Photo by James Lee on Unsplash
According to the U.S. Bureau of Labor Statistics, more than 20% of small businesses in the U.S. end up failing within a year. After five years, around 50% fail, and after 10 years, only 30% are still running. Once you pass the 15-year mark in business you still only have a 25% chance of surviving
Running a business is no walk in the park. Most businesses fail within the first five years. Many more fail in the next five.
After running Tenbound for 7 years, bootstrapping to 7 figures in revenue, and taking 7 years off my lifespan, I’ve learned a few things to share which hopefully will help you cut a few years off your entrepreneurial success. I hope this is helpful and you can miss some of the pitfalls I’ve experienced.
Here are 7:
- Product-Market Fit is Everything – Nothing matters if the market doesn’t want your product or service. You can fall in love with your idea all day, but if the market is silent on it, you’re walking dead. Obsess over this. You must pass the Mom Test and avoid the Sunk Cost fallacy at all costs. Cut your losses on loser products and services fast, even if you spent your life savings and the best years of your life, heart and soul developing them. Don’t drag it out. Pruning is hard, but creates room for healthy growth. Cut cut cut what is not working.
- Customers Must Become Raving Fans – it’s not what you want to do, not what you’re interested in, it’s what the market needs and will pay you for, repeatedly. It’s how well you fill that need. Your customers must absolutely love you and love the value you’re bringing them. You can have great marketing and amazing sales, but if the product or service doesn’t work you’ll never be able to get your customers back. You need to sell a painkiller not a supplement, and then make sure it’s working over the long haul.
- Focus on your Customers, not distractions – there are a million distractions taking your eye off the ball. Competitors, gurus, media hype, social media. One scroll of Instagram and you realize everyone is crushing it, and you’re a total loser. Block it out. Shut it down. Focus on your customers and understand them better than anyone in your industry, better than anyone in the world, so you can help them to the point where they can’t live without you. Truly help your customers succeed.
- Subscription Revenue is Everything – you have to be able to plan. That is why SaaS companies are so popular. Recurring revenue is beautiful. Most of the energy in a rocket launch takes place in the first few minutes. You don’t want to run from deal to deal without setting up recurring revenue streams. Nobody has that much energy. You will burn out. Focus on recurring revenue so you can put in the energy on customer acquisition and then obsessively keep them happy until they can’t live without you.
- Revenue is Not as Important as Profit – Sales does NOT cure-all. Coming from a sales background in the business world and then becoming an entrepreneur focuses you on selling, sell sell sell all day. This is good, you need to sell, but at what cost? You have to think about the business holistically. How much is the cost of sale? You can work your face off all year and end up with nothing left at the end of the year, or worse, in debt. Make sure you’re not just focused on the top line, but also the bottom.
- Budget Strictly, and Stick to it – Speaking of, you need to bank at least one year of cash. Never run up debt thinking that one Big Sale is going to wash away all your sins. Make sure you can run the business for a year without any sales. The big sale may never come, but the debt is due every month forever until its paid off. And if you’re bootstrapping, it’s your name on everything. Cherish cash, protect it and stretch it as far as you can.
- Carefully Choose Who You Work With – the intense stress, the lack of resources, the sleepless nights. It can strain relationships to the breaking point. Running a bootstrapped company on sales creates incredible stress. It’s my opinion, but I’d recommend you keep business and relationships separated. It may be expedient to hire when you have no money or traction but think twice before doing it. Thanksgiving, or even the evening meal, can get pretty awkward when things go wrong. And they do, repeatedly, over and over.
Entrepreneurship is not all it’s cracked up to be on social media … the carefully constructed artifice presented there is made to create ‘likes’ and sell online courses. It’s not all jets and cash, and it’s not for the faint of heart.
Read Gino Wickman’s The Entrepreneur Leap before taking the plunge.
Leave a comment if you’re thinking of bootstrapping a start-up, or have been in the game for a while. What are your thoughts? What would you tell your younger self, better-looking self?