Page 15 - Business Plans that Work A Guide for Small Business

6 • Business Plans that Work

from these studies is that entrepreneurs need to think big enough. Don’t
create a job, build a business.
This compelling data has led some to conclude that there is a threshold
core of 10 to 15 percent of new companies that will become the winners
in terms of size, job creation, profitability, innovation, and potential for
harvesting (and thereby realize a capital gain). As you plan your business,
think of ways to attain these threshold milestones. By understanding due
diligence, intimate involvement in planning, and the intricacies of your deal,
you will increase your odds of launching and sustaining a new venture.

Timeless Lessons from the Dot-Com Meltdown

Although failure rates seem to be relatively stable, there are instances
where they becomes more severe. Furthermore, ignoring the fundamen-
tal lessons of entrepreneurship can lead to failure even if your venture
achieves many of the threshold rules already discussed. Take the Internet
boom and subsequent bust, for example. The creation rate during the
late nineties was phenomenal, but by 2000, the failure rate exploded.
Through the third quarter of 2002, nearly nine hundred Internet com-
9
panies had shut down or declared bankruptcy. Several lessons can be
learned from the Internet debacle.
1. Entrepreneurship Is Hard Work and Requires Both Creativity and Rigor

During the boom heyday, entrepreneurs had visions of easy money and
quick success. Television, newspapers, and magazines highlighted sto-
ries of instant billionaires. All that was necessary, it seemed, was to be
young, create a concept with the term Internet in it, and go out and seek
start-up capital. The idea didn’t have to be original (how many Internet
toy companies, pet supply companies, electronic gadget companies were
there?), the goal was to spend as much money as possible and hope that
it led to impenetrable market share. Fast growth in Internet traffic led to
public offerings that created instant paper billionaires and funneled more
capital for the company to spend foolishly. Venture capitalist and entre-
preneurship professor Ernie Parizeau said, “When entrepreneurs become
movie stars it’s time to stop investing.”
What we learned (or relearned) is that entrepreneurship isn’t about
market share; it is all about a strong business model. That means profits.

9 Q3 Report: Shutdowns Down Sharply from 2001. www.webmergers.com.