2019 has been an exciting year for those of us following startups, and, as usual, tech startups hogged the headlines to a large extent. But, there were also a number of interesting startup stories from other sectors that offer important lessons for entrepreneurs who are just getting started, and can give us some insight into what we can expect to see in 2020.
It’s still not easy.
With the headlines routinely focused on unicorn companies that seemingly appear out of nowhere and disrupt an entire industry, a naive optimist could be forgiven for assuming the current economy is creating wealth and dropping it at the feet of every entrepreneur with an intriguing idea.
That is definitely not the case.
According to the 2019 edition of the Global Startup Ecosystem Report by Startup Genome, “Building a successful business is every entrepreneur’s goal — but only 1 in 12 succeed in doing so.” The report goes on to show that, statistically, “the primary reason startups fail is that their Inner Dimensions (customer relationships, product, team, finance and legal) get ahead of their Outer Dimensions (customers, product usage and revenue), which is called Premature Scaling.”
Lesson: Even if funding is generous and the future looks incredibly bright, a successful startup must grow strategically, methodically, and — most importantly — consistently. It’s a balancing act that can be easily upset by overly optimistic or opportunistic decision making.
Location is less important than it once was
While it’s still an important factor, especially in some sectors, where your startup is geographically established is no longer as integral to success as it once was. Certainly, traditional startup hubs like Silicon Valley, New York City, and Los Angeles still offer unmatched infrastructure and ecosystems built to nurture new companies. But, as all business becomes more global and interconnected, those advantages have paled somewhat.
With globalization comes decentralizing of funding, talent, and opportunities. In an economy where banks are comfortable lending, even smaller lenders and investors are proving willing to back a solid idea or strategic expansion. Another point pulled from the Global Startup Ecosystem Report is that “improved funding and support will see more homegrown businesses staying put, and boosting their local economy.”
Lesson: Don’t feel like the cards are stacked against you because you’re not located in a startup hub. Establish and grow your business where circumstances are most favorable and seek out help from sources that are likewise vested in the local economy.
Additionally, it’s impossible to ignore the ongoing growth of ecommerce, which is consistently stealing market share from nearly all traditional retail sectors.
Lesson: Where your business is located doesn’t matter as much as it once did, but even whether or not your business has any physical location at all is becoming less important as well.
Be prepared for economic trouble
We’re currently in the midst of one of the longest continuous periods of economic growth in U.S. history. It’s enough to make even the most down-to-earth entrepreneur complacent if they’re not careful. But, there are signs the economy is finally slowing down, an eventuality economists have been expecting for years now.
That doesn’t mean it’s the wrong time to start your new business. In fact, even the slowing economy in late 2019 is in far better shape than at many times in the past. Still, it’s an excellent time to rethink your expectations and make a concerted effort to be realistic and pragmatic about how to succeed with your new business in the coming years.
Brian Moran, CEO of Small Business Edge, lost his business to bankruptcy in 2008 during The Great Recession. Today, he’s back in the driver’s seat of a new business, and he credits that difficult experience with teaching some powerful lessons about being prepared.
Lesson: Take full advantage of economic strength to start and build your business, but don’t put on blinders and assume nothing will change. Moran’s advice includes “watch for red flags, stay on top of your receivables, develop alternative revenue streams, review your contracts and agreements, and play the ‘what if’ game.”
As you’re looking toward 2020 with entrepreneurship in mind, refer back to these simple but powerful lessons to keep your startup plans on track in the coming year.