Recently it seems that everywhere I look there is some mention of entrepreneurs and startups. Perhaps it’s my constant exposure to the startup scene or maybe there is a trend developing around us. Articles are popping up in a variety of industries trying to follow what the next big thing is and who’s going to be the ones to create it. Just this past week, numerous articles were posted in discussion with the startup scene in major news and media outlets including: Entrepreneur, Wall Street Journal, Bloomberg, Forbes, Fortune, TechCrunch, and many more.
So, what’s going on? Is everyone leaving their 9-5 jobs and going on to creating their own dream startup? Although the official 2016 numbers won’t be tallied until Tax Day, industry leaders from around the U.S. are talking about the possibility of an entrepreneurial boom coming soon. Seeing that this might be misconstrued in the media, I turned to the numbers to find out the facts.
By the Numbers
Although not as glamorous as the entertainment media outlets we enjoy, the U.S. Bureau of Labor Statistics tracks and records a variety of data on new businesses and job creation with the Business Employment Dynamics (BED) program. So, let’s just take a moment and check out the numbers during the past 20 years:
Looking further into this trend, this shows us a lot about the business cycle of the economy. The number of establishments created year-over-year is beginning to trend back towards where the U.S. economy was prior to the Financial Crisis during 2007-2009. So, why is the overall number of jobs created declining, but the percent of firms with less than 250 employees declining as well? Majority of this comes from the fact that the failure rate is increasing faster than the birth rate. More jobs are being created per startup, but more startups are also failing.
Go Big or Go Home
Typically, the reasons why individuals decide to create their own startup are that they:
- Hate their day job
- Want to follow their dreams
- Shoot for self-actualization
- See a need in the market
- Want to be their own boss
- Want to get rich
While I love the passion and dedication entrepreneurs have, it is important that everyone is educated about the high level of risk that is associated with startups. Nearly 50% of startups will fail in the first 4-5 years and 50% of those are from incompetency. Something that I hear repeatedly while talking with venture capitalists is that “An educated investor is a smart investor.” This is true from both sides of the startups. Entrepreneurs need to be educated since they are investing their time and money into their startups. Investors need to be educated since they are putting their money and other’s money into the trust of the entrepreneurs. If one or the other is unaware of the risk and unable to control it, both are likely to fail.
So, Should I Do It?
There’s no straight answer to the simple question that all of us want answered. Startups are far from easy and are most certainly not for everyone. Know what you are getting yourself into and have a plan B, C, and D if things don’t go the way you expected.
A few final notes to help you get on the right track:
- Find a business partner
- Find a profitable industry
- Have experience in what you’re getting involved with
- Money is money & customers are customers
- The market wants what it wants
- If you try, you might fail
- If you don’t try, you’ll definitely fail
- Sometimes you don’t get it right the first time
- Customers may not always be right, but they are your boss
This shouldn’t scare off everyone from trying to create their own startup, but like I said before, it’s important for everyone to be educated. Startups are a high risk/high return endeavor and the ones who succeeded and the ones who failed will tell you no different.
“I can accept failure. Everyone fails at something. But I cannot accept not trying.” – Michael Jordan
About the Author
Christopher Derbyshire has a passion for the hospitality industry. After a few years of managing and opening restaurants, he decided to focus his time and effort on creating his own businesses and helping others achieve their goals. He hopes to focus on business development and provide efficient business consulting services.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of RVF or UNLV. In addition, thoughts and opinions are subject to change and this article is intended to provide an opinion of the author at the time of writing this article. All data and information is for informational purposes only.