Entrepreneurs boldly go forth every day, working to achieve their dream of flipping the proverbial “Open For Business” sign on their startup. They have an amazing product, a strong client base, and a thriving business. Products continue to be made, customers continue to be served – day in and day out the small business continues to strengthen and grow. More skilled and educated employees are hired, new and innovative products are launched, and the startup business eventually evolves into an established small business – the well earned reward reflecting hard work and innovation.
In an ideal world this is how it would go. With determination, hard work, and a little bit of luck in having the right idea at the right time – most startups would be successful.
The reality is that 50% of startups fail within four years. Within a decade – 71% of startups are closed for business.
Whats the good news for Wisconsin Startups?
Wisconsin defies this trend. Startups in Wisconsin have a 30% higher survival rate when compared to the national average: 41% of Wisconsin startups are still open after a decade, compared to the national average of 29%. This makes Wisconsin 6th in the nation for having startups last at least a decade!
What makes Wisconsin a strong place for startup businesses? Is it the long bitter winters? The cheese?
Maybe it’s because entrepreneurs work on their startups before flipping over that “open for business” sign. The Director of the Small Business Development Center at UW-La Crosse, Ann Hlavacka thinks “We come from a part of the county … that tends to be a little more deliberate when it comes to starting up a business. It takes a little bit longer, they don’t just jump into it as a general rule, they’re trying to explore, they’re trying to make sure they’re doing it right.”
Can it really be that easy? Taking time to make sure you get it right seems to be advice that is so simple and repetitive you would find it in a fortune cookie or wrapped around a piece of chocolate.
Luke Kempen, Director of the Small Business Development Center in Eau Claire, writes about what makes startup businesses successful: “The line between success and failure with startup businesses is often very thin. Ending up with a successful business requires a lot of work and planning before you start your business. You need to test and validate your ideas to the best of your ability. Do your due diligence and research, talk to people, go to similar businesses and observe. “
Taking your time to get things right sounds like solid advice from the experts. But what about the startups who have been there and failed- what do they wish they could have done differently?
Why do Startups Believe They Failed?
When owners of failed startups were asked to name the main reason why their startup failed, most responses fell into two categories:
Incompetence accounted for 46% of responses. Overwhelmingly the specific reasons were focused on pricing and finances of the business: emotional pricing, living too high for the business, nonpayment of taxes, no knowledge of pricing, lack of planning, and no knowledge of financing.
Unbalanced experience or lack of managerial experience was the runner up reason coming in at 30% of responses. Specific pitfalls in this category included: poor credit granting practices, expansion that was too rapid, and inadequate borrowing practices.
Ouch – you read that correctly. 76% of failed startups pointed toward lack of knowledge or experience as the reason why they failed. That is 3 out of 4 failed startups that may still be open for business if they had a critical piece of knowledge or experience.
I Want a Successful Startup!
Accept that you will need assistance. You don’t know everything (its okay, really – no one does). Focus on your goals, and reach out to organizations that exist to assist entrepreneurs and startup businesses.
“There are many resources that can help – including networking with peers, partnering with other businesses, and working with business development experts such as the Small Business Development Center and your local Economic Development people,” advises Luke Kempen.
Below is a list to get you started – clicking on the links below will direct you to regional resources for the Eau Claire area and Northwestern Wisconsin, but if you are located elsewhere just search Google for your nearest resource!
- Small Business Development Centers deliver comprehensive financial, marketing and management consulting to companies at every stage of business development.
- SCORE offers free counseling in all aspects of starting, buying, or expanding a business to grow successful small business across America.
- Economic Development Organizations provide services for entrepreneurs and businesses to assist them in developing or expanding.
- Small Business Administration is an independent agency of the federal government created to aid, counsel, assist, and protect the interests of small business.
Take your time to get it right – sometimes the simplest answer is the best.
What else do you think differentiates startups that succeed from those who don’t? Comment below!
Sources:
- Starting Business in Wis. isn’t easy, but worth it; Kyle Dimke, 2014
- Startup Business Failure Rate by Industry; Statistic Brain, 2014
- Eau Claire Small Business Development Center; Luke Kempen, Director
