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When Enthusiasm Trumps Common Sense

When Enthusiasm Trumps Common Sense
By Tom Irmen

Although it’s a common misconception that 80% of all new business start-ups fail in their first year, a failure rate of 35% in the first two years, according to the SBA, is nonetheless a daunting statistic. So why do 35% of all new businesses fail in only the first two years and 55% in five years? Enthusiasm. That’s right, enthusiasm. The same essential characteristic that can be the catalyst to success in small business can also result in its failure.


If unbridled enthusiasm leads you to ignore answering key questions relating to your start-up, your potential for success will be greatly diminished. Too often, new entrepreneurs, who dislike the answers to these questions, often ignore them, convincing themselves instead that they be the exception. They rarely are.

Before you leap in to the world of entrepreneurship, ask yourself the following questions:

» How much capital will I need to get started?
You’ll need at least six months of capital until you become profitable, probably more. Don’t rely on sales as a substitute for working capital. Also, don’t expect a paycheck, and don’t exclude any expense items. Remember utilities, insurance, advertising, employees, etc.

» Who’s the competition?
Will you be able to successfully compete against a well-positioned competitor? Can you successfully differentiate your products and services, or will you be viewed as just one more competitor in a sea of generics?

» Location, location, location.
If you’ll be launching a brick and motor store, location is imperative. If you select an obscure location in order to save rent, you’re flirting with disaster. Don’t roll the dice on location. The money you save on rent will likely be more than offset by lost revenues.

Owning a small business can be a very rewarding experience when you follow a well-thought out and carefully implemented plan developed with your eyes wide open. Don’t substitute enthusiasm for logic and common sense. Reserve your problem solving skills for the unexpected and not the self-inflicted obstacles you may elect to ignore.

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