A pizza parlor, an auto repair shop, a kitchen and bath remodeling store and a coffee shop. What do these businesses have in common? They’re all near my suburban home and owned by independent entrepreneurs. These spunky businesses survived the market reversal and continue to make a decent living alongside bigger national competitors.
How do they do it? They’ve beaten the odds and pursued what they know and love while applying grit, drive, tenacity and a few core business practices contributing to their success.
Take this small-business thought and add a fresh wave of market optimism in the marine industry. With more than one-third of dealers now out of business, where are the employees whose jobs were swept away by company closings? Several have harnessed the drive and grit mentioned above and reconstituted themselves as energetic entrepreneurs running their own small boating-related businesses. They’ve taken their love of the water and turned it into a livelihood.
Will they survive? They have a good shot at making it, but not without risk and engaging the right formula for success. Whether their future proves lucky or lame, let’s take a look at what will help these newly minted marine moguls live the dream and stay in it for the long haul.
The numbers from the Small Business Administration tell a somber tale. Two-thirds of new businesses survive for at least two years, but only 44 percent stay alive for at least four years. Debate rages about what are the most common mistakes that cause entrepreneurs to sink or swim. According to AllBusiness.com, business blunders that shut down the dream include growing too fast, taking on too much debt, lacking reserve funding, setting up shop in a non-competitive location, weak accounting controls, poor customer service, incompetent employees and management, and inadequate business and marketing plans.
The study determined that “90 percent of small businesses that fail do so because of a lack of skills and knowledge on the part of the owner.” Whoa! Your dream won’t gain steam if you don’t know what you’re doing and don’t have years of experience doing it. On the other hand, 90 percent of those small companies still in business after five years had help from the government’s Small Business Development Center or other expert assistance.
Fortified with the facts behind entrepreneurial fortunes and failures, you might be curious, like me, about what gives small-business owners the gumption to give it a go. Independent boating and marine establishments are hanging out small-business shingles to provide watercraft service and repair, boat parts, water-sports equipment and tourism services. Where does their risk-taking energy come from?
On Feb. 1, Inc. magazine explored this question in an intriguing article by Leigh Buchanan that was titled “How Great Entrepreneurs Think.” That got my attention; let’s unwrap the how and why right now.
Here’s the dirt. Saras Sarasvathy, a professor at the University of Virginia’s Darden School of Business, wanted to find out how smart entrepreneurs think and share her findings with other rising business wannabes. She looked at several small-business successes and failures whose founders had at least 15 years of entrepreneurial experience, had started multiple companies and taken at least one public.
Of the 45 subjects she interviewed, her conclusions included comments from 27 of them. The companies, all run by their founders, covered industries reaching from toys to railroads and represented annual revenue ranging from $200 million to $6.5 billion. What did Sarasvathy’s study uncover? Buckle up, business buddies: We’re about to ride through a range of fascinating findings.
Sarasvathy determined that expert entrepreneurs thrive on what she referred to as effectual reasoning. This means these entrepreneurs are incredible improvisers who don’t start out with a concrete goal, but instead use their personal skills, resources and creativity to develop goals on the fly. On the opposite side of the scale, successful corporate executives use causal reasoning. Causal reasoning involves setting a goal and meticulously finding the best way to accomplish it.
Here’s another interesting twist: rookie company founders appear to be all over the effectual-to-causal board. Those who grew up around family businesses are more likely to be effectual thinkers, and those with MBAs lean more toward causal reasoning. Makes sense, doesn’t it? If you grow up around entrepreneurial, effectual thinking it could easily become second nature to think this way yourself.
How did effectual reasoning manifest itself with the expert entrepreneurs? Sarasvathy’s study found that four major characteristics were prevalent. As we walk through each of these, consider small boating and marine businesses that you have seen execute these practices.
• Do the doable, then push it: Take a great idea, do as little market research and planning as possible and push the idea into reality … then push it further. Impatience to get to market, perfection avoidance and embracing an inability to predict the future are part of the plan. This was summarized as “Ready, fire, aim.” Sounds right.
• Woo partners first: Pick partners and package yourself early before you have to spend a lot of money, keeping in mind that your most influential partners are first customers. Entrepreneurs used customers to help with product design, sales, finding suppliers and often as their best investors. They lived the customer experience to make the product better. Primal, yet powerful.
• Sweat competitors later: Corporate, causal thinkers research and map out the competitive landscape, but expert small-business founders analyze what can succeed before worrying about the competition. They see themselves not in the thick of the market, but on the verge of creating a new market — “like farmers planting a seed and nurturing it.” They care about the patch they’re creating and growing; competition is secondary.
• Don’t limit yourself: In brief, think big. Entrepreneurs express confidence in their ability to recognize and respond to developing opportunities. They might be cocky, but they don’t let limited thinking restrict their potential for success. Their corporate counterparts might need to use more constrained projections because they answer to a higher power. This also helps us understand why entrepreneurs are seen as eternal optimists.
Now come back to today’s world of budding small-business owners in the marine industry. Do you know any fresh, independent shopkeepers bringing products and services to the marine market? I’ll bet you do. In fact, I’ll wager that you have at least one industry friend who took the leap. Despite the choppy waters of small-business financial risk, employee drama and market challenge, all of these entrepreneurs and effectual thinkers jumped in.
When you drive by your local pizza place or nearby boat repair shop, consider the independent owners and risk takers running them who might have turned a previous job loss into a new option for customers such as you and me. Give them a try. This is how entrepreneurial energy is generating fresh market power — a force contributing to the market recovery. N
This article originally appeared in the July 2011 issue.