How to start a business … and be successful

Starting a business in the state of Ohio is a relatively simple process:

• Have a unique and/or patented idea for a marketable product or service
• Decide the structure of the business (LLC, S-Corp, Partnership, Sole Proprietorship) with the help of a professional, such as those available at a reduced-charge through the UA New Business Legal Clinic
• Pick a name and make sure it is not in use by searching the Ohio Secretary of State’s site, U.S. trademark database and Internet domain name listing
• File the appropriate paperwork and pay the assigned state filing fee (generally $125)
• Get ready to fail

The last point is less a joke than reality check for would-be entrepreneurs. Many don’t realize the sacrifices they will need to make to start a company. Nor do they realize that the risk of failure (as high as 80 percent by some estimates) means that they, personally, are unlikely to achieve success with even the best business idea. As a resource for entrepreneurs, I spend a substantial amount of my time trying to talk people out of starting their own businesses.

To start a successful business, one must have two important skills: the ability to innovate and the ability to raise money. By my definition, innovation is the ability to turn an idea into money. Many economic development professionals refer to this process as crossing the “Valley of Death.” In fact, it often takes a shocking amount of money to commercialize an idea, frequently $1 million to prototype and develop a commercial product. This means that entrepreneurs often must raise money without having a product to sell.

This brings me to the second skill. Entrepreneurship is raising money. It is getting people to invest in you, without any real assurance that your innovation will work or that your company model will succeed.

Investment generally comes from the 3 F’s:

• Family
• Friends
• Fools

Most entrepreneurs wind up selling their cars, mortgaging their houses, taking out substantial loans, maxing out credit cards and begging friends for money before they are even close to being ready to approach the investment community (the fools at the bottom of my list). I call those that complete strangers would be willing to invest in “fundable entrepreneurs.” To be fundable, you must have skills in innovation and business leadership, but you also must be willing to work with investors, to compromise, to accept advice and to even give up part of your business.

So, how can you acquire those critical skills for success? If you must start a business, how can you increase your chances of landing in the 20 percent that don’t fail? As with most skills, experience helps. Think about engaging in entrepreneurial activities, starting clubs at work or on-campus, commercializing an original idea through your current place of employment or enrolling in public speaking and small business ownership classes. Unfortunately, most universities don’t teach practical entrepreneurship particularly well, so you might need to talk to your university or community college about putting classes in place that will teach the practical skills necessary for business creation.

Welcome to University ED

The concepts of innovation, collaboration, growth and leadership are central to The University of Akron’s mission as an institution of higher education, but they are just as important to UA’s relationship to the community and the region, tackling local challenges, driving economic advancement and promoting the growth of technologies, businesses and industries that will shape the future of Akron and of Ohio.

Economic development opens the door for existing businesses and emerging startups to create new jobs and new industries through engagement with their communities. This blog’s mission is to provide information, spark discussion and offer a forum for addressing the most relevant and significant issues in today’s economic development landscape.

With weekly installments, UA news updates and special columns from expert sources, University Economic Development will keep you apprised of progress in Northeast Ohio’s wealth creation mission and how you can learn and benefit from engagement with The University of Akron and the greater Akron community.