Based on the many huge success stories we all see in the media today, including Jeff Bezos with Amazon, Elon Musk with Tesla, and the Shark Tank TV show, many people I meet in my angel investing efforts are anxious to jump into the fray with an assumption of similar returns. Yet I see only a few who have the mindset I find required for survival in these challenging business times.
Indeed, the cost of entry is lower than ever, and the marketplace is now a global one, but customer expectations and competition are now at an all-time high. People have access to many forms of instant communication around the world, and freely share their own experience, which can make or break your own reputation, as well as your business, as quickly as it gets started.
In my experience, most people starting businesses are genuinely surprised by the challenges they encounter, even after they hear my best recommendations. Thus I am happy to see some practical guidance for aspiring business owners in a new book, “The Entrepreneurial Brain,” by Jeff Hays. He details his own efforts and failures over several decades, with some good lessons.
Here is my summary of his key points and recommendations for starting and growing a new business, with my own insights added:
1. Expect failures, and learn from each one. By definition, entrepreneurs and new business owners are optimists, and most behave as if failure is not an option. You need to be honest with yourself about the level of risk you are taking on. Structure your initiatives so there are only two outcomes – either you succeed or you learn something.
In my experience, people learn more from failures than successes, especially if they do their homework to understand the root causes and celebrate the positives. The worst approach to failure is to try the same thing over again and expect different results.
2. New business experiences are often contradictory. You must embrace the paradox that there are no certainties in business, only certainties in the moment. Say goodbye to knowing what always works, and hello to brilliant, resilient flexibility. There really is a time for recognizing a failing approach or product, and pivoting to a whole new direction.
For example, I often recommend the online-only business model for its low cost and wide reach, but it doesn’t work with all products. Some products need to be seen or touched in retail before they can be appreciated. Consult your marketing expert before you commit.
3. Survival requires risk as well as long-term wealth. The biggest asset for anyone brave enough to start a new business is the willingness to take risks, but if you are constantly taking risks, you will eventually lose your income, unless you build a wealth account. Having a trusted advisor is essential to defining and maintaining that balance.
Financial stability is required for your business, as well as your private life. Yet I must caution you not to mix these two. Business owners who never pay themselves, or sacrifice their homes and personal lives will likely not enjoy long-term success.
4. Beware the delusions of passion and hubris. Every business owner needs a set of values to offset their emotion and ego, and to derive real satisfaction and success from any business. These values need to be validated with customers and used to drive strategic decisions. A higher-level cause, such as feeding the hungry, is often effective.
5. Practice your search for true win-win relationships. Too many business owners focus on win-lose activities, including negotiating lower costs and killing competitors. I suggest that you spend more time working on how both you and all constituents can win. Payback is in the longer term, for better relationships, the next deal, and your personal reputation.
6. Real wealth is the ability to give as well as receive. Long-term wealth is more enduring than money, and is really about the relationships you forge, and the skills you build over time. These allow you to help others, leave a positive legacy, and give you real satisfaction beyond money. Showing humility and asking for advice is the place to start.
If these strategies seem consistent with your own mindset, I encourage you to continue to pursue your dream of starting and growing your own business. If not, now may be the time to take a step back and evaluate other alternatives. Life is too short to wake up every day confused and under stress due to a chaotic business world that none of us can seem to predict or manage.
Related: 6 Reasons That Managers Still Add Value in Business