When could this startup bubble burst? Who will be affected?

Start-up Concept

By Dr David Demetrius

In another blog (“Effective Business Plans”) I bemoan the fact that so many ventures with very promising offerings never get the investment they deserve due to the appallingly drafted business plans that accompany the invitation to invest. I can’t count the number of plans that I have thrown in the bin before I’ve even turned to page two!

But that raises another thought in my mind. Why am I getting so many plans anyway? Why has the number of start-ups increased so much? I may be wrong, but I am convinced that more and more people are moving their career aspirations towards an “I want to be my own boss and do my own thing” philosophy. If I am right, is this potentially a start-up bubble that could burst at any moment?

Some of the reasons for the move towards starting one’s own business are no doubt economic. If there isn’t enough opportunity within the standard career path as an employee of a larger organisation, it is no doubt attractive to decide to start something up yourself. An alternative is to get business cards printed with ‘Consultant’ as your job title, as that is definitely better than ‘Unemployed’. Of course, most people who might hire you will normally see through this subterfuge.

In addition, the majority of today’s youth, as they embark on life after they complete their studies, no longer ask themselves “What do I want to choose as a career for the rest of my life?” but instead ask “What would I like to do for the next year or so? Towards the end of that period, I’ll plan the following couple of years.” This attitude, although perhaps personally satisfying for the individual, is not attractive to employers, who are normally looking for long-term commitment.

So can anyone launch a start-up successfully? My answer to this is an emphatic “No”. What do they need in order to succeed? People say “Everyone else seems to be doing it. Why not me?”. You might assume that I’m going to say that it is because they don’t have superb products and/or services that they intend to offer and for which there is definitely a large potential market. Whilst that is certainly necessary, it is not, in my view, the key parameter for success.

Far more important is that the person or persons launching the start-up is/are totally committed to the venture almost to the exclusion of all other activities (whether they be family, sport, hobbies or whatever). I was asked a while ago by someone what I thought of a venture they were planning. When I asked how much time they expected to spend on it, the reply was “Four days a week. That is one of the reasons that I want to start my own business. I want more free time.” Needless to say, I recommended that he give up the idea immediately and go and get some ‘Consultant’ business cards printed instead.

I have been involved in quite a few start-ups in my life, varying from extremely successful to abject failures. All of these, regardless of their success or not, had one thing in common. I ended up working very long hours at least six days per week (at one stage averaging between 80 and 100 hours per week for nearly two years).

So to return to my question as to whether we are looking at a start-up bubble that is about to burst. I suspect not. The good ideas being driven by dedicated individuals prepared to make the sacrifices necessary to achieve success will always continue to reap the rewards that they deserve. What is likely, however, is that the percentage of failed start-ups will increase simply due to the number that should never have been launched in the first place, whether that be due to a poor initial concept, lack of drive by the founder(s) or inadequate planning.

But don’t let me put you off starting something. The world needs good entrepreneurs. Just be prepared for it to be hard work.

Dr David Demetrius is Founder and President of the Emadin Group, the one-stop shop for business & trade acceleration into – and out of – Europe (www.emadin.com) . He has over 25 years’ experience in the management, growth and sale of businesses of all sizes, across industries and is a director of several European companies. From 2000 to 2007, David was the Chairman for Continental Europe of the Institute of Directors and a member of the governing Council of the Institute in the UK. He is also an honorary life member of the European Foundation for Management Development.