1. Money

7 Key Factors for Successful Entrepreneurship

By December 6, 2009

When it comes to research on entrepreneurship, few organizations do more of it than the Kauffman Foundation. For a  just-released study called Making a Successful Entrepreneur, Kauffman surveyed 549 company founders of successful businesses in high-growth industries to determine the factors that influence the success or failure of startups. The key success factors, it turns out, are "prior work experience, learning from previous successes and failures, a strong management team and good fortune." Let's look at the highlights one at a time.

1. "Nearly all of the company founders surveyed - 98 percent - ranked prior work experience as an important success factor, and 58 percent ranked it as extremely important." This seems obvious, but it's surprising (some might say alarming) how many people start businesses without any relevant prior experience. I have known people who were laid off from their jobs and felt forced into entrepreneurship, and then failed because they had no models for success. That doesn't mean people with no applicable experience shouldn't become entrepreneurs. It just means they need to realize the gap they must fill and that they take their deficiency seriously.

2. "Forty percent cited lessons learned from failures as extremely important." There's the Catch-22. You may have to fail in business before you can succeed. If you haven't started a business before, you have to learn how to fail without catastrophic results. That could mean knowing when to shift strategies or when to abandon an investment. A lot of startups these days are solopreneuring ventures with one full-time employee, the owner. But it's very hard to play all the positions on a team. Knowing how to outsource and develop a virtual team is a critical skill if you're going to build anything that scales beyond what you can do yourself. No matter how great your idea, you will be inherently limited if you do everything yourself. From the start, find other people to do things you don't absolutely have to do. Find a virtual assistant, outsource telesales to qualify leads, get your CPA's office to do your bookkeeping. You focus on the things that only you can do -- get new sales.

3. "For 73 percent of the entrepreneurs surveyed, luck was an important factor in success." There's truth to the adage that some people make their own luck. There's lottery ticket luck, then there's entrepreneurial luck. Ask any successful business owner what was the luckiest thing that ever happened to them in business that allowed them to be successful. I guarantee you that the "luck" was manufactured with a lot of intention.

4. "Professional networks were important to the success of their current businesses for 73 percent of the entrepreneurs. In comparison, 62 percent felt the same way about personal networks." Again, no entrepreneur is an island. Knowing people is critical. How many people have you reached out to and tried to help? Learn how to network and extend a hand to others. Earn some karma credits and you'll find the path much easier when you need a hand.

5. "Only 11 percent of the first-time entrepreneurs received venture capital, and 9 percent received private/angel financing. Of the overall sample, 68 percent considered availability of financing/capital as important." Message: if you think you're going to get formal private capital (venture, angel, private equity), chances are you are wrong. You will probably need financing from a good old bank, or with help from the SBA, or from your parents, siblings or others. How do you feel about asking people, especially people you know, for money?

6. "In identifying barriers to entrepreneurial success, the most commonly named factor - by 98 percent of respondents - was lack of willingness or ability to take risks." Knowing a calculated risk from a foolish one is a very important skill. When you prepare to take a business risk, are you the type who gets caught up in the moment with your gut feeling and goes for it, second mortgage and all? Or do you study the situation fully, wallow in the numbers, make sure you have thought of everything that can be antcipated, and then make your move?

7. "Other barriers...were the time and effort required (93 percent), difficulty raising capital (91 percent), business management skills (89 percent), knowledge about how to start a business (84 percent), industry and market knowledge (83 percent), and family/financial pressures to keep a traditional, steady job (73 percent)." Wow, why does anyone start a business? Even really successful people cite massive obstacles and difficulties. All the more reason to believe, should you go entrepreneur, that there is nothing else you would rather do -- make that nothing else you can do.

Comments
December 6, 2009 at 10:28 pm
(1) Shallie Bey says:

This list of 7 Key Factors for Successful Entrepreneurship is excellent. You have made easy access to some of the Kauffman Foundation’s most important findings. Thanks for your encouragement of entrepreneurs and entrepreneurship.

Shallie Bey
Smarter Small Business Blog

December 7, 2009 at 10:42 am
(2) Garry Arasmith says:

Point #1 is HUGE with the many entrepreneurs, and new innovators, we work with every day. It’s not out of this world for a golf pro to have an IT business idea! However, your insight is dead on.

“It just means they need to realize the gap they must fill and that they take their deficiency seriously.”

We’ve also seen the same thing with the new entrepreneur that wants to “own” the whole process. Many times, especially when starting out, when a correctly structured joint venture gives MORE freedom, more profit, and much less risk.

Thanks for the article.

December 8, 2009 at 9:45 am
(3) Angelique says:

Interesting that a whopping 73% of respondents thought LUCK was a key factor. I find it hard to believe that nearly three quarters are in fact lucky. I wonder if many entrepreneurs aren’t giving themselves credit for all the seeds they planted, the positive things that they attracted to them (laws of attraction / manifesting, etc.) and even good decision making that they are calling “luck.”

http://www.richersmarterhappier.com/blog

December 8, 2009 at 11:11 am
(4) Market research says:

Nice article, nice figures and stats.

I agree with your points. Another important point is to be sure about his market potential.
More than 80% of business startups failed during the 5 first years, most of them because a lack of research.
So, test your market first! Do some quantitative research about “YOUR” precise idea, be careful about only having your own or family circle feedback.

Feel free to have a look!
Good luck to all!

December 9, 2009 at 10:11 pm
(5) Nikki Romero says:

How interesting that luck was cited as a major factor. Luck is not something you create. Rather, you plant seeds of hard (and smart!) work, and the maybe reap good luck and success.

I think one smart move of entrepreneurs is partnering with virtual assistants – this does not give them fixed costs of employment, and there is no need to provide office space. They only pay for the hours that they need. And the best part of that is no unproductive hours!

December 14, 2009 at 4:57 am
(6) oshoke okogho says:

Of all the keys I consider #1 to be paramount. i have reservation for the ‘luck’. What it means is probably the outcome of a well done home work on the part of the entrepreneur.

December 17, 2009 at 12:16 am
(7) Christina says:

Interesting read. Something I really needed. I just started a small business and would have to agree that experience is really an important factor, it’s not something you just read on a text book. So far I’m learning through experience and I still need to learn more…

December 17, 2009 at 4:34 pm
(8) Mike says:

#1 always was and always will be selling yourself and your idea. You have to emanate your belief in yourself and your product in such a way that it becomes contagious. Everything beyond that is secondary.

September 7, 2010 at 9:19 am
(9) Suzanne says:

Having a professional network is definitely essential.A Suze Orman recommending AVON as the way to make money, prompted me to join and build an AVON team. Having a network of people with varied skills in the same line of work is extremely effective, as we support each other not only in our AVON businesses, but also in our other business ventures. Roadblocks to sucess cited in 6 and 7 are definitely minimized by the excellent business training provided by AVON Canada,in addition to being able to gradually expand my business, especially through emarketing potential. I credit team work, with our rapid rise in Canada. Our motto? Together WE Succeed!
Drop in and introduce yourself on (a href=http://ourteamcan.blogspot.com” target=blank>blog in our Small business Forum for Canada.

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