There’s a entrepreneurial myth out there that I want to squash right now. But before I do, let me get real with you about your amazing business idea. 95% of businesses fail within 5 years. 9 out of 10 businesses fail within 3 years. 8 out of 10 businesses fail within 18 months.
Ok, I really couldn’t find any valid sources to back up these seemingly inflated statistics that are ripe throughout the internet. However, according to the Small Business Administration, ⅓ of businesses WITH employees fail within 2 years. Half of all businesses with employees fail within 5 years. Statistical analysis aside, the long-term prognosis for your business idea is a coin flip.
MYTH: Work your butt off for 3 to 5 years and then you can sit back and relax.
In the past 6 years I’ve started and successfully sold two businesses. And you know what, despite my success, I’m not retired and I’m not set for life. So I get really pissed off when I meet with aspiring business owners and hear, “I plan on working my butt off for 3 to 5 years and then I’ll be set.” I hate to break it to you, but No, no you won’t. There are two things wrong with this proclamation of superiority.
First, if you think this way, you’re likely going into business for the wrong reasons. A business idea framed into a 3 to 5 year exit strategy is pure ignorance. It shows you’re not committed to a long-term growth strategy and that you really don’t understand how small businesses work. A small business depends on many factors for its survival and it’s success. Some of the big factors are great leadership, an amazing value proposition, a solid revenue model, and most importantly an insane passion that exudes from the founders every single day. If your passion is solely to make money, I have bad news for you, you’re gonna get burned out from “working your ass off” really quick. And when you, the founder, get burned out, your business fails.
Second, your timing is off. And by timing, I mean the duration of work it takes to achieve business cruise control so you can sit back and cash checks. Most big business successes, the home runs, the I should’ve thought of that, took much longer to achieve fame than you realize.
- Facebook started in 2004. It went public in 2012.
- Starbucks founded in 1971 and didn’t expand outside of Seattle until 1987.
- Google started in 1996 and went public in 2004.
- Amazon started in 1994 and didn’t turn a profit until 2001.
Despite having world-changing business ideas, none of the founders were able to sit back and coast about 3 to 5 years.
When you talk to a successful small business owner, they’ve been working on growing their business for many years. It could be multiple generations of work. It could also be that they’ve had other ventures that failed and now they are a success. Yes, there are always exceptions to the norm. The people who hit the right idea at the right time. Here in Colorado there are several marijuana millionaires, but the biggest and most successful owners had businesses before. Housing is popping in Denver too, and there are some very successful startups in housing. Still, these successes are driven by passionate owners, with great revenue models, working their butts off, and loving what they do. But understand, the runaway successes are the minority. Let me remind you, 50% of businesses FAIL within 5 years.
In Recap.
If you’re thinking about starting your own business, and want to work your ass off for 3 to 5 years and then shift to working part-time, just cruising along cashing checks. Stop dreaming. If you start a business under this myth, your life is gonna be miserable, you’ll waste your savings, and you’ll fail. In order to pursue your business idea, be sure of two things. First, have a passion for your idea. Second, be ready to sacrifice parts of your current lifestyle and commit to growing your idea for many years to come.
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