Starting your own business isn't for the faint of heart, or the poorly prepared, because only a fraction of entrepreneurs succeed.
One third of new enterprises fail within two years, half within five years. Only a quarter of start-ups still exist 15 years from launch. A 2014 study by two business school professors showed that of the 2.4 million retail businesses that opened in the 21 years from 1990 to 2011, a whopping 2.2 million closed. Three out of every four of those companies were established by first-time business owners.
How can would-be company founders avoid failure? We queried Ramon Ray, a serial entrepreneur, author, speaker and expert on business start-ups. This is a man who "is passionate about helping small businesses grow and entrepreneurs succeed."
Paychex: What's the biggest mistake you see small business owners make that they might not be aware of?
Ray: Before they start a business, they're not prepared, they don't know what goes on, they're not capitalized enough — they're not financed enough. They're not looking at their target customer demographic. As they're growing, owners try to do too many things themselves and don't grow enough to build a team. They're not getting enough help. They're not building in systems and processes, which a growing company needs. McDonald's was successful because after they got that first burger flipped just right, they said, "Aha, let's document that. And then we can flip millions more" exactly right.
What is the question you get asked the most from small business owners?
Ray: How to build one's personal brand. Whether you're a two-person company or a 20-person company, you have your corporate identity. How can you make that executive build his or her personal brand so they're known? The Steve Jobs of the world. the Martha Stewarts of the world. They make their companies stand out.
Then there's the unending social media question. "Ramon, how does social media work?" People are still confused about it, and understandably so. Just sending a tweet is not going to make you money. Social media and personal branding are two major questions, but there are more. How do I hire the right person, how do I enlarge my company in a fiscally responsible manner?
Do you see many small business owners who don't want personal branding, who want the focus on the business?
Ray: Not that they don't want it, but I think they don't know how to do it and they're not prepared when it takes off. Let's take a typical businessman, a pizza shop owner. Joe's Pizza. What if Joe goes to the next level and becomes known as the Pizza Guy? He becomes known as the guy who hires young students and teaches them to make pizzas. How to speak properly. Beyond selling pizza, Joe is on TV, Joe is being interviewed. Maybe Joe came out with his first book, From Pizza to Profits – How Joe the Pizza Guy Did It. That's what it takes.
What can small businesses gain from investing in technology?
Ray: Technology improves processes and productivity, saves money, saves time. But I caution people that technology cannot save your business if your business is bad or screwed up. You may need to fire someone and hire better. If you're losing receipts, it's probably not a technology problem. Yes, technology makes you faster, it can make you smarter with data — analytics, business intelligence. Technology can definitely make you more efficient. It can make operations smoother, saving you time.
I tell clients: don't think of technology as a cost, think of it as an investment and how it can make you money. Think investing $10,000, $20,000, $5 in a system, sure it's a cost, but think of the returns you're getting. Man! You need to flip it around.
What do you think holds business owners and entrepreneurs back from investing in technology?
Ray: They're not looking at technology in the right framework. They're thinking they want to spend as little as possible, and then they wonder why they're slow, they wonder why they're not nimble, they wonder why they're not efficient. It's because they haven't invested enough in technology. Part of it's the industry's fault because we haven't explained the benefits well enough. We need to provide more education. They're thinking technology is probably too expensive. They're not looking toward the future.
What do all business owners have in common?
Ray: Two things. The first is an undying persistence in going forward. Never, ever, stop. A wall for entrepreneur is not a wall, it's like, "Great! I can get up higher and see my competition better." Anything that to a normal person is bad is to us delicious. "Oh, my customer fired me? Great, I didn't need them anyhow."
Second, a good entrepreneur has an insatiable desire to learn. "Teach me, teach me, teach me." The entrepreneur is always fueled by passion, persistence, a desire to reinvent himself and go forward. Thomas Edison considered his many failures in trying to invent light bulb as learning experiences. If not for Henry Ford's persistence, we wouldn't have the car today.
What's the best advice you could give business owners or entrepreneurs?
Ray: Find yourself a good mentor. As an entrepreneur, you know how to make the pizza, you know how to make shoes, you know how to hang drywall, but you don't know finance, you don't know marketing, you don't know all the other things you need to know [to run a business]. A mentor who can advise you is invaluable.