What Does It Take To Start A Business?
By Tom Sellars, CEO, Sellars Absorbent Materials
Any new business begins with a vision for a product or service. You identify a need in the marketplace and develop a way to fill the need. The idea might be a brand-new product or a better service. The product could be a significant enhancement to an existing item, or it might be a “me-to” product that you’re able to offer at a cost savings.
While a product can be the catalyst for launching a new business, it’s important to keep in mind that success hinges on more than just the product. The company’s founder and leadership team are the driver of success. In the early days, the product needs to be paired with a founder and team who are willing to take risks and are highly motivated to succeed.
For example, when my brother John first started his business in 1985, he had to decide if he was going to keep his full-time job or quit. He eventually took the leap to being a full-time business owner and that paid off but, at the time, it was a risky and uncertain move.
What Intangibles Are Part Of Starting A Business?
I’d say almost all business founders start out with a lot of passion and energy. Unfortunately, as the hours, days, weeks and years grind on, most get exhausted and can’t continue to burn the midnight oil seven days a week.
That’s where dedication, persistence and team building come in. Establishing and running a fledgling business is a marathon combined with an obstacle course. It’s a long journey that requires incredible fortitude and ingenuity to solve problems and address unexpected obstacles that come up.
Honestly, I think most owners underestimate the amount of time and energy it takes to birth a business. In fact, national stats from the Labor Bureau show that 20% of small businesses fail within the first year and nearly 50% fail within five years. Sustaining a business is a continual process of business improvement and persistence.
At What Stage Do Many Small Businesses Buckle?
Early-stage companies face significant challenges of not only how to stay in business, but how to grow the enterprise. A founder usually has a key skill set. For example, he or she may be great at product innovation but isn’t able to effectively position it in the marketplace. Conversely, a founder may have a talent for sales and marketing but doesn’t have the skills to implement internal operations.
Founders must be honest and aware of their strengths and weaknesses and be confident to build a team of talented people to handle the areas where they need help. Since entrepreneurs typically like to have control, it can be hard for them to delegate but it is essential in order to sustain growth over a long period of time.
Finding, recruiting and retaining talent to handle IT, accounting, finance, production, HR, and sales and marketing is key. Existing companies have these functions and departments in place but a new business that’s growing must invest the time and resources necessary to establish these areas of responsibility. For a company to thrive, it needs to have the right positions and the right people in those positions.
And, while those functions are vital to a growing company, it’s important to evaluate the costs to determine what level of support is needed. Young companies can have a hard time attracting good talent because they can’t afford the salaries. That’s when you need to get creative. Can a part-time accountant fill the need? Is a fractional CFO an affordable solution? Many times, stretching to pay for the right talent pays off.
However, founders have to do what they can afford to do, in order to make the business economically sustainable.
When Does Capital Come Into Play?
Capital can come from a variety of sources. In the beginning, a small business is typically bootstrapped or funded by the founder’s personal savings, along with family and friends, which was our case.
For companies that produce something and are looking to grow by adding more equipment or employees, outside money can help fuel growth. However, securing outside funding can be another obstacle for small businesses. Banks aren’t interested in lending money without a guarantee they’ll be repaid so the founder must line up guarantors for the loan. Another option is trading equity in the business in exchange for capital. It’s a growth lever but it can come with strings attached since you now have “outsiders” to answer to. Typically, entrepreneurs are often reluctant to dilute their ownership by raising outside equity capital.
In rare cases, there are businesses that have such a sound and strong business model right from the beginning that they’re self-funding, meaning the profits/excess cash flow can be put back into the company to fuel growth and expansion.
What Are Your Final Thoughts On Starting A Business?
There’s much more to cover on this topic, including the importance of doing market research, understanding potential customer needs, developing a business plan with a business model that is economically sustainable, etc.
However, what I think many entrepreneurs truly don’t realize is that the odds of success are quite low. Launching a business and nurturing it to grow and succeed is a commitment that requires a lot of sacrifices, such as early mornings, full days and late nights on weekdays and weekends. It’s a commitment to a journey that requires perseverance, passion and determination to wake up every day and face the obstacles that are in the way — without getting discouraged or giving up.
It’s a test of your character. What doesn’t kill you actually makes you stronger. It’s deeply rewarding to see something that you’ve invested so much blood, sweat and tears into succeed. For the entrepreneur, business is personal.
Sellars is a leading manufacturer and marketer of shop towels, multi-use disposable wipers, towel and tissue and absorbent products. Sellars’ products, which are sold under the ToolBox®, Clean Task® and Mayfair® brands, are made from recycled and renewable materials, are high performance and good for the environment. Sellars is committed to using sustainable practices in all business areas while serving its employees and customers and the planet. Learn more about Sellars’ 40 years of innovation at sellars.com.