Think You Have What It Takes To Be An Entrepreneur? Ask Yourself These 3 Questions First

Only 10% of startups survive their first year.

That’s a scary statistic, but if you plan to start your own company, you have to know the odds are stacked against you from the start. Because even if you’re among the 40% of companies that get funded, you aren’t guaranteed success. And most of the companies that do succeed aren’t billion-dollar unicorns—they’re small ventures still slugging it out every day to keep up with the bills.

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But if this challenge excites rather than scares you, you just may have the entrepreneurial spirit it takes to be successful in this cutthroat world.

To get your company off the ground, spend some time from the get-go thinking hard about your goals, why your product or service is the perfect thing for the market now, and why it has you be you introducing it. You may have the right entrepreneurial readiness, but are you prepared to be honest with yourself about what you need to really succeed?

If your answer is yes, it’s time to start asking yourself some tough questions.

  1. What Does Success Look Like For You?

When you start a business, it’s helpful to have the end goal in mind.

Are you building a business to sell, or to keep in your family for multiple generations? Do you want to make $2,000 a month, or do you want to IPO? You might be able to generate a decent income with an Etsy business, but wanting to IPO requires a more aggressive approach.

Too often, entrepreneurs try to chart their company’s course after it’s already up and running. Then, once their business takes off, they have no idea where to go.

A better strategy is to map out your company plan from the get-go. One of the best ways to do this is by reverse-engineering a path to success starting from where you want to end up. For example, if your goal is to make a few thousand dollars a month, you should probably set up your business with a variable cost structure. This means your costs are tied to your sales, versus a fixed cost structure, where your costs are an up-front investment.

Here’s why:

In a variable cost structure, you pay a bit more for everything, but you can make something on every $1 of revenue you bring in. This approach means that less up-front investment is required since you pay expenses as you go. But if instead, you’re trying to build a huge company quickly, you want to go with a fixed cost structure. That means the types of expenses your business incurs remain unchanged regardless of your output. Then you’ll have capital reserves later when you want to expand.

Figure out what you need, what you want, and how to get there in advance so that you don’t get stuck later.

  1. What makes your idea unique?

Entrepreneurs always want to believe that they’re the first to have an idea.

But once they do some early research, they find out that at least five other people beat them to it. But that isn’t necessarily a bad thing. It’s extremely rare to have a truly original idea.

Remember that Uber and Lyft weren’t the first ride-sharing companies, and Facebook wasn’t the first social media platform. Sidecar was on the market before Uber or Lyft, but they won out because it provided user control of the type, route, price, and time of the ride—addressing all the previous issues with the taxi and ride-care industries. Facebook was predated by MySpace, LinkedIn, Friendster, Bebo, Orkut, and others. But Facebook saw that MySpace rigidly controlled its market. They decided to let users decide what they should do with the site. Being the first is great, but being the best is more important.

And being the best all comes down to market fit.

If you aren’t creating something new, you should try to identify what your competitor is missing. To find this secret ingredient, ask yourself what makes your product different, and why your market needs it.  

When my friend Eric Ryan launched his company, Olly Nutrition, he decided to differentiate his supplements in two ways. First, by creating better packaging than existing supplements. Second, by formulating function-driven supplements for sleep, beauty, energy, and so on.

The brand is another potential differentiator. Your company may offer an amazing product and price. But if your image is weak, you won’t be able to create an attractive brand to control the space.

  1. Why you, and why now?

If you’re in a position to spot trends early, you can capitalize on them and get ahead of the market.

Bouqs, the direct-to-consumer flower delivery service, is a great example that spotted an early trend and ran with it. At the time, several companies were looking to sell flowers directly to consumers, but none had succeeded. The family of one of the Bouqs founders, however, owned a flower farm in Latin America. That eliminated many of the supply chain issues that competitors had been experiencing.

They used their unique vantage point and unfair advantage. They capitalized on the demand and deliver the product in a novel way before the competition.

Today, through the Internet, new distribution models, and abundant access to information and capital, the barriers to entry for entrepreneurs have dropped and the floodgates have opened. It’s easier and less expensive to start a business in today’s market than it has ever been. Entrepreneurs are taking full advantage of this opportunity.

But these same forces are also creating a more crowded environment in which it is more challenging to compete and grow.

That’s why you need an idea that sets you apart—like John Foss with his chia farm.

Figuring out what kind of company you want to be and how to corner the market on it will likely evolve as you spend more time considering your fledgling company—and that’s good. You should always have a handle on where you are and where you want to be. But flexible enough to make changes.

Courtney Reum, along with his brother Carter, is the co-founder of M13, a disruptive Brand Development + Venture Capital firm that has invested in over 100 startups such as Lyft, Pinterest, ClassPass, and Slack. He’s been recognized as one of Goldman Sachs’ 100 Most Intriguing Entrepreneurs 4 years in a row. His entrepreneurial venture VeeV earned him a place on Inc’s 250 fastest growing companies.

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  • Originally published January 9, 2019, updated April 26, 2023