Small Business Trends Radio

How to Start a Profitable, Long-Lived Business

Scott Shane<br />
on Beating the Odds: How to Start a Profitable, Long-Lived Business. Consider this. Statistical odds state that 55% of startups fail within the first five years. Yikes! Now consider this. At times, it is possible to beat impossible odds.

So . . . how do you discover which industries, funding sources and strategies are most likely to lead to a successful, rewarding business?

Illusions of Entrepreneurship Our featured guest in this Episode of The Small Business Trends Radio is Scott Shane, A. Malalchi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University. He is also the author of a new book, Illusions of Entrepreneurship, which is the source of much of the information in the show. (You can find the book on Amazon, too.)

Scott provides insights into that question and more.JumpUp

Discussion topics include:

  • What is the single biggest myth regarding startups? — Myth: The growth of a startup depends on the individual entrepreneur’s talent, right? Wrong. The industry chosen has huge effect on the odds of growth.
  • Why does the chosen industry have such a powerful effect? — Here’s an example. Approximately 4.2% of companies listed as the fastest growing private companies on the Inc. 500 list are in the computer and office equipment industry. And .005% are in the hotel/motel industry and another .007% are in eating/drinking establishments.
  • What do the above statistics mean? — That’s simple. It means that the odds for success are 840 times higher for the computer and office equipment industry than they are for the hotel/motel industry.

Do I have your attention now?

Scott Shane has been studying and teaching entrepreneurship since 1989 with half that time also spent as an angel investor. His insights into developing successful startups are invaluable, and in this interview — he shares many.

Would you like to hear them? You can do so by clicking the player below and listening to Scott’s interview.

6 Responses to “How to Start a Profitable, Long-Lived Business”

  1. Chris Says:

    Those statistics are really compelling. Honestly, I was surprised to see it spelled out like that – wow. I still think it helps to be a spirited entrepreneur as well though. Every little bit helps.

    A combination of a correctly chosen industry and a determined entrepreneur would be a real powerhouse combo, don’t you think?

    Great entrepreneurial test in the included link, too. I’d advise everyone to take it. Pretty interesting.

  2. Amanda Says:

    I do have to agree that planning and marketing are very important. Interesting information about debt & funding also. I definitely know all about using credit cards for financing. It can be a hard hole to dig yourself out of so I could see how easy it would be to get behind and have to close your business.

  3. Martin Lindeskog Says:

    Scott,

    Interesting statistics. I have entered an industry field that is focused on B2B, but it is also open for the public. If I should describe it by comparing with some well-known companies, I would say it is a combination of a coffee-house, e.g. Starbucks, a space with office services like Kinko’s and a community for Blue Chip club members. The niche is that you get several things that a small business owner could need in one place. The added value is the networking element, i.e., meeting other business people in a relaxed atmosphere. We want to become “the third place” after your home and office.

    We have done our background check, writing a business plan, etc., but the hard thing is the marketing and to reach out to the small business owners and get them going through the AIDA (attention – interest – desire – action) process. With today’s tech tools like mobile phones, high-speed internet at home, and so on, it could take some time before small business owners get the sense that they should do business in other places in order to become even more productive. At the end of the day, a business transaction is an exchange between two parties who trade value for value. We are working on implementing an element of storytelling into the business, so the customers reach a positive state of mind by getting an insight how it was in the old days at the coffee-houses. The Economist article, Internet in a Cup (December 2003), has been a great source of inspiration for my part. I think a meeting place is the solution for an universal need to interact and talk with other business minded individuals.

    I agree with Chris that is should be a plus if you are a determined individual and a spirited entrepreneur. I am an American in spirit and I have got plenty of inspiration from my time at an university in NH and at my work in OH. Even if I am used to the American sense-of-life, I got impressed with the service minded attitude and I am trying to bring this approach with me here in Europe. My long-range goal is to return to the Land of Opportunity and to set up a business venture in the United States of America. I want to learn more about the role of the business angel and other types of investors. I have had a pretty hard time to understand their presence here in Sweden. I wonder if it is much different in North America and other places in the world.

  4. EJMalyn Says:

    Really surprising to hear that many entrepreneur’s do not start out with a good businees plan and marketing — two top keys.
    Enjoyed the interview Scott!

  5. Martin Lindeskog Says:

    EJMalyn: How do I get hold of the “101 Practical Ways to Increase Your Business Visibility and Brand … On A Budget”? I checked out your site, but I couldn’t find much material at the moment. Where should I look?

  6. career change options Says:

    Good Info. yes credit cards can be a rough way to fund a business.

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