Damage to confidence can be the beginning of the end for an entrepreneur. And nothing wreaks havoc like the unexpected. Entrepreneurs need confidence. Confidence, combined with skills, training and knowledge in their field, gives entrepreneurs the capacity to believe they can make a business successful, writes Alan Manly, author of The Unlikely Entrepreneur.
When surprises happen, valuable staff resign, competitors emerge from nowhere, emotions run high. Anger – the emotion we feel when our goals are blocked – can cloud thinking.
Entrepreneurs are risk-takers. They are the gambler class of the business community. And start-ups operate in unknown environments, with unproven teams led by these gamblers brimming with confidence. It sounds exciting, but then something unexpected occurs, and the fun can quickly disappear.
Many companies fall back on their plans, if they have them. In bigger or established businesses, a strategic plan usually addresses risks. It also outlines business priorities and where resources will be focused. Entrepreneurs and start-up operations will usually have a business plan. These plans may also attempt to address risk. But, when it comes to longevity, it takes much more than a good plan to stay in business.
When the unexpected occurs, one of the most damaging effects is that it reveals a lack of knowledge. Knowledge underpins confidence, and confidence keeps entrepreneurs running, so the shock of the unexpected shakes the foundations of the business.
It’s here we start to see the start-up failures. According to data registry and analytics company Illion, the majority (86.9 per cent) of the 250,242 small businesses deregistered by the Australian Securities and Investment Commission in 2018 had fewer than 20 employees.
- 80% made it to the second year (2015)
- 70% made it to the third year (2016)
- 62% made it to the fourth year (2017)
- 56% made it to the fifth year (2018)
These are small business that aren’t responding to the unexpected and lack the knowledge, and more practically – the cash, to continue. Most research lists, the world over, give similar reasons for failure; no market demand, lack of the right team or skills on board and running out of cash.
Why start-ups fail:
- No market need (42%)
- Ran out of cash (29%)
- Not the right team (23%)
- Get outcompeted (19%)
- Pricing/cost issues (18%)
- No market demand for the product
- Lack of skills needed for the business – in founders and in the team
- Ignoring and not avoiding cash burn
- Reluctance to get feedback and criticism on prototypes
- Lack of market readiness for the product
While this data is revealing, and useful for those heading into a start-up, there is another factor that needs attention. The missing ingredient with many start-ups is the entrepreneur’s ability to manage the unexpected. Experienced entrepreneurs know it’s not necessarily the event itself that has the power to end your business, but how you handle it. To manage the unexpected there are some key things that help, and they seem simple but are tough to execute in times of stress.
- Stay calm. Do whatever it takes to keep an even head and approach the situation objectively. It’s also important to appear calm to the people who look up to you, they’ll need to use their heads to address the issues too and it won’t help it you’re all in a flap.
- Assess and research the situation. Knowledge is power, and an unknown event comes from a lack of knowledge. Get across all the details.
- Be flexible and open to new ideas and to changing plans.
- Stick-to it and execute your plans. They may change and you’ll adapt but persistence and follow-through will make the difference.
A successful entrepreneur who is skilled at managing the unexpected will know that a surprise, or a set-back, is inevitable. The unexpected is, paradoxically, expected. Know that a failure simply means “not yet” – this mindset enables you to carry on and do what you need to move forward. Know that you are capable of learning and adapting and in this way, you’ll succeed.