The Keys to Small Business Success

By Planet Laundry staff | Dec 04, 2009

What determines whether a small business succeeds or fails? Although no one has any definitive answers, the Kauffman Foundation recently released the results of a new study, “The Making of a Successful Entrepreneur,” which offers insight into what successful entrepreneurs believe most affects the success or failure of a startup business.

The survey polled 549 founders of successful businesses, and here’s what they said:

• Their most important success factors: previous work experience, learning from their successes and failures, a strong management team and good fortune.

• 98 percent said prior work experience was an “important” success factor; 58 percent said it was “extremely important.”

• 40 percent said learning from failure was extremely important.

• 82 percent said the management team was important; 35 percent said it was extremely important.

• 73 percent said luck was an important factor.

• Professional networks were key to success for 73 percent of entrepreneurs surveyed, while 62 percent said personal networks were important.

• 68 percent said availability of financing/capital was important, but only 11 percent had received venture capital, and just 9 percent had obtained private/angel financing.

What about the most common barriers to entrepreneurial success? The one most respondents cited (a whopping 98 percent of them) was the failure to take risk. Others included:

• Not putting in the time and effort required (93 percent).

• Difficulty raising capital (91 percent).

• Lack of business management skills (89 percent).

• Lack of knowledge about how to start a business (84 percent).

• Lack of industry and market knowledge (83 percent).

• Family or financial pressures to hold a traditional job (73 percent).

Robert E. Litan, vice president of research and policy at the Kauffman Foundation, believes the survey results can lead to job creation and a healthy economy.

“If we, as a nation, respond to this data by developing policies that encourage entrepreneurship, we have the potential to increase the numbers of high-growth companies that will create jobs and accelerate economic recovery,” Litan said.

The lead researcher, Vivek Wadhwa, agreed. “Entrepreneurs tell us their ranks remain small because others fear the risk and time required to start a venture,” Wadhwa said. “But the current economy has given us an opportunity: We could harness the energy of the many workers who are now unemployed, teach them how to be entrepreneurs and provide them with seed financing for their ventures. These workers have nothing to lose, and the economy has a lot to gain.”