By Bill R. Shelton, CEcD
“Ensure the sustainability of new and startup businesses” is a strategy included in many community business retention and expansion programs (BR&E). And while this is an admirable strategy that, if successful, would be beneficial for the community, the execution of this strategy is a major challenge.
Why is this strategy is a major challenge? The unfortunate reality is that a lot of businesses fail – with or without community assistance and encouragement.
According to the U.S. Bureau of Labor Statistics, almost 50 percent of all businesses fail in the first 5 years and only one-third survive 10 years.
There are two overriding reasons why small and new startups survive or fail: management ability and economic conditions. The first the community can exert limited but some influence; the second the community can’t directly influence – but the community can still be alert and responsive to the changing needs of the local business sector.
Theirs is no shortage of studies on why businesses succeed or fail. Actually hundreds of studies, books and articles have been published on the subject.
But most have emphasized the external factors such as economic conditions, government regulations and policies, and lack of financing.
One of the factors generally missing is internal influences, such as the attributes and abilities of the individual running the business. In a recent Gallup study of 4,000 entrepreneurs in the United States, Mexico and Germany, Sangesta Badai, Ph.D., senior consultant at Gallup, discusses the impact entrepreneurs have on the success or failure of businesses.
Because the entrepreneur’s role is so important, Gallup’s understanding of individual differences led them to develop the Entrepreneurial Profile 10.
It is standard procedure for communities to select companies to receive help based on business plans and financial documents. By adding and using the Gallup Profile 10 as a check list to measure the possible effectiveness of the business owner of the business, the community increases their understanding of the business’ potential.
Here are the traits and habits of business owners that beat the odds and who build highly successful companies as used in Gallup’s Entrepreneurial Profile 10.
1. They dream big. They have complete faith and belief in the vision of what the business can become.
2. They spot opportunities. They see potential and opportunities where others don’t.
3. They know how to execute. The ability to execute separates successful entrepreneurs from dreamers.
4. They take small steps. They know how to prioritize and achieve things by taking small steps forward.
5. They ask for help. They need sounding boards and know how to use mentors.
6. They’re nimble. They learn from and make mistakes and change course.
7. They are confident. They are persistent, focused and move forward.
8. They are not afraid to fail. They don’t let risk stop them from pursing their goals.
9. They build strong teams. The ability to hire well – as well as fire – is critical.
10.They delegate. The successful ones know that they can’t do everything, especially as the business grows.
The Bottom Line
The challenges that communities face when helping local business can be overcome more successfully when decisions are based on scientifically identified traits rather than instincts and by studying past history of the individual running the day-to-day operations.