The statistics seem grim: more than half of this year’s startup businesses will fold within three years; 75 percent won’t last five years. Despite those foreboding figures, 25 percent of the companies starting out this year will still be serving their clients in five years. Why do some businesses thrive and prosper while others never even bloom? Have the successful entrepreneurs discovered some hidden secret that the others have overlooked … or were they just lucky, a simple case of being in the right place at the right time? Maybe their success is a combination of the two … or is it something more?Perhaps the entrepreneurs who carry their businesses over the five-year hump are more than just lucky. These successful entrepreneurs have found ways to develop their visions into working business models that they then pass on to their dedicated employees who share their vision. By relying on intuition, in-house and outside advisors, and customer comments, these entrepreneurs ensure that their companies will gain the staying power they will need to survive into the next decade. There is no sure-bet strategy, but those who have "made it" share some similar business practices. In a nationwide survey, 100 successful small business owners who have been in operation for three to five years were asked about factors they attribute to their successes. Here are the top 10 questions they said they ask themselves daily to keep their companies on the right track:

1. Do I have a clear vision?
2. Does my management style motivate employees to obtain my vision?
3. Do I have a clear business model that reflects the goals of the company?
4. Do I have an adaptable business strategy that changes with the market?
5. Do I have an effective marketing strategy?
6. Do I know my business’s financial condition?
7. Do I have strong advisors and/or a team of committed employees?
8. Does my company present a consistent level of quality to customers?
9. Am I flexible in adapting to changes in the business environment?
10. Am I constantly educating myself to keep up with business trends?

Respondents say that these questions have helped them become more self-aware. But to achieve success, these questions must lead to answers that will help formulate strategies. Maintaining a successful business — a company with the staying power to find a niche and then capitalize on it — requires action. Successful entrepreneurs start with a vision, a clear idea of what they hope to achieve, then mold that vision into a working business model. They identify their own strengths and weaknesses, then surround themselves with others who will fill the voids. Successful entrepreneurs emphasize the importance of consistency with both clients and employees, and solicit input from these two groups. Most of all, operating a long-lasting business is an ongoing process in an always-changing environment. Successful entrepreneurs learn from their surroundings — employees, customers, advisors and competitors — and they never stop learning. By keeping up with trends, they are able to re-examine and redesign their business plans to anticipate changes in the marketplace. There are no hard and fast rules that will guarantee your company’s success. But, according to many successful entrepreneurs who have enjoyed successful businesses for more than five years, there are some steps that will increase your chances of survival. This survival guide is a compilation of steps that could help your company thrive in the coming millennium. BECOME A VISIONARY A vision is the foundation of your growth. Before you can grow, you must develop a clear vision of your expectations for the company. What is your business model? Where do you want your company to be in five years? What about in 10 years? How large do you want your company to grow, and how will it get there? Do you already see other untapped markets that might complement your current projects? As the company leader, it’s your responsibility to generate these answers. Almost as important as providing yourself with these answers is the challenge of passing them on to your employees. If, for example, you are attending a dinner party and someone asks about your business, can you provide a concrete answer in less than five minutes? Just as importantly, could your employees? As you’ve probably already noticed, it’s not enough to just have a great idea. You have to be able to tell others about it, and then have them share your enthusiasm. Your company will grow from your vision, but only if you develop goals and strategies for your employees to achieve them. Regular meetings may help motivate employees. But, remember, preaching about your expectations most likely won’t work. Instead, teach by example. If you plan to succeed, act like it. If your goal is growth and expansion, start planning for that the day you incorporate. "I never talk about failure," says Harry McKinney. "There is always a plan, and we always want to grow." Harry McKinney and his wife, Karen, founded Pediatric Special Care in 1993. Before starting the business, he looked for potential competitors providing in-home care to pediatric patients. Finding none, he realized that the business he envisioned would corner the market in this unrecognized specialty. And he planned accordingly. "From the beginning, we assumed that we would grow, and we prepared for it," says Harry. "When we started out, we just had one case and five nurses. But I started writing computer programs that would enable us to schedule 100 nurses if we had them." At first, his wife laughed at the programs because she could do the entire schedule by hand on one sheet of paper. "As time went on, and we began to add employees and cases, our software programs became extremely useful," says Harry. "They enabled us to not be overwhelmed." As anticipated, the company has grown and now employs 70 people. MANAGE AND MOTIVATE Are you a true leader? Does your management style motivate your employees to embrace your vision? Do you solicit their input? Do you encourage forward-thinking among your employees? Do you provide incentives for employees to grow within your organization? As the owner of the company, you must do more than merely pass your vision down to employees. Although it is important that they understand your goals, it is even more crucial that they share your desire to achieve those goals. As the leader, it is up to you to motivate them to do so. Don’t wait until employees have settled into a routine, start the motivation process during initial interviews. Look for people with a commitment to succeed, then make them loyal members of your team. Hire smart, aggressive employees who want to make your business work. For Hank Kashiwa, co-founder of Volant Inc., a ski manufacturer in Wheat Ridge, Colo., that meant recruiting others who, like himself, were former professional skiers. These ski pros were able to transfer their credibility to Kashiwa’s newly designed skis. David Currier, a former U.S. Olympic ski team member and 1975 professional world champion, was among Volant’s first group of employees. "We attract very capable, energetic and well-known industry marketing specialists, David Currier being the lead on that," says Kashiwa. "Our technical sales reps are the absolute finest fleet of gentlemen of that caliber in the business. They are professional and energetic. The number one criteria is that they are good with people." Currier, vice president of sales and marketing, agrees that Volant attracts a highly specialized sales force. "We have the best management group in the business in terms of the people who are involved in sales, marketing and product management," he says. "We are all well tuned to the ski market." Regardless of your business, it is imperative to find employees who will interact well with your customers. Kashiwa realized that his customers liked dealing with technical reps who were very knowledgeable about the ski industry, so he hired accordingly. Jody Wright, owner of Motherwear, a direct mail catalog of clothing for nursing mothers, discovered that her customers preferred dealing with other women who had been nursing mothers themselves and could relate to their concerns. Wright hires mostly women because her customers appreciate that Motherwear employees are often able to offer advice based on their own experiences. By accommodating customer preferences, Motherwear has won return business from these women during subsequent pregnancies. Attracting good employees is only half the battle. Once they’ve joined your team, you need to keep them motivated. Make them feel that they are directly responsible for the company’s success. Martin Singer, founder of Fanfare Enterprises Inc., which produces the music equipment mail order catalog The Music Stand, holds weekly meetings to make sure his 75 employees feel they have a voice in the company. "We believe that everyone has something to say," says Singer, whose company has been part of the direct mail industry for 19 years, and last year brought in $20 million. "We share industry articles with the employees. A lot of times the factory workers aren’t given credit for knowing where they fit into the industry, so we try to share that information with them." It is important to let the employees share in the company’s success. If weekly meetings aren’t feasible, find another way for employees to reap the benefits of their hard work. John Wright, founder of Viewpoint DataLabs International, a computer animation service based in Orem, Utah, implemented a profit-sharing program to reward employees. Viewpoint’s first few years were lean, and more than once the young company almost didn’t pull through. The turning point came when Wright sold a football image to NBC that was used for the phenomenally successful Bud Bowl commercials. And business has been booming ever since. In 1995, the company had revenues of $6 million, and Wright projects $10 million in revenues this year. Rather than pocketing the profits, Wright decided to reward loyal employees who stayed with him during the difficult years. He distributed 10 percent of his stock among management, then set up another 20 percent in employee stock options. "It was shared so that everyone felt like they were growing with Viewpoint," he says. "It became a company where everyone felt that it was because of their hard work that Viewpoint was succeeding." BUILD A BUSINESS MODEL REFLECTING THE COMPANY’S GOALS Step back and examine your business model. The model you have chosen should complement the goals you have set for your company. Do you intend to be a manufacturer, manufacturer’s representative, product developer, service provider or retail merchant? Your strengths and weaknesses, industry, product line and level of technical expertise will all play a part in determining what business model you choose. Nathaniel Weiss says he pondered many of these questions when trying to decide on a business model for Lyrrus Inc., his Philadelphia-based music technology company. He knew that the company would be driven by a technology that enables guitarists to learn how to play, brush-up on skills or compose via a computer connection. Before he could introduce the device, he needed the capital to build a prototype. He successfully recruited investors to back him, but after a while, they began asking about the company’s business model. [See story on pg. 45] "A lot of my investors would ask me, ‘What business are we in?’" he recalls. He had to decide if he wanted to manufacture the product, distribute parts or distribute the finished product. After considering all of these options, Weiss determined that his strengths laid in research and development, and pointed the company in that direction. He decided not to get involved with marketing and distribution. "There are so many different ways to run a business, and there are so many different business models," he says. "The model defines what we focus on, and it all came back to what I wanted to do with the business from the start." Once you develop your business model, don’t think it is set in stone. Be prepared to modify your plan as the market demands. Volant’s founder, Kashiwa, originally planned to license their new ski technology to other companies for sale and distribution. But, when those companies didn’t bite, he changed direction. "We decided that if they didn’t want it, we would do it ourselves." That directional change forced Kashiwa to examine how he wanted Volant to be perceived in the marketplace. He decided to capitalize on the company’s newness. "One reason we are successful is because of the size and the state of our business, we had the luxury of being the new kid on the block," he says. "We see ourselves as a young, energetic company, sort of bucking the trend." Unlike the competition’s skis that are made of fiberglass, carbon composites and aluminum, Volant skis are made of stainless steel caps that cover the ski tops and wrap down the sides. "The innovation," says Kashiwa, "started in 1989 — a new ski material, a new ski design and a new look." Along that same line, Volant decided to take a different approach to sales and distribution than other ski manufacturers — selective distribution. "We have not been over-distributed," says Kashiwa. "The dealer can look at us and see that we are a new company that is being sensitive to the needs of its dealers." By doing that, and adopting that philosophy around the world, Volant protects the dealer’s territory. "Therefore, the dealer never has to worry about discounting across the street and having to give up margin on the product," he says. "In addition to having the highest brand loyalty the last two years, we’ve also had the highest sell through and dealer margin at retail. Last year, it was 78 percent sell through and 42 percent margin at retail; higher than any of the other companies." If Kashiwa hadn’t changed the original business model, Volant would not bring in the $12 to $13 million he expects next year. ADAPTABLE BUSINESS STRATEGIES Does your business strategy change with the market? Do you listen to your customers, then modify your product to meet their needs? Are you constantly examining the market looking for ways you can edge out your competitors? Do you see an untapped market that might be able to use your product? All entrepreneurs start out with an idea of how they want to conduct business. They sit down, formulate an annual budget, then compile their yearly projections. That’s not enough. The projection is just that — a hypothesized expectation. It’s not concrete, and it’s not a guarantee of how your business will prosper — or even if it will. In order for your business strategy to succeed, you need to follow the market. You must be flexible and willing to change. From the way you price your product to the way you bring on new employees, advisors and investors, to the state of the economy, these factors should guide your business strategy. Rather than merely keeping up with the competition, be a step ahead. In Volant’s case, that meant changing the market. "You can’t go with what the trend is," Kashiwa says, "You have to go outside it." Volant’s competitors were producing skis identical in almost every aspect other than brand. "If you take the names off their skis and line them up against a wall, it is really difficult to tell which one is made by which manufacturer," says Kashiwa. "You can take our name off the ski and pick it out a mile away from that wall." Kashiwa moved his company to the next level by bringing change to a mature market. But what about those products and services that don’t really fit into an established market? Maybe the product or service meets the needs of a specific customer. Look at the larger picture. A few minor adjustments and you may discover new or untapped markets. Dran May-Reese, founder of Monrovia, Calif.-based Trevco, found an open market, earthquake safety products, and tapped into it by developing Quake Hold!, an adhesive that secures fragile items including crystal vases, porcelain figurines and other collectibles, to display tables. But, she wondered, why should distribution be limited to earthquake-prone areas? After all, even though earthquakes rarely strike the East coast, those residents still have a need to secure valuables. She renamed the product Collectors Hold! and Museum Hold! By changing the perceived use of the product, she was able to market her product nationwide. "We have items that are for securing [in case of earthquakes]," she says. "But they also have cross-over appeal to the general consumer nationwide." Both Kashiwa and May-Reese entered markets with clear ideas of how to present their products. Both also realized that by altering their original expectations, they could force change within an industry, then capitalize on that change. Re-examine your product or service. Could your marketing approach be off, or is there a better way to sell it? Could you modify it, then present it to a new audience? Little changes can make a big difference. KEEPING ON TOP OF THE MARKET Who are your customers? Are you providing them with a product or service that they need? And if their needs change, how will you know? Pediatric Special Care is succeeding today because it has tapped into a niche market that was wide open. In the beginning, McKinney says his wife was reluctant to start a business — until she started working with a home-care company and recognized that they were not providing adequate care for their pediatric cases. "I saw my opportunity," says McKinney. Pediatric Special Care provides services almost identical as those provided by other home-care companies. But, unlike the others, Pediatric Special Care employees are specially trained to deal with pediatric patients. Although the concept is simple, McKinney says no one else was doing it — not in Michigan anyway. "We recognized a market that previously was unrecognized," says McKinney. "We were at the beginning of a trend." After the in-home-care business stabilized, McKinney looked for other complementary markets. In 1993, he added pediatric in-home medical equipment sales to the Pediatric Special Care’s list of services. By adding this service, he increased the company’s chances of winning hospital referrals. "A child has to be very sick in order to get in-home nursing," explains McKinney. "Usually the child has a life-threatening condition, so the hospital’s discharge planners recommend to the parent a nursing agency and/or a medical-equipment company." By offering both services, he increased the company’s chances of securing the referral. McKinney plans to add a third service that would prove beneficial to both his business and his patients — home infusion therapy. Like McKinney, John Ingersoll, co-founder of High Cascade Snowboard Camp Inc., in Bend, Ore., saw a need, then moved in to fill it. When snowboarding started gaining popularity, Ingersoll, who at the time was working at a local ski resort, noticed that a new kids’ snowboarding camp was experiencing logistical problems in getting the campers up the hill. "I was base operations manager for National Alpine Ski camp for five years, so I knew how things worked on the hill," he says. He felt he could take his experience in the skiing industry and apply it to a snowboarding camp and surpass the competition. Ingersoll began with the idea of a summer snowboarding camp for kids and ran an ad with a toll-free phone number in Snowboarder magazine. Recalls Ingersoll, "I came home the [first night the ad ran] and had 40 calls, most of them wanting brochures. I realized that first month that we were going to do really well because I got so many calls. I could tell people liked the idea of summer snowboarding. "Our first year was the second year for our competitors, and we just overwhelmed them because we had a better game plan," he says. "I saw where my competitors were failing and filled the need." KNOW YOUR FINANCES Understanding your company’s finances means doing more than just monitoring your cash flow. One of the biggest problems startup companies face is running out of cash. The projections may be based upon last year’s sales, but since the ’90s are times of rapid change, emerging technology makes business harder to project. To keep on top of your business, analyze your financials every month. Determine which products and services are making money, which are not, which cost the most money to make and which provide the least amount of margin. Watch your payroll. Keep track of inventory. Scrutinize your monthly reports. Be aware of your cash flow at all times. A business owner should never suddenly realize that there’s no money in the bank. You should be able to see troubles four to six months in advance so you can adapt your strategy or look for financing before you really need it. Banks and venture capitalists won’t look favorably upon a business owner who shows up at their door saying that he/she needs money that day or the business will fold. Instead, if you realize that you are heading for financial troubles, go to the lending agency a year before the problems hit. Tell them that, because of changes in the market, you will need "X" amount of money in six months. And, assuming they agree to the loan, provide them with your revised projections. After all, you can’t have a business if you don’t have any money. Michael Rubin, CEO of KPR Sports International, King of Prussia, Pa., says businesses fold when they don’t keep on top of their financials. [Entrepreneurial Edge, Spring, 1996]. "I love when these big public companies say, ‘Oh, we have to take a $26 million markdown on inventory,’" says the 23-year-old owner of the $50 million player in the athletic shoe business. "Well, where was someone to figure out that inventory was getting bad before it was $26 million?" Rubin says, to know his business he needs to know the numbers. "We take losses on merchandise but we figured out one day last year, if we’ve got $2 million in bad inventory, let’s sell it for $1.5 million. We can take that money and put the working capital back into the business, rather than letting it sit on the shelf. I analyze and scrutinize our monthly financials. I track possible problems before they become real problems. STRONG ADVISORS Surround yourself with loyal, competent advisors and/or a strong employee team. Acknowledge your strengths, then locate others who complement them. Identify your weaknesses, then find people who can compensate. Advisors will help you face hard decisions, as well as provide advice, input and encouragement. They will give you the objective perspective you need to continue to grow and expand. Establish regularly scheduled meetings to update your advisors on your company’s progress. These meetings will also provide you with an opportunity to elicit feedback, guidance and support. Whether you hire these people or form the relationships outside the company, make sure you have somewhere to turn when you need advice. Even before the founding of Lyrrus, Nathaniel Weiss realized the importance of relying on others. His first advisor was the college professor who encouraged him to market his senior project, the music technology that eventually fueled his company. That same professor also guided him in locating sources of funding. Those investors have, five years later, become his advisors. He says he cultivated the relationship between himself and the investor/advisors by issuing regular newsletters on the progress of the company. By doing this, he says, he felt comfortable picking up the phone to ask them questions, relying on their experience, business acumen and gut instinct. On the other hand, rather than looking outside her company for advice, Jody Wright says she relies on Motherwear employees to help iron out rough spots that arise. For example, the company is currently undergoing a computer conversion. To deal with problems inherent with such a conversion, Wright pulled together a team of current employees. "By setting up a team of people who work together, we have people who look at it from a lot of different perspectives and bring a lot of different fields to it," she says. "The result is that you get a better decision than if you’ve got just one person there to solve the problem." BE CONSISTENT It is imperative to provide customers with the highest quality of service or product that you can. If you try to get away with providing subquality work or products, you will be discovered, sabotaging your company’s chances for longevity. Businesses survive when owners provide customers with quality service. Those are the companies that customers come back to. If the quality isn’t there, neither are the customers. Regularly ask yourself if your products and services are consistent. To go a step further, owners who care about quality service care about in-house quality, as well. That means hiring the right people and then treating them well. "If you’re a company that wants to have staying power, you have to be consistent," says Joanne Harmelin, founder of the media buying company, Harmelin & Associates in Bala Cynwyd, Pa. "Clients don’t stay with companies that are up and down in terms of [providing] service to them." Employee turnover is one way to gauge consistency. Chances are good that if you have high turnover, your clients are receiving inconsistent service. Harmelin says that achieving consistency begins with hiring dedicated, committed employees, then treating them well so they don’t want to leave. Customers can tell when employees are satisfied with their jobs — and when they’re not. "When a client calls to speak [to one of our associates], they’re going to know that the employee is happy in their job," explains Harmelin. "The employee is going to want to do everything to make sure that the client is happy because they’re going to want to keep their job. The client, in turn, is going to want to stay because he’s been getting consistent service from the people he’s been dealing with for years." Consistency can’t stop there. If you have investors in your business, consistency must be extended to them as well. By keeping investors updated on Lyrrus’ financial standing, Weiss was able to keep them involved with the company. "The most important thing is to start and maintain consistent communication with investors and potential investors," says Weiss. "The first three years of my business, I would send out a monthly investor newsletter. It described all the good and bad things that were happening with the business. It showed these people that we always did what we set out to do." Since his investors knew what to expect from Weiss, they constantly returned to reinvest. "If I wanted to raise capital from them, and they said no, I would still keep them involved and interested in the company," says Weiss. "Eventually, they would invest money. Most came back for a second level of investing. I’ve had some who have invested three and four times." Quality and consistency go hand-in-hand. When the two work together, you have a finely tuned machine. FLEXIBILITY Flexibility means more than just listening. You need to watch the market and solicit input from customers and employees. But that’s not enough. You need to take this information, then apply it to your business. Flexibility means realizing that you don’t have all the answers. It means learning how to delegate authority to those employees you trusted enough to hire. And it means analyzing your financials so you can make the difficult decisions that will drive your company forward. No matter how good a plan or system is today, unless you keep updating it, it will become old very fast. The market is changing constantly. To succeed, your business must change with it. Be open to new ideas and different ways of doing things. Keep up with the trends in the marketplace. By listening to his customers, Weiss realized that he needed to rethink his product’s packaging. Customers said they would prefer purchasing his music software in one bundled package, rather than individually as they were previously sold. "There comes an important time when you have to start listening to the market," notes Weiss. "If you’re getting feedback that counters what you originally thought, you’ve got adapt to that." NEVER STOP LEARNING Some successful entrepreneurs have earned degrees from prestigious business schools; others have learned how to succeed from the school of hard knocks. Almost everyone learns from those around them. Regardless of your background, don’t be fooled into thinking that just because you’re not sitting in a classroom that you’re not being graded. The success of your company depends upon your ability to gain knowledge from your every experience. Jody Wright advises other entrepreneurs to remain humble. "There is always more to learn from other people, particularly the people who work for you," Motherwear’s owner says. "I’ve learned a lot from our employees and the sales people we work with. You have to learn from other people. And if you’re not humble, you close yourself off from learning the things you need to know." McKinney monitors the health-care market by joining associations that publish journals. He is currently a member of the National Association of Medical Equipment Services, the Michigan Home Medical Equipment Association, the National Home Care Association and the Michigan Nurses’ Association. To keep in tune to the direct mail business, Singer subscribes to the Direct Marketing Association’s journal. Weiss religiously reads Forbes. Ingersoll reads ski and snowboarding magazines so he can spot trends before his competitors. Rubin says he reads trade magazines that let him know where athletic apparel trends are heading. Media buyer Joanne Harmelin says she reads anything she can get her hands on. Read every business journal you can, stay alert for interesting, improvement seminars for you and your employees to attend. To succeed, you must continually improve and expand your product, your business and especially, your employees and yourself. HERE TODAY … AND TOMORROW Although there are no guarantees on keeping your business alive, there are some steps that can promote your company’s staying power. Become a visionary. Motivate employees to share your vision. Build a strong business model. Create an adaptable business strategy. Develop an effective marketing strategy. Know your finances. Surround yourself with knowledgeable advisors. Stay consistent and flexible. And, most important, never stop learning. About the Writer: Marianne Detwiler is senior editor for Entrepreneurial Edge magazine. This article originally appeared in the Summer 1996 issue of Entrepreneurial Edge.

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