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Why Many People Will Fail as Entrepreneurs

Guest post by: Adam Gottlieb

Article Overview: With the economy in the doldrums, it seems that an entrepreneurial spirit is in the air. But the question is: should everyone be breathing it in?

Why Many People Will Fail as Entrepreneurs

With the economy in the doldrums, it seems that an entrepreneurial spirit is in the air. But the question is: should everyone be breathing it in? According to the Kauffman Index of Entrepreneurial Activity, a leading U.S. indicator of new-business creation, there has been a significant year-over-year increase in the number of new businesses established as the recession began to take hold, during the years 2007 to 2009. Even professional freelancers and independent contractors have suddenly been redefined, claiming instead the title "solopreneur."

But while the thought of becoming an entrepreneur may seem alluring, the truth is that entrepreneurship is not for everyone. According to the Small Business Association, 50 percent of new businesses will not last five years, at ten years that number drops to 30 percent. While a small percentage of these failures are likely do to "natural" reasons, such as a natural disaster, illness or simply a change in career choice, a significant number of these companies ultimately failed due to mismanagement or ignorance.

Why is it that so many people fail to sprout entrepreneurial wings? Here are a few reasons:

- Some people have unrealistic expectations about the amount of money they will make or the amount of work that will be required, and/or they choose ventures that are inappropriate for their personalities, lifestyles, or experiences. Before starting a company, entrepreneurs must make sure that they are clear and realistic about what they want to get out of their business and what they have to offer in terms of time, commitment, and experience.

- Aspiring entrepreneurs are unfamiliar with the basics of business management. Many small business owners lack a formal business education and have never before experienced running a small business. They may therefore be unaware of some basic tools and guidelines for effective business management. The good news is that there are numerous free how-to articles and tutorials available online that can fill in this information gap, such as those offered by the SBA and SCORE.

- Entrepreneurs fail to invest adequate time and money in market research, product development, and business planning. They are thus out of touch with their target market and are unable to establish a niche nor respond to changes in consumer attitudes. Those who are unsuccessful as entrepreneurs also fail to adequately assess their competition.

When these three elements are not in place, it virtually spells disaster for the nascent business even before it gets off the ground. Aspiring entrepreneurs who are lacking in these three areas are also more likely to crumble under cash flow issues and will have a harder time accessing financing. Why? Because they are less likely to make the kinds of decisions that could possibly save their businesses.

In short, not all people were born to be entrepreneurs, not all people are cut out to run a business, and that it is how it should be.

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Article Tags: entrepreneurs, entrepreneurship, successful entrepreneur



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