And they are not alone. According to Gallup, half of new U.S. companies fail in their first five years. It gets worse. The failure rate hits 70 percent in the first 10 years.
“That’s not surprising,” says Randy H. Nelson, an entrepreneur who has built multi-million dollar companies. “The skills it takes to start a business aren’t necessarily the same as those it takes to keep that business afloat.” What is surprising, though? In the U.S., more businesses are now being shut down (470,000) than are being started (400,000).
“Many entrepreneurs have the gumption to take that dramatic first step of sparking something into creation, but too many lack the perspective to reflect on what’s needed for the next step,” says Nelson, author of “The Second Decision – The Qualified Entrepreneur.”
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Nelson says entrepreneurs often make five mistakes that threaten to put their businesses at risk.
Insistence on autonomy. An Inc. Magazine study once said that a trait most entrepreneurs share is their desire for autonomy, which is great starting out, Nelson says.
But after the startup phase, the company steams into the growth phase, becoming more complex and more vulnerable to industry and economic trends. At that point, an entrepreneur’s insistence on autonomy can hinder the company’s ability to respond quickly and intelligently to challenges it faces. “In the growth phase, you simply can’t do it all, and it’s foolish to keep believing you can,” Nelson says.
Unwillingness to build structure, cultivate expertise or delegate. Many entrepreneurs will need to surround themselves with a strong executive team— or at least a steady right-hand individual—to ensure the company’s success, Nelson says. But too many business owners fail to create the kind of structure that produces good leadership decisions within a managerial team.