New Venture Lab: Equipping Christian Entrepreneurs

Scott Shane is a professor of entrepreneurial studies at Case Western University, a researcher on new businesses for the Ewing Marion Kauffman Foundation and an angel investor with the Cleveland-area North Coast Angel Fund.  He offers 10 excellent tips to improve your odds of startup success. in the following article.

The odds are stacked against entrepreneurs, and many handicap themselves by making decisions that actually make them more likely to fail, according to Scott Shane, author of The Illusions of Entrepreneurship. "There are many things that we know enhance the performance of startups that most entrepreneurs aren't doing," Shane writes. "You can take the atypical (and better) approach. If you do, you won't guarantee your success, but you will increase your odds." His tips follow.

Pick the right industry. Entrepreneurs "tend to choose industries in which they are most likely to fail," Shane writes. Many never look outside the industry they used to work in, even if they don't have any competitive advantage over their former employer. Pick a sector with a growing market where you can differentiate yourself from the competition.

Evaluate your ideas. Research shows "42% of new-business founders decide to start a company before they have identified a business idea," Shane writes, and 28% never consider more than one idea. Think through lots of opportunities and pick the one most likely to succeed. (Note: use our Venture Analysis tool to perform a detailed analysis of your business idea.)

Start with a team. More than half of new businesses are started by individuals, "even though the performance of new businesses founded by teams is better," writes Shane. Going in alone lowers your chances of success.

Sell to businesses, not consumers. "Most startups sell products or services to individual consumers, even though 90% of the fastest growing private companies in this country sell to businesses," according to Shane. Founding a business-to-business company will raise your odds.

Launch full-time. Even though there's lots of evidence that full-time ventures are more likely to survive, profit, and grow, Shane says, most entrepreneurs launch their companies part-time.

Form a corporation. "New corporations outperform new sole proprietorships on almost every possible measure," Shane writes. But 60% of new businesses are sole proprietorships, and fewer than 8% are actually incorporated.

Write a business plan. Whether or not you're trying to raise money, writing a business plan helps a new venture with everything from product development to sales, Shane says, but many entrepreneurs don't write one before starting.

Start marketing. Lots of startups neglect marketing early on, "even though new companies that start marketing sooner, and that emphasize the implementation of marketing plans, perform better than other startups," Shane writes.

Compete on service or quality, not price. "Many entrepreneurs compete on price, even though this strategy hinders the performance of new ventures," according to Shane.

Focus on one product or market. "New businesses that focus their activities perform better than those that do not," Shane writes.

By: John Tozzi

Source: Business Week