The millennial generation is quite a unique generation for a multitude of reasons. Unlike their predecessor, Generation X, who focused on landing a good job and retiring from the same company. Millennials are all too willing to give up their day jobs in the search for start-up opportunities.
Starting, building, and running your own business is no simple task. The dream of being your own boss and running your own business is what gets you motivated to make it happen, but only a fraction of businesses started each year even make it to the five-year mark. Very few of those businesses that make it are millennial entrepreneurs.
There are the few millennial startups, such as Facebook, Snapchat, Airbnb, and the like, which were wildly successful, but there are many more companies founded by millennials that fail due to the same basic mistakes that create failure for most new businesses.
Every new business owner will put money toward start-up costs such as marketing, sales, and materials. If you forego learning the best way to manage your business's finances, you are much less likely to make smart financial decisions.
Financial Advisor Winnie Sun and Founding Partner of Sun Group Wealth Partners, says Millennial entrepreneurs continue to commit the same repeatedly, but knows how to avoid them in the future.
1. Not Working with A Financial Expert
According to a recent study, incompetence, as it relates to managing finances, taxes, pricing, and planning, was the cause for 46 percent business failure. One of the most important ideas to take into consideration is the value of hiring an expert to manage the company's cash flow properly.
2. Living the lifestyle when you can't afford 'the lifestyle'
Since 2008, nationwide student loan debt has jumped 84 percent with 40 million Americans (most Millennials) with student loans. This debt sidelines many millennials, causing them to be saddled with paying off debt instead of investing in their business.
3. Failure to Deliver Real Value
42 percent of businesses fail because there is no market need for the product or service.
4. Not Having a Business Plan
Many Millennial entrepreneurs do not outline their goals and details on how to achieve those goals when it is the GPS for your business. The need for a plan becomes obvious as soon as you recognize that you don't know how much money you need, and when you need it, without laying out projected sales, costs, expenses, and timing of payments.
5. Not Having a Cash Flow Cushion
According to a U.S. Bank study, a whopping 82 percent of businesses that fail do so because of cash flow problems. What are your monetary needs in the next 12 months, in the next 24 to 36 months? It is important to have a cushion if your profit projections do not materialize or if there is an emergency. Remember that cash flow doesn't just mean the amounts of money that are coming in and out: you have to take timing into account, too.
6. Not Starting (Or Raising) With Enough Money
77 percent of small businesses rely on personal savings for their initial funds. 29 percent failed because they ran out of cash.
7. Quitting Their Day Job
There are good reasons why aspiring entrepreneurs should stick with traditional jobs (see the list above) while they grow their own ideas rather than take a complete leap of faith by quitting their day jobs. In reality, nearly 15 percent of small business owners work a second job while starting up, something many young entrepreneurs don't realize.
8. Not Being Lean Enough
Lattes, happy hour, open concept office space; it all adds up. Businesses need to focus on running lean for years, not days. Utilize Facebook, Twitter, Instagram and LinkedIn to promote your startup, market your business 24/7 without a large marketing budget.
9. Failure to Rally Up A Tribe
23 percent failed because they didn't have the right team running the business. Your employee tribe and culture is crucial for long-term success.
10. Weakness Begins Up Top
Most businesses lack strategic and effective leadership. Without real experience in the business world, most newcomers to the entrepreneurial world struggle with the overwhelming amount of demands placed on them. When problems do arise, which they often do, navigating becomes an impossible task. That's why businesses, big or small, need to build up their board of seasoned advisors, and founders need to find trusted mentors if they're serious about longevity.
Even will the failure rate what it is, millennials have some great things going for them, such as drive, spirit, and innovation, which are all things that can help contribute to a successful startup.
Every business owner will make mistakes and learn from those mistakes, but doing a little research and planning can save you a lot of headache as a new business owner.