5 Things Every Millennial Entrepreneur Should Know About Startups
Startup life conjures images of warm, innovative workspaces, community game areas, catered gourmet lunches, laid-back dress codes and generally positive working atmospheres. Perhaps it’s this glamorization of the entrepreneurial lifestyle that draws so many millennials to the prospect of launching their own business.
The desire to ditch the traditional career path and pursue solitary business ventures is prominent among this youngest generation of adults, with 66 percent of millennials reporting a desire to start their own business in a 2014 Bentley University survey — compared with just 13 percent who cite climbing the corporate ladder to become CEO or president as their career goal.
But it’s not all glamour, glitz and game rooms in startup life. Fortune reports the less publicized failure rate among startups at 90 percent. To become part of the 10 percent who succeed, here’s what millennial entrepreneurs should know about startup reality.
1. Success Doesn’t Happen Overnight
The seemingly instant ubiquity of startup companies like Uber and Facebook make others seem like overnight successes, but the reality is considerably different.
A Huffington Post article recalls an interview with Facebook co-founder Dustin Moskovitz in which he was asked about Facebook’s “overnight success.” His response: “If by ‘overnight success’ you mean staying up and coding all night, every night for six years straight, then it felt quite tiring and stressful.”
A successful startup venture requires constant commitment and unwavering persistence, especially in the face of obstacles and setbacks. “The best-kept secret in the startup world is that there is no such thing as an overnight success,” wrote George Bradt, founder of executive onboarding group PrimeGenesis in an article for Forbes. “Success typically takes six to seven years — if you survive the first three.”
2. Entrepreneurship Is Self-Driven
Being your own CEO might sound like the ultimate freedom, but getting your own company off the ground means operating on all cylinders all the time and in all roles. In addition to whatever product or service you’re developing, startup founders should be prepared to serve as their own human resources team, accounting department and even janitorial staff.
“Be willing to pick up the phone and talk to customers, learn to code or even take out the trash — there is no single job that is ever above or beneath you,” said Ross Cohen, co-founder and chief operating officer of the online background check platform BeenVerififed.com.
Startups can’t afford to segment responsibilities like traditional corporations. Even as they grow, employee roles and responsibilities will inevitably overlap. Founders should expect to be involved in all tasks, no matter how seemingly menial or mundane.
3. You Can’t Do Everything by Yourself
While startup founders need to be committed to every aspect of their business, there are some responsibilities that are better reserved for specialized professionals. And budding entrepreneurs should be prepared to pay a premium for those services.
Twenty-something entrepreneurs Roger Graham and Ryan Williams are in the process of getting their startup Nift — a company that transforms the excess capacity of bars, restaurants, hotels and coffee shops into legitimate, affordable workspaces — off the ground. One of their first lessons learned: Some jobs are better reserved for the pros.
“There are far more documents that you have to have together than we realized: bylaws, common stock purchase agreement, option agreement, indemnification agreement, etc.,” said Williams. “It’s so much better to have a lawyer explain these things to you and have your ducks in a row than to get off to a messy start.”
Outside help for major business needs, such as tax preparation and legal counsel, can prove highly valuable even if the cost seems impossibly high for your shoestring startup budget. “We see too many companies start out with what they can afford rather than what they need to succeed,” said Paul Bies, co-founder of Mystique Brand Communications, which helps smaller businesses grow.
4. Securing Funding Is a Challenge
Despite seemingly countless headlines of new venture capital-backed businesses, securing funding for a startup is a struggle for the vast majority of startups. A recent Wall Street Journal (WSJ) piece highlights the unique, post-recession challenges to raising money for entrepreneurial endeavors: “Many banks that pulled back on small-business lending during the recession […] have continued to keep lending standards tight,” stated the article.
It’s a reality Scott Smith, co-founder of inbound marketing agency Jump Suit Group, is all too familiar with. “My two business partners and I still live at our parents’ houses,” he said. “We carry a truly scary amount of student loan debt, and our lines of credit are about as maxed out as they can get.”
This poorer financial condition of today’s young entrepreneurs has been noted by Karen Mills, a senior fellow at Harvard Business School and former head of the U.S. Small Business Administration. They don’t have the same ability to tap into savings, draw equity from a home or obtain bank loans to cover startup or ongoing business costs, Mills told WSJ.
Even alternative capital raising methods, like crowdfunding, can prove difficult. Fifty-seven percent of campaigns on the popular platform Kickstarter fall short of their funding goals or flop completely, reports CNBC.
5. People Might Not Want What You’re Offering
Fortune magazine reports that making a product no one wants was the top reason for startup failure. A 2014 CB Insights — which is an angel investor and venture capital database — survey of failed startups found that 42 percent cited a “lack of a market need for their product” as the single biggest reason for their failure.
If you’re going to spend your time making a product, spend time making sure it’s the right product for the right market. “Business owners fall in love with their idea and don’t spend enough time segmenting their market,” said Spencer Smith of Spencer X Smith Consulting.
“You don’t want to spend all the time and effort and build a company no one wants,” said Mudit Rawat, founder and CEO of an on-demand alcohol and grocery delivery company servicing the Toronto area called Urbery. “Know answers to basic questions, such as what is the size of this market, who is the competition, etc. The more you research … the better your chances of solving the right problems.”
Founder of online education platform Study.com, Adrian Ridner, echoed that sentiment. “Focus on the problem, not the solution that you think you have,” he said. “Let your customers, data and the market tell you.” Ridner also suggested entrepreneurs put something out as soon as possible to get feedback and see if people are interested.
Startup life might not be as glamorous as the media portrays it, but the many challenges faced by budding entrepreneurs are far from insurmountable and offer great rewards when successfully overcome.
This article originally appeared on GoBankingRates and was syndicated by the Personal Finance Network.