? Clearly, you need to be extremely passionate about what you do. Most successful entrepreneurs deeply love what they do, and hence enjoy doing it all the time.
5. Focus on making meaning, not money. Many people want to start their own business to become rich. If you think along these lines, better work in a well-paying job. Given the start-up failure rates, your chances to make a lot of money are higher if you pursue a corporate career.
As Guy Kawasaki suggests in his book The Art of the Start, your prime motivation to start your own business should be not be on making money, but on making meaning: Create a valuable new product, service or solution that improves people’s lives and makes the world a better place. Ideally make your business idea cater to a wider, unsatisfied need of consumers, other businesses or society — the wider the need, the easier it will be to scale your business later on.
6. Take a long view on your venture. What does it take to create original, meaningful new products and services that form the solid foundation of building and growing a truly great business? Time. Don’t rush launching another “me too” product or offering another “quick fix” solution. Take the time you need to create a truly new, meaningful value propositions that differentiates your venture from other players in the market.
When I envision the evolution of Thinkergy, I’d like to think in decades: Our “childhood decade” was all about getting into the market and understanding how to develop meaningful products that go beyond what’s already out there. In the coming “teenager” decade, we will focus on growing our business and expand our market presence in Asia and beyond with the help of an expanded team and outside delivery partners. Thereafter, we will solidify business operations of our expanded business entities (third decade) before eventually focusing on developing the systems that make the business a going concern regardless of the people running the firm (fourth decade).
One more remark here: Personally, I believe that there is something fundamentally wrong when you start a new venture and overly concern yourself with your exit strategy. If you found a venture that focuses on making meaning and if you deeply love what you do, why would you want to exit?
7. Have a game plan, but be flexible. For each major phase of building your business (e.g., creation, launch & growth, consolidation, systemisation), create a strategic roadmap that outlines your strategic action ideas (or in other words: projects) that you want to execute in each year to move you towards the next phase of business evolution. Use your game plan to roughly guide your actions towards achieving your goals, but be flexible: Your plan is likely to be affected by unforeseeable changes in the highly dynamic modern business environment and by execution delays. As Woody Allen noted: “If you want to make God laugh, tell him about your plans.“
8. Keep track of the score. In the entrepreneurial start-up game, what is the most important financial figure to track? Cash flow. Building a business requires upfront investments and related cash outflows. Most start-ups that don’t survive run out of cash at some point of time — often even although they have confirmed orders or booked revenues (that typically don’t translate into cash inflows immediately). Closely check your cash flow score if you want to stay in the game. Moreover, know how much money you can still afford to invest in your business (your “affordable loss”) and the cash flow floor you cannot undercut without endangering the financial viability of your venture (your “red line”).
9. Give more to get more. In business, many companies overpromise and underdeliver. If you want to stay in the entrepreneurial game and make your business flourish, follow the opposite strategy: underpromise, overdeliver, and keep your promises. “Doing business is easy”, confided a fellow-entrepreneur to me years ago: “Give your clients much more value than they expect to get. Make then insanely happy about the value you deliver to them — and they will come back and want to do more with you.”
10. Stay humble and grateful. If your business flourishes against all odds, resist the temptation to become overconfident, proud and self-centered in attributing this success to you. Silence your ego! Stay humble and be grateful to all those who really made your venture rise:
- Celebrate the people in your team who give you their hearts and minds, and their time and energy, to jointly build a great business.
- Treasure your customers —especially those loyal patrons with repeat sales— who trust in your products and delivery capabilities in return for their money.
- Acknowledge your reliable suppliers and business partners who support your venture with their services and know-how.
- Show appreciation to any investor or financier who chipped-in funds temporarily or permanently.
- Finally, share your joy of success with your family, friends and cheerleaders who have supported and encouraged you along the way.
Recall the proverb: “Success has many fathers, failure is an orphan.” Salute all those who helped you making your venture survive, rise and flourish — and they will continue supporting you on your entrepreneurial journey.
© Dr. Detlef Reis 2015, This article is published in parallel in the Bangkok Post under the same title on 6 August 2015.