By Russell Holcombe, CEO of Holcombe Financial
At its core, an entrepreneur is commonly seen as an innovator of new ideas who takes on considerable financial risks to start a business. They are full of energy and have an intoxicating and contagious positive attitude. They work day and night to make their idea, invention or company a success.
The fact is, success is hard to come by. It is estimated that less than four percent of businesses achieve one million dollars in revenue and sixty-five percent of small businesses never even make it past five years.
But ask an entrepreneur about the personal odds of success. Chances are, they don’t think this statistic applies to them. Why is that? Many entrepreneurs get so caught up in their work that they tend to lose perspective and, more often than not, end up catapulting into financial failure.
I have been fortunate enough to work with all types of entrepreneurs over the past twenty years. Here are my top 3 ways to improve the chance of your success.
Force a Process
Good ideas are hard to come by. It’s almost like searching for a needle in a haystack. Unfortunately, the great idea looks exactly like a bad idea. They trigger the exact same emotional response in our brain. We can’t sleep, it consumes our mind, we begin role playing the successful outcome in our head and we think, “I just have to do this one thing and all my problems will go away!” It does not take long for the reality bus to show up. The ad did not work, the employee that was going to solve all your problems just added a dozen more, (insert your mistake here), etc. When your “great” idea fails, both the time and money are forever gone. In my opinion, this is the #1 cause of financial hardship for entrepreneurs.
I force a process to let my “great” ideas steep. I try to find out every reason why an idea won’t work. I don’t imagine success; I role-play failure. What can go wrong? Time is the most critical component of this process because the emotional anxiety of a new idea needs time to fade. My process for hiring a new employee is three months; a consultant six months; a software product – over a year. I have wasted too much money and time on things and people that caused more problems than they solved. Each person has to pick their own process but not having a process is dangerous. Just remember it’s not the missed opportunity that creates regret, its the bad “opportunity” that bankrupts you that creates regret.
Maintain the ability to adapt
Mike McQuary, founder of Wheego electric cars, totally missed his target market – retired people. People with no kids, stay close to home, live on a fixed budget and don’t carry a lot of stuff is the perfect demographic for the electric car. Missing your target market would destroy most new businesses unless they have the resources to adapt. Adaptation is the most critical component of a business surviving long term.
Businesses survive on cash, period. The trial and error of starting a new business is ugly. In all likelihood, it was the fourth or fifth version of the “great” idea that finally worked with each prior version consuming both time and money. Many new business owners don’t understand the fragility of money. It leaves their hands as quickly as it arrived. When you are fortunate to get sales, respect the value of what just happened. Protect your resources (i.e cash) because your business will have to evolve to survive long term. As Darwin said, it is not the smartest, nor the strongest but the creatures most able to adapt that survive.
Do have a board of Advisors
Entrepreneurs don’t enjoy a bird’s eye view of reality. Our vision of reality is a combination of our mind’s interpretation and fact sort of like the difference between a painting and a photograph of the same landscape. Our brains are so good at creating the vision of this landscape that it is hard to spot when it is a fake. This is especially problematic for the entrepreneur with the business and family at risk.
Assembling a team of advisors that we respect is critical to helping us see reality. Many people are surprised by the number of people I have around me to help me see clearly. I have assembled a team of clients, consultants, fellow entrepreneurs and even some of my competitors to help clarify my vision. Other see my problems with a clarity I just can’t and clarity is something the entrepreneur can’t afford to live without.
These simple ideas are not easy to implement. It takes a great deal of self-control, commitment and determination, but balancing these principles is critical to surviving the trials of entrepreneurship.
About The Author:
Russell Holcombe is President of Atlanta-based wealth management firm Holcombe Financial and author of the award-winning book You Should Only Have to Get Rich Once. Holcombe earned his Masters in Taxation from Georgia State University, his BBA in Finance from Southern Methodist University, and carries the CERTIFIED FINANCIAL PLANNER™ designation.