How your inner fire can burn your business to the ground
Let us say you have the inherent characteristics to become a success as an entrepreneur, you manage your finance well, you have a substantial amount of business and technical skills and you believe to possess the required personality traits. Then one day it hits you, a million-dollar idea!
Combining your unique set of entrepreneurial characteristics with your idea, supported by motivation, optimism and passion helps you kick off your startup. But what if I told you that that same passion could burn your business right back to the ground.
In reality, the majority of all new startups fail within the first five years.
According to a study performed by Smallbiztrends (2019)
Of all small businesses started in 2014:
· 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)
Looking primarily at the stats, it almost seems irrational to believe that your business will be as successful as you predicted. Then again, at least one in three marriages end in divorce and we are still getting married. What can I say, love is blind.
Should I write a business plan?
The web is filled with reasons why you should or shouldn’t write a business plan before to the launch of your startup. There is no right or wrong. There are numerous successful businesses out there that did not construct a business plan before the launch of the business. I would say that it is always wise to develop a business plan since it will be a documentation of how you desire to operate your business on all fronts. Besides, the execution of a proper business plan involves managing factors efficiently at each stage that are required to deliver the product or service at the appropriate time. In addition, it will provide you with insights on the business its weaknesses, threats, competitors and target audience which can help identifying and mitigating risks.
“Uncertainty surrounding the decisions can lead to actions or inactions”
Be aware! If the audience response to your brand, product or service is different than expected, do not hold on to your initial strategy just because you’ve fallen in love with your idea, but adapt if necessary. Admit that you as a business owner misperceived the outcome of your brand and use your business plan to recognize how a potential adaptation would influence the other aspects of your business. Perhaps alternating your plan of approach by adapting to the expectations of the suspects, prospects and obtained customers feels easier when you didn’t spend those long nights writing the perfect plan for your business. Remember that is not just about the business, but also about your learning curve as an entrepreneur.
A person who never made a mistake never tried anything new.” — Albert Einstein
Ultimately, evolving a startup is a parallel process of personal development and business growth that involves proactive reflection and a positive attitude towards failure.
The passion trap
A passion trap can be described as a self-reinforcing pattern an entrepreneur can find him/herself in. It is a pattern of interconnected beliefs and behaviours that shape certain choices. Being a true believer of your idea, you will find yourself making choices and decisions based on those beliefs. Unconsciously you will filter the data from the environment that support your beliefs. As a result, we are often not aware that these cognitive biases are taking place and believe that the marketplace is confirming our expectations. The emotional support that helped you create this business in your free time has turned into emotional attachment that creates misjudgements and holds you back from making the right adaptations.
“Almost every robust, healthy business looks different than the founder first envisioned.”
Stacy’s Pita Chips
A story that functions as a great example is the Stacy’s D’ Lites case. A company that started as a healthy sandwiches company, where fresh ingredients where served rolled in Pita bread, turned into a multi-million-dollar business selling anything but sandwiches.
At the start, Stacy acquired a small lunch cart business on Boston’s streets due to a lack of money to rent space for a restaurant. Along the way, they started serving leftover Pita bread chips to the people waiting in line for sandwiches, because they didn’t want people in line to abandon the line. One thing led to another and people went crazy for those Pita chips. Stacy recognized the need and started selling the Pita chips in groceries. Shortly after they abandoned their restaurant plan, changed their name to “Stacy’s Pita Chips”, got fully into the consumer food business, and ended up selling the business a few years later for approx. $60 million. All because they were willing to pay attention to what the market was telling them.
Of course it is not always as apparent like in this particular example. There is however a thin line between doing what you love and loving what you do. Get in love with the personal learning curve your startup provides and avoid getting fixated on your initial idea. In case failure seems unavoidable, recognize where it went wrong and implement a quality exiting strategy to minimise losses.
As mentioned before, evolving a startup is a parallel process of personal development and business growth that involves proactive reflection and a positive attitude towards failure.
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written by Kevin Bos, Account Intern at VBAT
edited by Connie Fluhme, PR at VBAT
References
Kalyanasundaram, G. (2018). Why do startups fail? A case study based on empirical analysis in Bangalore. Retrieved from DOI: 10.7545/ajip.2018.7.1.07
Kazdin, K. (2000). Encyclopaedia of Psychology: Volume 8
American Psychological Association.
Mansfield, M. (2019). Startup statistics: The numbers you need to know. Retrieved from
https://smallbiztrends.com/2019/03/startup-statistics-small-business.html
Smith, D. (2011). Most startups fail because founders have too much passion. Retrieved from
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