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“Ventures Capital’s Secret – 3 out of 4 Start-Ups Fail……

This is the headline in an article in this morning’s Wall Street Journal. In my opinion this rate is too high and may be driven by the greed of the investors, or should I say the “hope” that the investors have in receiving a large return on their investments. It may seem a little like rolling dice. Perhaps the 25% that succeed can more than make up the investment in the other 75% that don’t yield a return.

Every time there is a business failure, there are people that get hurt. Yes, the investors may not make a return on their investment and may not even get the return of their investment, but in most cases that does not result in the investor losing everything else they own.

The same is not true for the small business owners that are receiving the venture capital. They usually have to invest their life savings and then borrow from family, friends and even credit cards to get their business in a position to be considered for a venture capital investment. Failure in this case can personally hurt the owner who started the business. In many cases he is left with the original debt and bankruptcy may be the only answer.

While most small businesses, even without venture capital, don’t survive 5 years, my experience tells me that the failure rate can be drastically decreased if proper steps are taken. Small businesses that use the services of a good business consultant/coach will certainly increase their chances of not only surviving but also growing their businesses.

Coaching can provide the following benefits:

  • An honest appraisal of the chances of success at the time the business plan is developed, or shortly after its implementation.
  • A complete resources analysis to insure the probability of success from a financial prospective,                 (both personal and business).
  • When funds are tight, the marketing dollars and marketing time are more carefully allocated to produce the “biggest bang for the buck”.
  • A working (hands on) business and marketing plan that the business owner understands and will implement with accountability to himself and his coach.
  • A better understanding of what obtaining venture capital means both pros and cons, and a determination when a business is ready to seek such support.
  • A better opportunity to create a profitable company not just a job for the owner.

It’s important for a small business owner who hires a consultant/coach, not to look at this relationship as a short term one that will end as soon as there is “light at the end of the tunnel”. It is precisely at that point that the coach is needed to take the business from a start up to a going concern and that requires an entire new marketing and management approach to sustain the growth.

Be in business for yourself, but not by yourself. Carefully select your mentor and build a trust relationship.

Nick J. Petra CFP    helping you grow your business is our only business©


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