By Fiona Hudson-Kelly, author of ‘Grow and Sell your Startup’
New businesses are launched all the time; acccording to the latest government statistics, between 500,000 to 700,000 new startups are launched in the UK every year, which sounds like great news. Sadly, withing a year, a fifth of those startups will have failed, and 3 out of 5 won’t make it past three years of trading. That’s according to The Telegraph – don’t blame the messenger.
But who or what is to blame?
The majority of companies fail to scale and sell because they don’t start with the exit in mind. Usually, an entrepreneur comes up with a great idea. Perhaps they’ve spotted a gap in the market or an issue they are able to solve effectively. They develop their product(s) and put it out in the market, expecting organic growth. They see some revenue but only enough to tread water, so they remain a small business and make it their day job.
What needs to change?
Entrepreneurs who want to scale and sell their businesses need a shift in mindset. Rather than seeing the business as a lifestyle choice (an extension of themselves), they need to separate themselves from their business.
As parents, we raise our children to be independent in the world. At first, they are small, weak, and incapable. Then they grow and can be more independent, but still need our help. Then, finally, they fly the nest, and we must trust them to make their own way in the world.
We need to think of our businesses in the same way. At first, we need to be very hands-on – it may just be us carrying the load. Then, once it survives infancy, we can relax a little and take a step back. Then, we can separate almost completely.
Why does it need to change?
It comes back to that scary statistic: 60% of companies fail within three years. Failing businesses aren’t good for national prosperity or individual well-being.
An expanding business is twice as likely to survive. That’s good for prosperity on a national level and is immensely exciting and satisfying on a personal level. We all get into business to succeed and make money, so let’s make a big success and big money while we’re at it!
How do we change?
Real Role Models
One of the most important things we need to change is getting real role models to share their stories and experiences. The UK, like much of the world, has become obsessed with the cult of celebrity. We look up to and admire superstars, like the entrepreneurs on Dragons’ Den. The problem is that they are a few in a billion, making successful entrepreneurship seem like a winning lottery ticket.
Most successful business leaders aren’t on the television. They have quietly walked a successful path to prosperity and now keep a low profile enjoying their wealth. These are the role models we need to hear from, not celebrity entrepreneurs.
A Shift In Conversation
There is a lot of conversation around starting a business, which is a difficult stage where reading and researching do help. So, it makes sense to have conversations about how to start a business.
What gets neglected, however, is the conversation around scaling and exiting a business. In fact, this should all be part of the same conversation. Scaling and selling need to be on the horizon from the outset to spot and capitalise on the right opportunities.
Starting with the end in mind forces us to think differently. Rather than seeing the company as being an extension of oneself, it becomes a product that can grow with the marketplace and be sold when the right opportunity comes along.
Developing Know-how
Even those who have studied business or entrepreneurship struggle with knowing how to scale and sell their companies. Their go-to is often to seek investment with a fancy pitch deck. But seeking investment means selling part of their business (often more than they want) at an early stage, reducing their incentive and drive to make it successful.
For those without a formal education in business, it can be even harder. They might have a hungrier, do-or-die attitude, which can be very helpful in growing the business without investment, but they are likely to get stuck along the way.
Better role models and more conversation around scaling and selling will definitely help develop know-how as well as demonstrate that investment isn’t always the best option. We can also try to improve access to educational resources, whether formal or informal, to provide some of the more technical know-how.
How can I start to change?
If you’re an entrepreneur looking to scale and sell your business, my biggest tip would be to try to imagine what the business will look like in 10 years. Try to detach yourself when you evaluate your idea. You want to see what it could look like even if you weren’t involved. By shifting your thinking into the longer term, you create a goal. It then becomes far easier to orient your business decisions around reaching that goal.
