Even with a great product idea that has gained traction with customers, founders face daunting challenges.
Successful entrepreneurs have taken significant personal risks to start and grow their businesses. Before moving forward, they should have evaluated each major risk and recognized the potential consequences of their decisions.
Entrepreneurs might encounter several perilous situations.
Consider the odds of success. Based on research data from hundreds of thousands of startup firms from a dozen industries, more than half will fail within the first three years. Of those that remain, about one-third will make a profit, another third will break even, and the balance will continue to lose money.
After 10 years, only a handful of companies will still be in business.
There are numerous causes that can end the dream of a business builder. The most devastating are: not enough customers, insufficient revenue, formidable competitors, a shortage of cash, poor execution of a business plan, uncontrolled expenses and minimal gross margins.
Any combination of these difficulties will adversely affect a company's ability to generate a sustainable profit.
The other risks are very personal and perhaps even more painful. A failing business can impact the owner's personal assets, including property and money. A bankruptcy will damage credit and a person's reputation. Investors, suppliers and other creditors might sue to recover assets.
There are other significant risks that impact a founder who is launching and growing a company.
Consider the long hours spent at work. Most entrepreneurs will spend 12-hour days managing the organization with little time off for personal or family activities.
Such a commitment can be damaging to personal relationships and hazardous to physical and mental health. Stress can also be a constant and unwelcome companion resulting from the strains of managing relationships and financial matters.
Considering such devastating possibilities, I would suggest that all aspiring entrepreneurs carefully ponder and evaluate each situation measured against their values, priorities and personal standards. A founder's spouse and, in some cases, children, should be engaged in this life-altering discussion.
The question should be, "Can we be happy with these challenges, or will this be too risky and disruptive?" The answer will vary among entrepreneurs and their family members.
Can the risks be mitigated? Yes. I watch entrepreneurs who have found ways to lessen the impact on their personal lives and those of their families. I should also note that, for single adults without family obligations, the severity can be far less.
Please consider the mitigation plans that have value. Until you, the business builder, are ready to purse your dream on a full-time basis, I recommend remaining an employee at a current position and working evenings and weekends to build your company.
Another approach is to leave your current assignment and give yourself a specific time frame -- one year, let's say -- to either succeed or, if not, seek new employment.
Even with these remarkable risks, people still take the plunge. Those who do so want to lead, to be their own boss. They seek independence and have a desire to be in charge.
They envision wealth and profound fulfillment. They anticipate fame, glory, praise and recognition. They have a vision and a strategy and want to achieve their goals. They want to ignite their bold dream, create jobs and enhance the lives of their fellow man. They have a fire in their bellies and won't rest until they have given it their best shot.
My story
Nearly 24 years ago, knowing the risks and after consulting with my supportive wife, I began the journey of starting a new business.
To mitigate destructive factors, I had a balanced life plan. To protect my relationships with Jeanne and my six children, I would work no more than 10-hour days. I would enjoy dinner and the evening with the family. I would not work Sundays.
As you can appreciate, there were many days when this did not happen.
For emotional and physical well-being, I would try my best to work out, jog, listen to music or enjoy some form of entertainment. To protect and grow the business, Jeanne and I secured a personal bank loan using the home we owned as collateral.
Fortunately, we were also free of all debts, including credit cards and car payments. Through Jeanne's modest employment, we had adequate health insurance.
I watched expenses carefully. I agonized for days over the purchase of a $200 fax machine.
To engage customers and generate revenues, I spent several hours every day contacting potential clients. My goal was to close a sale with everyone I contacted.
I sought the wise counsel of mentors who gave timely and valuable advice. They kept me focused on generating cash to survive and prosper.
As the years passed, I continued to manage and overcome barriers, several of which were monumental. I view myself as a survivor. I am still alive and continue to be engaged in entrepreneurship. I am still married to the same wonderful woman who supported my obsession.
She is also a survivor. During the early years of the business, my take-home pay was a $5,000 a year. Jeanne managed to provide the sustenance of life while living with an income below the poverty line.
In time, the personal loan was retired and subsequent business loans were secured by corporate assets. Today, I am happy to report, MarketStar is a global business with several thousand employees working with multiple Fortune 100 clients.
I should mention that the wounds from business battles have healed, and as a result, I am much wiser and smarter. The rewards I sought have all been achieved.
Was it worth it? Would I do it again?
Absolutely!
Alan Hall is founder and chairman of Grow Utah, a not-for-profit entity with a mission of stimulating economic development through entrepreneurship. He invites you to share personal stories about risk. He can be reached at alan@doobizz.com.
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