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Small businesses are making a comeback. The Small Business Administration is lending money to startups at pre-recession numbers, and during the Great Recession, more Americans became entrepreneurs than at any time in the previous 15 years, according to the Kauffman Foundation, which tracks U.S. entrepreneurship trends. In fact, more than half a million new businesses started each month in 2010.
So if at least half of new businesses fail in the first five years, according to the SBA, and only 25 percent survive longer than 15 years, the big question we need to answer is, What do the successful business owners have that the others do not?
“Of the many startups I’ve seen go under over the years, I think the principal problem is the lack of good leadership,” says Tim Westergren, co-founder of Pandora Radio. Founded in 2000, the Oakland, Calif., company went public in 2011, reporting $138 million in revenue that fiscal year. “Great ideas are of course the kernel,” Westergren continues, “but ultimately, startups are about execution. Execution excellence requires a leadership team to be great—and consistently great at many things: great salesmanship, great at hiring, great at project planning, great at financial management, great at strategic decision-making and great at adaptation. It’s a lot to be good at.”
These entrepreneurs are good at a lot—enough to thrive despite the infinite obstacles new business owners face. So we asked them for their best startup advice, the words of wisdom that would have helped them in the early days.
Irwin Jacobs, Qualcomm founding chairman
Irwin Jacobs is a two-time telecom startup success. He is best-known for his role as co-founder of Qualcomm, the maker of an early and leading satellite tracking system that is the foundation of much of today’s mobile communication. In 2011 the San Diego-based company reported revenue of $14.96 billion. Before that the former MIT professor co-founded Linkabit, which developed satellite encryption devices and was sold in 1980 for $25 million. Today he serves as Qualcomm’s CEO emeritus and is active in philanthropy.
Get Ready to Be Wrong
The greatest lesson I can share with other entrepreneurs is that whatever you have in mind in terms of making something happen or the schedule on which you expect results, you are always going to be wrong. But you need to continue to be confident in what you are doing and examine new ways of accomplishing your goal.
When we first developed our technology for Qualcomm, we kept getting delayed. We couldn’t raise enough resources because investors didn’t think the technology would ever be available commercially. Every time we tried to do something innovative, investors would find a negative reason why it wouldn’t work. But we were persistent. We overcame critical problems in the product and found ways to make it a commercial success. We started the process in 1988 and didn’t bring to market a commercial system until 1995—twice as long as we projected. But the technology at that time was so exciting—what we were working on would allow much more efficient transmittance of data and voice. We had no idea that today there would be 6 billion cellular connections.
During such trying times it can be easy to get discouraged and lose confidence in your ideas. I advise new business owners to apply what I call the “4 a.m. test.” If you wake up at 4 a.m. in a panic over something and you can think through the issue and feel comfortable with it, go back to sleep and keep going with your project. If you can’t get back to sleep because the problem is too great, you may need to find a different path.
Build a Better Team
One of the most critical things to growing a small company is attracting and retaining good people. I led by example by working very hard and being excited about what we were doing. You have to sell your team on your idea—they have to be convinced they are going to work with good people and on very good things. It is also important to create the right working environment. Not only do you need the best equipment, but you have to break down any hierarchal structure so all employees feel their ideas are heard and there are resources to develop the best ideas.
The larger you get, the harder it is to keep that spirit of innovation alive. Now that we have 22,000 employees around the world, we continue to include everyone in emails and meetings that other companies might reserve for top executives. Once a year we bring together team leaders at a companywide meeting to present new ideas. We award monetary prizes for the winners and provide the resources to develop those ideas.
Don’t Forget Your Family
It is also important to consider your personal life when you are starting a new venture. Time is always a major constraint. I had a wife and four young sons when I was starting my business, and I always made sure to be home for dinner so we could talk about our day. Even if I had to go back to work at night, I always held that dinner time very firm.