Sometime over the last decade, entrepreneurship became synonymous with technology, venture capital funding and the high-growth “unicorns” for many people.
While Uber, Instagram and Twitter stole the spotlight, and venture capitalists pumped $238 billion into startups over the last five years, entrepreneurship actually declined, according to a study by the Brookings Institution. The study found that the number of businesses that were less than a year old fell by almost half between 1978 and 2011.
The decline in entrepreneurship is being fueled by a steep decrease in the formation of what a recent MIT Technology Review article called “subsistence” businesses — companies that were created with the intention of being small entrepreneurial ventures.
So while a crop of “unicorns” have grown up, the number of new small business startups has declined. This is concerning news because small businesses have been the bedrock of the U.S. economy. A revival of small business entrepreneurship — business founders not looking to land millions in venture funding or build billion-dollar companies but focused on building strong, profitable small businesses — is one of the keys to unlocking new economic growth and stable job gains.
Among all the focus on high-growth startups, we need to rediscover the pride and power in small business entrepreneurship. Here are three things that prospective entrepreneurs should consider when looking to build a new entrepreneurial business.
You don’t have to swing for the fences
The mentality that a startup is not a success until it goes public or is acquired for hundreds of millions of dollars is something that needs to change. While there will always be the entrepreneurs who want to build the next world-changing business, there is something honorable about building a successful small business that employs people, helps support families, becomes a part of the fabric of a local community and provides financial freedom for its founders. Having realistic expectations and attainable goals when founding a small business is admirable, and building a small business from scratch is one of the most satisfying experiences a business person can have.
Not all startups are technology companies
While technology pervades almost all facets of business these days, many other industries also have great entrepreneurial opportunities. Fixating on technology can make entrepreneurs miss out on prime small business opportunities in engineering, professional services, manufacturing or other tried-and-true industries.
Technology might grab the headlines, but it does not mean that non-technology entrepreneurs are building businesses that are inferior. In fact, the increased focus on technology sometimes can leave a little less competition and more opportunities in other industries.
Venture funding is not the only way to build a business
Venture capital funding comes with advantages and disadvantages. It can help a business scale quickly and get a product to market more rapidly. But it also can mask fundamental business problems and put investor pressure on a young CEO and an immature company. Building a small business with your own money or limited funding from a local bank is often a pace of business growth that is perfect for the first-time founder and entrepreneur. With more money you can make more mistakes. But small business entrepreneurs using their own money often make more thoughtful business decisions and scale thoughtfully and logically in lockstep with revenue growth. While some small business entrepreneurs might look longingly at the deep pockets of venture-funded startups, they learn the discipline and business fundamentals of entrepreneurial success in the early days of the founding of a small business on a limited budget.
John Solari is the managing partner of J.A. Solari & Partners. He has 25 years of accounting experience and is also a member of the American Institute of Certified Public Accountants and the Nevada Society of Certified Public Accountants.