Over the past year the United States has seen vast quantities of new businesses emerge. According to business formation statistics generated by the US Census Bureau, a total of 423,095 business applications were processed in February 2021 alone.[1] Contrast this number with 298,342—the number of business applications processed just one year prior in February 2020. The new businesses associated with the applications of February 2021 were developed within a wide range of industries.
This information shows that many different industries exist in which those who have a desire to start their own business can focus their efforts. Thousands of different individuals with different strengths have been able to pursue the opportunity to put their talents and skills to work as they turn their dream business into a reality. However, upon viewing this data, many people’s minds may arrive at this question: “How many of these businesses are actually successful in the long run?”
The data generated by the Bureau of Labor Statistics and presented by G. Dautovic, an experienced data operator and writer for Fortunly, helps answer this question. Dautovic points out that roughly 20% of new businesses make it through their first year, 50% make it through their fifth year, and only about 34% make it through an entire ten-year period.[4]
Unsurprisingly, statistics such as these quickly scare many people away from pursuing their entrepreneurial dreams. But wise entrepreneurs, rather than letting statistics like these deter them, choose to learn from the mistakes of others and recognize what steps they need to incorporate to have the greatest probability of long-term business success. These steps include the following:
- Find a reliable mentor
- Understand the company’s ideal target market
- Create a well-thought-out business plan
Many entrepreneurs tend to leave some, if not all, of these steps out of their business development. This may be the result of various mindsets such as being overly confident, lazy, or simply uninformed of the value each step brings. Regardless of the specific reason why entrepreneurs may skip these key points, the purpose of this article is to help all potential entrepreneurs understand the importance of these three steps and to point them toward resources that can help them implement each step into their own journey.
Mentors
Before getting too far into business development, a wise entrepreneur will find a reliable mentor. A mentor is someone who has walked a similar path to that of their mentee, and as a result can give credible advice and support. Finding and utilizing a mentor is important because a mentor can help to ensure that new business owners avoid as many unforeseen roadblocks as possible. Collaborating with a mentor is in no way a sign of weakness or incompetence but rather a sign of wisdom and maturity. In her article posted on Entrepreneur.com, Sheila Eugenio pointed out that even some of the world’s best-known business owners have relied on mentorship to climb to where they are now. She said, “Facebook’s Mark Zuckerberg was mentored by Steve Jobs. Jobs was mentored by Mike Markkula—an early investor and executive at Apple. And Eric Schmidt mentored Larry Page and Sergey Brin of Google.”[5] These world-renowned business leaders set a good example for the entire business community.
This being said, naturally many readers may be thinking, “that’s great that they found such incredible mentors, but how am I supposed to find a mentor as helpful as Steve Jobs or Mike Markkula?” This is where personal research and networking comes in. An entrepreneur can choose where to look to find a good mentor: inside their personal network or outside of it.
An entrepreneur can start looking for a mentor inside their network by thinking through their family members and friends to identify who may have experience that could prove beneficial. This can even be taken one step further as the new entrepreneur asks friends or family to connect them with someone they know and trust who has expertise which could be helpful.
When it comes to finding mentors outside of an entrepreneur’s personal network, they can find many useful mentorship websites or agencies by doing in-depth research online. This approach can help find someone who would be most fitting to any entrepreneur’s specific needs or situation.
Regardless of which method one uses to find a mentor, arguably the most important aspect is to find someone who can be trusted and confided in. Matt D’Angelo, a freelance business writer featured by Business News Daily, pointed out that “good mentors are experienced, successful, authentic, creative, empathetic, and honest. The best mentors share similar values with their mentees.”[6] As this statement points out, new business owners’ top priority in finding a business mentor should be to find someone who shares their own values and can help them in areas where they as new entrepreneurs may be lacking, especially in the area of prior experience.
Target Markets
One of many important business steps that a mentor may assist with is understanding an entrepreneur’s ideal target market—the group of people predicted to buy their products. This step is vital because the only way a business can stay afloat is if people are willing to pay for its product. Therefore, it’s imperative that an entrepreneur take the time to understand their target market so that customers will choose them and their product rather than their competitor’s.
When one is trying to understand a target market, two research methods can be used: primary research and secondary research. Utah State University Applied Economics professor Kynda R. Curtis partnered with her Undergraduate Research Assistant, Sierra Allen, to document details on how to collect information about target markets. With respect to primary research, they said, “primary market research methods include surveying potential or existing customers, conducting general market assessment surveys, running product and/or pricing trials and researching competitors.”[8] To emphasize the usefulness of primary research, Curtis and Allen share the types of information (https://extension.usu.edu/apec/files/uploads/Target_Market_Identification.pdf) that can be generated by primary research and the value which that information holds. As seen in this table, a plethora of information can be gathered from even the most basic aspects of primary research. Surveys with targeted questions are not the only way of generating data—much can be gathered by observing general customer information and spending habits.
While primary research is the best way to study personal target markets, sometimes it is unrealistic due to expenses or small customer pools. That’s when secondary research can fill in the missing gaps. Secondary research is done by exploring information generated by others. In some ways, secondary research may be less specific and less reliable, but it is also far less expensive and less time consuming. No matter the industry a business owner finds themselves in, searching through different business databases and consumer reports will most likely lead to a deep well of knowledge about their target market.
Business Plans
Pairing an entrepreneur’s understanding of their target market with the expertise of a good mentor will almost always help in creating a powerful business plan. A business plan is a document that details a business’s goals along with the steps intended to take to achieve these goals. Business plans are important for many reasons, but there are two main reasons they should be considered.
The first of these reasons is that they help business owners stay organized and on track. Asha Mankowska—business, leadership, and high-performance coach—compared a business plan to a car’s GPS: “It gives you direction and focus and speeds up your journey through all the necessary steps.”[9] Just as planning an efficient route to take when driving will save time and money, so will planning a good business route. Now, this does not mean that an entrepreneur will never experience any slowing or detours because of unforeseen accidents or road closures, but for the majority of the time planning a path beforehand will be greatly beneficial.
The second reason why entrepreneurs should create a business plan is because without one, they will find it hard to convince anyone to invest in their idea. Mankowska emphasized this when she talked about helping her clients find investors. She pointed out, “the most crucial winning component is a well-written and up-to-date business plan. It serves as concrete proof that investors feel confident in my client’s ability to generate sufficient cash flow and fulfill debt obligations.”[10] If by any chance an entrepreneur will be seeking for financing, they should put in the extra time to create an impressive business plan. By doing this, they will show that they are prepared to follow through with their promises.
Sitting down and creating a good business plan may seem like a daunting task, but Martin Zwilling, founder of a company called Startup Professionals which is focused on helping entrepreneurs worldwide, reassured potential entrepreneurs that the task is doable. He said, “Fortunately there are many useful templates available online, books on how to write business plans in every bookstore, and several software applications being marketed to at least partially automate the process.”[11] As pointed out by Zwilling, resources exist at every turn to help entrepreneurs with this important step.
No matter what methods are used to make a business plan, one of the most important points entrepreneurs need to remember is that their plan doesn’t have to be perfect from the very start—it should be adaptable to changes in the market and growth within the business. As entrepreneurs update their business plans, they enable themselves to avoid roadblocks and find the most efficient route that leads to success.
Conclusion
When all is said and done, the world needs more successful entrepreneurs, and the three steps that would likely improve the probability of each entrepreneur’s success are finding a mentor, taking time to understand their target market, and creating a good business plan. If an entrepreneur is determined to do everything in their power to turn their dream business into a reality, they would be wise to consider incorporating these steps.
Notes
[1] “Business Formation Statistics, February 2021,” US Census Bureau, March 10, 2021, 1, https://www.census.gov/econ/bfs/pdf/historic/bfs_2021m02.pdf.
[2] “Business Formation Statistics.”***
[3] “Business Formation Statistics, February 2021,” 4.
[4] G. Dautovic, “Examining What Percentage of Small Businesses Fail,” Fortunly, May 27, 2020, accessed March 18, 2021, https://fortunly.com/blog/what-percentage-of-small-businesses-fail/#gref.
[5] Sheila Eugenio, “7 Reasons You Need a Mentor for Entrepreneurial Success,” Entrepreneur, August 17, 2016, https://www.entrepreneur.com/article/280134.
[6] Matt D’Angelo, “How to Find a Mentor,” Business News Daily, December 23, 2020, https://www.businessnewsdaily.com/6248-how-to-find-mentor.html.
[7] Kynda R. Curtis and Sierra Allen, “Target Market Identification and Data Collection Methods,” Utah State University Extension, December 2018, https://extension.usu.edu/apec/files/uploads/Target_Market_Identification.pdf.
[8] Curtis and Allen, “Target Market Identification.”
[9] Asha Mankowska, “Council Post: Four Reasons Why Your Company Must Have A Strong Business Plan At Any Phase,” Forbes, June 16, 2017, https://www.forbes.com/sites/forbescoachescouncil/2017/06/16/four-reasons-why-your-company-must-have-a-strong-business-plan-at-any-phase/?sh=75739a686198.
[10] Mankowska, “Have A Strong Business Plan At Any Phase.”
[11] Martin Zwilling, “Startup Professionals Musings: 10 Key Business Plan Elements Not in A Product Spec,” Newstex Entrepreneurship Blogs, Newstex, June 26, 2020, http://erl.lib.byu.edu/login/?url=https://www-proquest-com.erl.lib.byu.edu/blogs,-podcasts,-websites/startup-professionals-musings-10-key-business/docview/2417439417/se-2?accountid=4488.