Sorry for the downer title. But while it’s obvious that plenty of first-time business owners find success, it’s far more likely that your first business is going to fail.
The bright side is, if you understand why this is the case, you’ll be able to better prepare yourself and potentially avoid some of the pitfalls of first-time business ownership.
So, why is it that your first business is likely to fail? Here are seven reasons.
You (probably) aren’t an exception
There are a number of variations on the exact statistic, but most sources agree that the vast majority of businesses eventually fail. Some claim that as few as 4% of businesses survive for more than 10 years, with more than half perishing in the first couple of years of operation. It’s comforting to believe that you’re the exception to the rule, or that you’re more likely to succeed than your contemporaries. But the statistics suggest this isn’t really the case.
There’s a reason more experienced professionals make more than amateurs — experience yields skill and knowledge. If this is your first time starting a business, you won’t have any prior experiences to draw upon when making decisions, establishing a direction or facing harsh challenges.
It’s true that other experiences in your life, such as holding a leadership position, navigating the industry in a lower-level position or even working with other entrepreneurs, can substitute as some level of experience here. But until you’re in the driver’s seat, you won’t know what it’s really like to run a business.
You won’t take risks
First-time entrepreneurs tend to be more conservative than their more experienced counterparts. This is partially due to first-time entrepreneurs’ lack of confidence, which stems from a lack of experience. It’s also partially due to the fact that first-timers have access to fewer resources than their more experienced counterparts.
And that means they’re less capable of tolerating financial instability, and have more riding on the success of the business. The conservative route can potentially lead to success, but risk-taking sets you apart from your competitors.
You don’t have enough contacts
Even if you’re outgoing, it’s likely that you won’t have a very large network when you start your first business, and your professional network will play a major role in the ultimate success of your business. Your contacts will provide you with potential clients, partnerships, suppliers and even employees, and if you’re lucky, maybe even investors or mentors who can give you advice.
Without a strong network in place, you’ll miss out on these benefits and lag behind competitors who have stronger connections.
Your instincts are untested
When properly developed, your instincts can actually be a valuable tool for strategizing and decision-making. “Good” instincts are usually the product of experience; grandmaster chess players can “feel” which moves are correct because they’ve played thousands of games and can read the board almost unconsciously.
In the same way, seasoned entrepreneurs can sense which options are better than others, and have a stronger likelihood of leading their respective businesses in the right direction.
You’re too excited
When you start your first business, you’re nervous and excited — but that enthusiasm may end up being a hindrance. If you’re too excited, you may get pulled in too many different directions at once, chasing different ideas simultaneously rather than focusing on the single items that your company needs most.
You may also invest in expansion and growth too early, or overspend your resources in a big push to get to market faster.
People won’t take you as seriously
The sad truth is that most people — including investors, partners, employees and clients — won’t take you as seriously if this is your first business. They’ll be familiar with the fact that less experienced entrepreneurs aren’t as successful, and may avoid your business simply because it bears a slightly lower chance of succeeding with you behind the wheel. It’s a self-fulfilling prophecy at its finest.
All these factors may seem intimidating, but there’s an important silver lining to remember here. Your business’s failure isn’t the end — it’s a beginning. Every failure in your life, from small, inconspicuous errors, to massive heartbreaking events, will teach you something, and give you experience and a platform to do something better with your next opportunity.
Most entrepreneurs end up starting and running multiple businesses, so if your first one fails, that just means your second one will be more likely to succeed. Successful entrepreneurs thrive in failure, so don’t think of failure as a dirty word; instead, think of it as getting one big step closer on your path to realizing your entrepreneurial dreams.
After graduating year 12, Dan began his banking and finance career at Westpac Banking Corporation in Brisbane in 1988. He worked for the bank for seven years, excelling in his career and working his way up to management.