By Elizabeth Exline
Entrepreneurship is one of those words that can inspire an adrenaline rush of both terror and excitement. There's the promise of being your own boss, doing what you love for a living and, to some extent, finding validation that your business idea is in fact a good one.
But there's also the rather grim data from the U.S. Bureau of Labor Statistics: About 20% of small businesses fail within the first year, and only about half make it to five years.
According to Rose Lorenzo, PhD, the answer essentially boils down to preparation (also known as a solid business plan) and ongoing education.
“Most entrepreneurs start a business and they keep doing the same thing every day, and they don’t ever grow,” Dr. Lorenzo says. “You can’t be sustainable if that’s what you’re doing, because everyone out there is trying to take over your market position.”
Dr. Lorenzo would know. She wrote a book on entrepreneurship, is a serial entrepreneur herself and is the force behind Idea 2 Open Academy, an online school dedicated to entrepreneurship training. So, when it comes to achieving success as a small-business owner, she has a few informed suggestions.
1. Adopt an entrepreneur mindset. Wanna know the opposite of an entrepreneur? A corporate-preneur. That, Dr. Lorenzo explains, is someone who tries to start his or her own business with the same habits and assumptions that brought success in the corporate world.
Spoiler alert: Those habits and assumptions don’t translate.
“As an entrepreneur, you have to do everything, you have to think of everything and you have to pay for everything,” she says. “As a corporate bigwig, you may have great ideas, but someone else foots the bill.”
The other part of this equation is your personality. You have to ask yourself if you have the tenacity to see your idea through to success. Do you have the stomach for the highs and the lows, the hiring and the firing? No one, after all, said it would be easy.
2. Do your (market) research. “This is so important because the competition is great,” Dr. Lorenzo points out. “You need to see what’s out there in your industry. You need to find a way to make yourself different so that you can get that client to come to you — and stay.”
By way of example, Dr. Lorenzo cites Hackathon Jr., which teaches kids how to use technology to solve real-world problems. She started the organization with three of her University of Phoenix doctoral studies classmates to help children learn emotional intelligence and computational problem solving. Coding is part of that, but there were already coding camps and schools aplenty in the marketplace. Hackathon Jr.’s edge, she says, is in that interpersonal component.
Other businesses have to take a similar approach to research. They have to think globally, not just locally. (Thanks, internet!) And they have to be ready to compete with the online giants and big-box stores. So, in essence, being different is good.
3. Understand your customer and niche. “If you market to everybody, you get nobody,” Dr. Lorenzo quips. Make sure your customers are front of mind when developing a marketing plan and a brand (see below!).
Points to consider include your target customers' age range, gender and income level as well as where else they shop.
The more specific you are about your customers, the more effective your marketing and business will be.
4. Develop a plan. Dr. Lorenzo concedes that not everyone agrees that a business plan is necessary, but she compares it to GPS. Without a business plan, she explains, it’s like asking someone to meet you in Chicago without offering an address. You’ll take your business in one direction for a while and then, when you hit a roadblock, course-correct in another direction. But all those changes cost money.
While a business plan is important, it’s not the Ten Commandments. Consider it a living document to be revisited and strategically updated as your business evolves, Dr. Lorenzo advises.
5. Build a brand, not just a company. More than ever, branding matters. Yes, this means you should have a logo and consistent visuals across all of your marketing materials. But it also means you have to have a compelling and crystal mission.
Dr. Lorenzo says: “A brand has a mission. It has a vision. It says, ‘This is what my company stands for. This is how we’re going to serve the community.’”
People are increasingly concerned with the “give-back” right now, she adds, so make sure you know the ways in which your business will enhance and give back to its community.
Dr. Lorenzo has lived more than one business life. She got her start selling t-shirts in Chicago, went on to open a financial consulting firm in North Carolina and has launched both Hackathon Jr. and Idea 2 Open Academy over the course of her career. She has been undoubtedly successful. And, as any entrepreneur will tell you, every success is built upon multiple failures.
While the potential pitfalls of opening a small business are many and varied, Dr. Lorenzo says most fall into one of two categories: “The mistakes that I’ve made and the mistakes that clients have made are trying to take shortcuts and overpaying employees.”
She chalks up the second error to empathy. Working closely with employees to launch a business creates a familial atmosphere that makes owners more sympathetic to the financial goals and shortfalls of their staff. If you don’t have a solid business plan (or at least a solid grasp of the revenue coming in and going out), it’s all too easy to issue raises that aren’t justified by increased revenue or output.
One other piece of advice: Keep a good lawyer and a good accountant on speed dial. A good lawyer will help you with contracts, and a good accountant will make sure you understand your financials, Dr. Lorenzo says.
While entrepreneurship is risky, Dr. Lorenzo’s Idea 2 Open Academy is designed to help tilt the scales in favor of success. Once it launches, the online academy will feature curriculum, video instruction and coaching from both Dr. Lorenzo and outside experts on subjects that range from how to define your business idea to which tax return to file.
Creating an academy was a natural enterprise for Dr. Lorenzo, who is an accomplished student herself. (She earned her bachelor’s degree, master’s degree and doctorate from University of Phoenix.) Education, after all, is essentially research, and research can spell the difference between thriving as a business and shuttering.
Beyond that, Dr. Lorenzo recommends ignoring advice or maxims that can’t be verified (what worked for your cousin Bobby won’t necessarily apply to you) and stay focused on your own success.
“There’s a lot of risk involved [with starting a small business], but there’s a lot of freedom to do something you absolutely love,” she says.
Just don’t skip the business plan.
See what owning your own business really looks like with two University of Phoenix alumni who became small-business owners.
Need to brush up on your marketing skills before hanging your shingle? Check out our professional development courses for digital marketing!
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