The Keys to Small Business Success

The Key to Small Business SuccessWhat determines whether a small business succeeds or fails? Well, we don’t have any definitive answers-yet. But the more we learn about this, the more it will help government officials create policies that better support small businesses. With that end in mind, the Kauffman Foundation has just released a new study, The Making of a Successful Entrepreneur, which offers insight into what successful entrepreneurs believe most affects the success or failure of a startup business.

The survey polled 549 founders of successful businesses in high-growth industries, including aerospace, defense, computing, electronics and health care. Here’s what they said:

  • Their most important success factors:  previous work experience, learning from their successes and failures, a strong management team and good fortune;
  • 98 percent said prior work experience was an “important” success factor; 58 percent said it was “extremely important;”
  • 40 percent said learning from failure was extremely important;
  • 82 percent said the management team was important; 35 percent said it was extremely important;
  • 73 percent said luck was an important factor;
  • Professional networks were key to success for 73 percent of entrepreneurs surveyed, while 62 percent said personal networks were important;
  • 68 percent said availability of financing/capital was important, but only 11 percent had received venture capital, and just 9 percent had obtained private/angel financing.

What about the most common barriers to entrepreneurial success? The one most respondents cited (a whopping 98 percent of them) was the failure to take risk. Others included:

  • Not putting in the time and effort required (93 percent)
  • Difficulty raising capital (91 percent)
  • Lack of business management skills (89 percent)
  • Lack of knowledge about how to start a business (84 percent)
  • Lack of industry and market knowledge (83 percent)
  • Family or financial pressures to hold a traditional job (73 percent)

Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation, believes the survey results can lead to job creation and a healthy economy. Litan said, “If we, as a nation, respond to this data by developing policies that encourage entrepreneurship, we have the potential to increase the numbers of high-growth companies that will create jobs and accelerate economic recovery.”

The lead researcher, Vivek Wadhwa, agrees: “Entrepreneurs tell us their ranks remain small because others fear the risk and time required to start a venture. But the current economy has given us an opportunity: We could harness the energy of the many workers who are now unemployed, teach them how to be entrepreneurs and provide them with seed financing for their ventures. These workers have nothing to lose, and the economy has a lot to gain.”

I know many of you think the government has no place “interfering” in our business. But, I must admit, Litan’s and Wadhwa’s conclusions make a lot of sense to me.

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About the Author: Rieva Lesonsky is CEO of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. A nationally known speaker and authority on entrepreneurship, Rieva has been covering America ‘s entrepreneurs for nearly 30 years. Follow her on Twitter @Rieva and visit SmallBizDaily to read more of her insights on small business.

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Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

15 Reactions
  1. Rieva,

    Nice job on this article. Somehow, I knew for sure that the word “Time” would have to be included in there somewhere.

    As entrepreneurs, we must put the time in to succeed, and then put in even more.

    The Franchise King
    Joel Libava

  2. Nice post, Rieva. In addition to addressing the immediate needs of people out of work, this study provides some insights on longer term strategies that can be employed to better prepare us for future crises.

    Many people wait until they no longer have a job before they decide to think about becoming entrepreneurs. By then, the risk is way to high. However, if we began to think more universally about entrepreneurship as a very real possibility, we might face our job choices in a different manner.

    Instead of just putting in our time, what if we:
    – learned as much as we could about the industry we work in
    – networked more broadly on the job to form relationships with people in different disciplines within our businesses
    – sought to establish mentor relationship(s) with senior managers in the business
    – learned how our company really makes money

    This simple shift in perspective before it is needed could start to shift our preparedness when opportunities present themselves. Only the prepared ever think that luck was key to their success.

    Cecilia Edwards
    Equipping Businesses for Phenomenal Success

  3. Rieva- Great article. Kaufman’s research is usually very accurate. The conclusions and data verify what small business owners are thinking. However, there still is a lot of things the Federal government can do to help us. Most of all is to just get out of the way!

  4. The link to “The Making of a Successful Entrepreneur” is not working. (-“http//”)

  5. I fully agree that failure to take risk is the biggest hurdle to entrepreneurship. My concern is how the government would go about trying to remedy the situation. The most likely conclusion would be for the government to guarantee loans or offer grants. These options sound attractive because it “reduces risk”, but all it does is transfer risk from the entrepreneur to the government (which ends up being all taxpayers, me included).

    I believe the real problem is that people don’t understand what risk means. The word itself has such a strong negative connotation that it’s no wonder people avoid it like a plague. A better solution would be to more accurately educate people on risks so they can make logical choices about what is an acceptable risk and what is unacceptable (to them personally).

  6. I agree we all need to put in the time to learn and that ups our chance of succeeding. But I think so many people are panicked today, turning to business ownership because they’re scared and desperate, that they don’t take (or think they have) the time to figure out what’s the best business for them to start.

  7. 73% said luck was a factor in their small business success?? Really?

    I’m reminded of something I once heard from an older, quite successful small business owner. In response to a group who envied him by telling him he was lucky I heard him say, “True. And the harder I work, the luckier I get.”

  8. Nice concise article Rieva,
    Many businesses are doomed to failure even before they start becasue their Business Model just does not work. It sounds simple but if the following measures don’t work properly it’s not a matter of hard work but rethinking the strategy to make it more sustainable
    1. Customer Value – if you can’t extract sufficient value from a business above the costs to provide the product of services you’re doomed
    2. Transaction Flow – if you can’t get sufficient sales volume through your business again you’re doomed
    3. Money Flow – if your working capital requirements are way above the flow of your business you’re doomed again
    I see so many businesses doing extensive business plans which do not verify these three measures properly and then in the execution of the plan the business owner doesn’t bother to follow these three measures carefully and diligently.

  9. There’s a famous saying “You cannot help those who refuse to help themselves”. So I will say it in this way if someone fears to take risk then he/she is never going to touch the peak of success in life. Previous experience is significant but doesn’t matter if one doesn’t have any. The only things matter is your strong determination and management skills. One should always be prepared to take risk and must be ready to tackle the ups and downs.

  10. Sounds like one of the most popular article in this topic, nice one indeed.
    My advice: market research!

  11. Thanks for a great report on the Kauffman Foundation’s study on entrepreneurial success. I think there are some helpful insights to be gotten from the study. I particularly encourage potential baby boomer entrepreneurs to look at this information to se how they can best leverage their life and business experiences.

    Shallie Bey
    Smarter Small Business Blog

  12. This is a great article but I believe there are two additional points that need to be made. Business sucess also depends on successful marketing for your demographic. In todays enviroment that can be a challenge to decide what medium to use traditional or internet or a blend of both. The second aspect is controlling costs, it doesn’t matter how much you are grossing monthly if you are spending more than you take in. It is very important to monitor both aspects on a monthly basis instead of waiting till the end of the year. A good bookkeeper will be able to generate this information for you at a reasonable price.

  13. Marketing or the failure to market your business is one of the biggest reasons for success or failure. I have owned and operated an air conditioning business in Berryville Ar for 40 years and have seen a lot of businesses come and go. Marketing in a lot of different areas will help prevent failure.

  14. I love your blog.. very nice colors & theme. Did you create this website yourself or did you hire someone to do it for you? Plz reply as I’m looking to create my own blog and would like to find out where u got this from. thank you

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