1.The U.S. currently ranks twelfth among developed nations in terms of business startup activity and has produced a negative net number of startups every year since 2008, according to Gallup. Why do you feel the number of startups has been steadily decreasing in this country?
A number of reasons may account for this decrease in startups, and by the way, I know we like being first, but twelfth is not terrible. I think a number of things are contributing to this phenomenon of fewer startups, but the first may be that our economy is doing better, especially compared to most of the rest of the world. When this happens, more hiring is going on, there is more stability in the economy and the job market, less people are unhappy, and thus fewer people have a desire to start their own company. I also think that there has been a lot of press over the years regarding the failures of startups, and very possibly it is sinking in with people that starting a company is not as easy as it sounds.
I do not think this has too much to do with a lessening of entrepreneurial spirit in this country, but for many years there has been a pretty heightened sense of insecurity due to poor economic indicators such as high unemployment, housing foreclosures, etc. That is now changing, but people are still cautious, and that caution may be contributing to the lower startups. However, the fact that we are still twelfth in the world in startups proves that we still have a lot of ambition. In addition, we are still right there in the top three countries for innovation and productivity.
2. In a survey conducted by Gallup, 25 percent of Americans reported they thought about, but decided against, building a business. What do you feel is contributing to this hesitation and reluctance to become an entrepreneur?
Mainly, because there is security in having a job and working for someone else. With the high incidents of failures in undertaking a new business, it is quite a risk. As someone who has started several businesses, I understand the risks associated with this direction. There is no dipping your toe in the water to see if they like it. To be successful it is pretty much all or nothing, and you have to have a great deal of confidence, business smarts, and the will to overcome defeat.
I will add that starting a business is all consuming, and it is 24-7 for the first year or so and sometimes beyond that. People have to be willing to focus, focus, focus. The threat of failure is always there; it never leaves. If you are looking for security, it takes years to get there.
3. Nearly half of the new ventures in the U.S. fail in their first five years. Why is the level of failure so steep initially, and what are the major challenges facing new businesses?
I believe many people who begin a new business go in with their eyes closed and not enough business experience. A plan is a must! The old saying of “failing to plan is planning to fail” is right on. You must think through the business, and depending upon the kind of business, there are many factors to consider, (e.g. financing, location, hours of operation, workforce, supplies, back-up plans, etc.). I also think that many people simply have no idea how much work it takes and how much capital it takes to start and maintain a business. The dedication is absolutely necessary, the hours are long, the discipline is a must, and things always take longer and cost more than people anticipate.Also, having good—no great—people surrounding you is a must! Those are the people to guide and advise you, as well as the people to support you emotionally, and intellectually. Everyone from professionals/consultants to family members are key to your survival that first year.
In addition to the necessary skills and a good knowledge of the industry or sector you are entering, a bit of luck is also necessary for success. Mostly however, it is having good business sense, watching the market you are in, and having kind of a sixth sense when it comes to marketing and reading the landscape for your industry/sector/business.
4. What can a start-up do to attempt to overcome the high rate of early failure and achieve success?
As mentioned, plan, plan and plan more. In addition, surround yourself with people who know what you do not. When my wife and I started our first business, we brought in a great lawyer, a financial planner, a business planner, and several key people who we trusted and knew areas of the business we were starting that we did not know. In addition, we laid out an action plan, then a business plan, and made certain we had the capital to make it all work. We also had contingency plans in case things did not work out. We constantly asked ourselves – “if this does not succeed, will we still be okay financially?” We also made certain what we could or would do next if we did not meet our financial projections.
Once you have made the decision to jump in, and have done the planning, then comes the hard and smart work that will make you successful. It is not enough these days to only work hard. Again, studying and knowing the landscape of your market is essential. Expect long hours, and expect no social life for the first 6-12 months, and that is if you are lucky! Otherwise, it will take longer.
Also, build upon the small wins along the way. Celebrate your success, and keep a positive attitude even when times are tough. There will be difficult, tough times. Attitude is important, and having someone to share that with is also important.
5. Do you feel that the level of entrepreneurship will continue to decrease in the U.S.? What will it take to turn these numbers around?
I don’t think anyone can answer that question. I have learned a long time ago there is no predicting the future. With that said, I think this country will always have a good amount of entrepreneurs and people who want the independence of starting their own business. I am hopeful that the number of entrepreneurs stabilizes and possibly even grows, but I will not make a prediction around that. It could be that, in a way, people are getting smarter and making good decisions not to start a business, if they truly do not have either the fortitude it will take, or the knowledge of the particular business they are thinking of, to succeed.
I am not as concerned about turning around the numbers as it relates to entrepreneurship, but what I am interested in seeing is that more of those who start a business do it informed and thus succeed. Success breeds success, so if we can see more businesses start and succeed, and others find out what made them successful, then I think we will be fine as a nation. Much of our success has been on people starting out to do different/unique ventures, and I believe we will, as a country, continue on that track.
Don Mroz, Ph.D., is the President and Founding Dean of the Malcolm Baldrige School of Business at Post University. Mroz holds a Ph.D. in Human & Organization Systems, an M.A. in Human & Organizational Development, an M.A. in Guidance and Counseling, and a B.S. in Industry & Technology. Mroz has extensive experience helping businesses large and small manage change and find new ways to grow and prosper with a focus on quality, innovation, and continuous improvement.