Entrepreneurship is lonely.
No matter how powerful your dream of creating a business, the hard truth is that the dream is usually yours alone. Government offers limited help. Banks run away from the risk. As much as our society celebrates the successful entrepreneur, we do little to help the newborn business get on its feet, much less survive. And the prognosis for that new business usually is not good.
The Small Business Administration will tell you that half of all start-ups fail within just five years. To be sure, in our “survival of the fittest” economy, many start-ups should fail. The math simply doesn’t work. But even the best ideas often go begging for financial backing. The typical entrepreneur has maxed out his or her credit cards and raided his or her life savings to invest in the dream. In my dozen years of covering the business beat for CBS News, every entrepreneur I’ve ever encountered (including the most successful) has shared tales of gut-wrenching moments when the cash ran dry and the business teetered on the precipice.
If you’re reading this book, you probably know already how hard it is to find investors out there. The reality is, most new entrepreneurs get start-up money by tapping their own bank accounts, their 401(k) plans, and their parents or friends. There is no central clearinghouse for generous angel investors. In fact, there aren’t many of those angels out there. And banks don’t generally finance start-ups. As Tim points out, 99 percent of new businesses never receive third-party funding.
Despite their high failure rate, new businesses are absolutely critical to our economy. Historically, during the last seven recessions, it’s been entrepreneurs who essentially restarted the economy. But this time the damage is far more severe.
The Federal Reserve of Cleveland recently concluded that “the Great Recession was actually a time of considerable decline in entrepreneurial activity in the United States.” Crunching numbers from the Bureau of Labor Statistics, the Cleveland Fed found that the US economy lost 146,000 employer businesses between 2007 and 2009. That’s especially alarming because employer firms account for 97 percent of private-sector GDP. While some of the decline was due to the closure of existing businesses, “the largest effect came from a decline in new business formation, particularly for businesses with employees.” If the economy is to recover or replace the more than 8 million jobs wiped out in the Great Recession of 2008–2010, we must do everything we can to encourage and rekindle America’s entrepreneurial spirit.
How important is entrepreneurship? A 2010 study by the Kauffman Foundation has some striking numbers. It concluded that net job growth in the US economy occurs only through start-up firms. The study revealed that both on average and for all but seven years between 1977 and 2005, “existing firms are net job destroyers, losing one million jobs net combined per year. By contrast, in their first year new firms add an average of 3 million jobs.” In other words, it’s entrepreneurs who, through their energy and ideas, constantly reinvigorate and grow our economy. We need them. We need you.
That’s why Tim McEneny’s new book is such a valuable tool. Tim has travelled this route himself. He knows the way. Unlocking Your Entrepreneurial Potential will not remove all the obstacles in your path, but it will help you navigate around them. As you enter the tangled forest of entrepreneurship, Tim has provided the road map and a flashlight. Good luck on the journey! With Tim’s book as a guide, you are not alone.
CBS News, Senior Business Correspondent
New York, New York
Unlocking Your Entrepreneurial Potential will be available mid-September, 2011