It takes a particular type of person to have the will and fortitude needed to embrace entrepreneurship. Not everyone has the patience, confidence, talent, financing, and self-esteem that it requires. That being said, there are some misconceptions about entrepreneurialism, portraying it both in an overtly easy and difficult light.
The most important thing to know is the success rate of most startups. Barring any glaring issue such as a misappropriation of funds or poor marketing, a solid company has an 80% success rate for its first year. According to the U.S. Small Business Association (SBA), approximately 70% make it to year two, with a decline that increases as years go on. Only about 30% of companies celebrate their tenth year in business. For entrepreneurs, this can paint a bleak picture.
The truth is that many famous entrepreneurs were once knocked down at least once. Every upcoming entrepreneur should know that failure is a chance to learn from one’s mistakes and is almost certainly when entering into the high-risk world of becoming one’s own boss. Even Milton Hershey, the seemingly effortless king of candy bars, had numerous setbacks before he found success. Armed with only a 4th-grade education, he worked as an apprentice for several years before setting out on his own to start a struggling candy pushcart business. Six years later, he tried again to fail in Chicago, followed by another flop in New York. Eventually, he came up with the winning formula we all know today.
Henry Ford, a name synonymous with the Ford Motor Company, had to survive several setbacks when venturing out on his own. His first cars were considered too expensive and to be of poor quality. He kept developing designs and improving on prototypes until he realized his dream. One important lesson learned was that success means more than building a great product. It takes confidence and courage.
Entrepreneurs should also understand the ins and outs of finance, including when to allow yourself a salary versus putting money back into the business and never going over budget without a backup plan. The majority of startups fail either because of poor cash flow management or a faulty business model. There needs to be a firm foundation for any business starting from day one of the planning stage. Everything else will build upon that framework.