According to the most recent data on business creation available from the U.S. Census Bureau, 414,000 new business ventures were created in 2015. In total, these startups created more than 2.5 million new jobs that year. Clearly, new businesses are a defining characteristic of our country's vibrant economy. But they often run into significant roadblocks as they try to grow and sustain initial success. While it may seem almost impossible to take a company from the startup phase into long-term success, it is actually within the reach of business leaders with the right knowledge and resources at their disposal - this includes having a trusted team of experts at one's side.
"More than 400,000 new businesses are created in the U.S. every year."
The way most businesses begin their lives is generally the same across every industry. It doesn't matter if the company is involved in technology, consumer product design or simply a new corner grocery store - the formula for a new business is static: write a business plan, acquire some initial capital, introduce a product or service and start selling. Unfortunately, this age-old foundational model doesn't have a great track record. One study from the Harvard Business School estimated that three-quarters of all new businesses financed by venture capital fail. No matter the source of funding, small businesses with big ambitions face a tough road ahead.
According to Waverly Deutsch, a professor and researcher on the topic of entrepreneurship at the University of Chicago, this model was begging to be unraveled. In 2011, a popular book pitched a new methodology for entrepreneur careerists to follow. Titled "The Lean Startup," its author Eric Ries made waves for his very detailed, prescriptive model for how to start a company from scratch. The lean startup model was soon adopted by what are now big-name brands: Intuit, Dropbox and Wealthfront are a few notable companies that were launched on the lean startup framework.
However, Deutsch argues that this popular methodology can only get small-business founders so far.
"Creating a company is like getting a jet airplane off the ground," he explained in an article for University of Chicago's academic business journal, the Chicago Booth Review. "The start-up phase so clearly articulated by Lean Startup is merely the plane's systems check and taxi out of the gate. As the plane begins to accelerate down the runway, it must build enough traction and momentum to overcome gravity and lift off from the earth. Only then can it speed toward the sky. The same is true for young companies."
What it takes to succeed as a startup
What "The Lean Startup" succeeded at, according to Deutsch, was providing a workable model for the first 24 months of a company's life. But it is often the next year after that timeframe when the success or failure of a new business is determined. This is the go-to-market phase, the pivotal point when entrepreneurs and their teams must execute a perfect launch. In the experience of business founders who spoke with Deutsch, most companies stumble at this point. Too often, their business plans ignore important details surrounding initial customer acquisition, marketing and sales.
So much of the success of a new business is tied up in the people and systems that support its critical functions, like accounting, payroll, human resources and more. Having a skilled partner at one's side in the form of a business-focused bank can help to alleviate some of these risks and eventually propel a new business to greater heights.
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