When you have been on the startup firing line, you quickly learn that any insight from experts and entrepreneurs who have been there before you can make the difference between failure and success. Yet, many new entrepreneurs brazenly assume they are bulletproof, and march blindly into the fray. The result is that well over 50% of startups fail in the first two years.

I don’t think anyone proclaims to have any silver bullets, but there are common failure threads that appear all too often. There are many books written about failure in startups, and I don’t recommend any of them. I prefer the more positive approach of getting you better prepared up-front, like the new book “It’s Your Biz” by Susan Wilson Solovic.

Susan has years of experience in the small business trenches, and really focuses on what it takes to succeed, with realistic caveats, including an excellent summary of words of wisdom categories that every entrepreneur should review:

1. Don’t chase your tail. As you are building your business, take introspective looks at yourself weekly. How many days have you had lots of activity going on, but at the end of the day, you’ve accomplished nothing to move your business forward? Measure results to make sure you are not chasing your tail, like your favorite puppy dog.
2. Keep moving forward. Never let a day go by in which you haven’t done at least one activity that directly relates to a key business goal. Establish deadlines and milestones for yourself and track your forward progress. Keep you eye on the ball, and don’t be distracted by seemingly attractive options that lead you away from your core business.
3. Listen to your instincts. It’s important to ask and listen to others for advice and guidance, but measure these inputs against your own instincts as well. Blindly following someone else’s strategy doesn’t help as an excuse for failure, and doesn’t help you learn along the way.
4. Manage growth wisely. Overextending yourself and your resources by taking on too much too fast can kill your business. Growing a business is like a marathon, you don’t want your company to be a flash in the pan. Remember, according to Seth Godin, the average overnight success takes six years.
5. Look for collaborative opportunities. In business, it’s tough to survive on an island. Strategic alliances allow you to take on bigger contracts, offer more services, and cover larger geographic territories. In addition, two heads are better than one, so collaborative brainpower is a significant asset.
6. Expect the unexpected. You can’t predict natural disasters, and economic fluctuations. Yet too few entrepreneurs have a current list of business essentials, emergency contacts, or documented backup procedures. Even better, you need a “Plan B” for survival when the unexpected arrives.
7. Learn to manage your stress. The stress of growing your business will take its toll, unless you take care of yourself. Be realistic about what you can expect of yourself and don’t over-commit. Learn to say “no” and really mean it. Schedule some time each week that is just for you, and for your family.

Overall, we all emphasize that you need to keep purpose, promise, and principles as the cornerstones of your business. It’s amazing how many business owners and their teams go through the motions of running their businesses on a day-to-day basis without ever understanding the purpose behind what they’re doing.

Businesses without a purpose don’t have a heart. Or if the principles and values aren’t yours, then it’s not your heart. If it’s not your heart, then you will be making promises to your customers with your fingers crossed. Remember that if you don’t deliver for your customers, they won’t deliver for you. That can make the normal business trenches a deep hole. Read and heed.

Every entrepreneur needs to be honest about their strengths and weaknesses, and realistic about their reasons for choosing the startup route. For any entrepreneur, even the best business opportunities, if entered for the wrong reasons, will likely fail. Some of these reasons seem obvious, so forgive me for restating, but I still hear them too often.

Statistics show that at least 50% of new startups fail within five years, and many of the survivors eventually fail. If you don’t want to be part of these statistics, consider all the alternatives to starting your own business, especially if you have one of the following perspectives:

1. “I’m tired of working hard and being so stressed all the time.” Starting and growing a business is more work and more stress than any employee role should be. Perhaps you need to look carefully at the reasons for your weariness and stress at work. Health and personal problems don’t go away when you start a business.
2. “It’s my hobby anyway, so why not make it my business?” The problem here is that most hobbies cost money rather than make money. Just because you love doing it doesn’t mean anyone will love paying for it.
3. “I’m desperate, since I can’t find a job that suits me.” With the current recession, jobs are indeed hard to find. But don’t forget that businesses are failing at a higher rate as well. Desperate people don’t make good entrepreneurs, and probably don’t have the resources or fortitude to start a business.
4. “My family has always been in business, so it’s in my genes.” Good entrepreneurs do seem to have certain innate qualities, but it’s not clear that these qualities are automatically passed to offspring. If your passions are elsewhere, don’t try running the family business.
5. “I’ve inherited some money and starting a business should be a good investment.” You can’t start a business without capital, but having capital doesn’t mean you can start one. Learning is expensive and risky. It’s less risky to invest your windfall in someone with a proven business record, or put the money in the bank.
6. “I have some extra time, and I need a second income.” Being an entrepreneur is not a part-time job. A business startup is actually a second expense more than a second income. For supplementary income, you would be better served to take a part-time job with an existing company.
7. “I hate having a boss, and just being an employee.” Don’t start a business for a power trip. When you become a business owner, your customers, suppliers, creditors, partners and a lot of other people will become your new “bosses”. These people may be harder to please than your boss at the office today.
8. “All my friends own hot businesses and seem to be doing well.” You shouldn’t believe all the hype, or all the things said in social circles. Definitely don’t jump into trendy businesses you don’t know just to be popular. Even good friends tend to forget talking about the years of hard work and sacrifice, in favor of recent success.
9. “I’d like to be rich, so I’ll start a business.” Starting a business with a dream of riches is certain disappointment. There is no evidence that entrepreneurs make more money, on the average, than other professionals. There is much evidence that the risks of failure are higher on the business owner side.
10. “My primary goal is to contribute something to society.” This is laudable, but more effectively addressed after you have built a successful company, not before. If changing the world is your main motivation and money is not a concern, then do it, without allowing the building of a company to slow you down.

For anyone with entrepreneurial aspirations, I recommend you start by networking with peer business people and organizations before you commit to a startup of your own. Ask questions and do everything you can to make sure you are tackling the right business for the right reasons. Your entrepreneurial life depends on it.

It would be no fun if starting a business was simply plotting a straight line between your idea and success, with no challenges along the way. Zigging and zagging amongst the obstacles is the fun part of being an entrepreneur, and it’s what sets you apart from the average worker who knows exactly what he or she has to do every day to get paid. Relish it, or if it scares you, don’t try it.

That doesn’t mean that starting a business should be a random walk into the unknown. There are certain foundational elements that every entrepreneur must build on to succeed, as well as some critical tools we all need. I found these tried-and-true principles summarized very well in a new book “The Zigzag Principle” by serial entrepreneur Rich Christiansen:

1. Assess your resources. At some point financial capital is usually needed to meet business goals. But it’s not a substitute for the other critical resources, mental capital (domain knowledge, skills, and passions), plus relationship capital (friends and advisors). Money results from mental and relationship capital, not the other way around.
2. Identify your beacon in the fog. Start with a big audacious goal to guide you, so that every once in a while you can hit a smaller goal, to provide a break in the fog and catch sight of the beacon before those next steps into the darkness. Goals need to be written down, measurable, and realistic. Expect your fair share of zigzagging to get there.
3. Create a catalyzing statement. This is a key element of every elevator pitch, with enough specificity and fuel to keep you and everyone around you moving toward the beacon in the fog. This quantified big dream should be a long-term goal that your short-term zigzags are all leading to. Use your values as the foundation.
4. Drive your startup to profitability. A first zig of getting to profitability is important to every business, because being broke and always fighting for funding can cause a lot of pain. More importantly, profitability can drive you to find hidden assets, zag to interim revenue sources, and force you to pace yourself in getting to that final destination.
5. Define processes and add resources. After the initial zigs and zags to get profitable, it is time to formalize and document the processes that worked. Only then can you expand those things that led to your initial success. It also means that it’s time to stop micro-managing, hire some of the right people, and start giving up some control.
6. Scale the business. This is implementing a model that you can replicate, to get your product or service out across the country, and around the world. Scaling models charge by the transaction, or subscriptions, or have digital assets with no cost to reproduce. Switch to a mindset of working “on” your business, rather than “in” your business.
7. Stay within your guardrails. Set up some rules to constrain your zigs and zags to prevent “out of control” situations. Common controls include some spending limits, time commitment limits, financial milestones. These guardrails should be closely aligned with your values. Practice the art of saying “no,” and the discipline of delegating.
8. Develop reward systems. To keep you and your team from burning out, you need to define a simple system of motivators and rewards. Too much reward leads to an entitlement mentality. As you hit each zig, you need to take a break from the intensity, celebrate, and enjoy the fruits of your labor.

The alternatives to planned zigzags are a planned straight line, or a planned random walk. Neither of these are realistic for an entrepreneur seeking success, but I still see them every day, and I see the pain that results. Smart entrepreneurs are nimble and flexile, bootstrap to the maximum degree possible, and pivot for emerging opportunities. Be one.

It’s time for more entrepreneurs to reset their focus, and shift their thinking to completely different ways of doing things. Everyone talks about innovation, but the majority of business plans I see still reflect linear thinking – one more social network with improved usability, one more wind-farm energy generator with a few more blades, or one more dating site with a new dimension of compatibility. Serious changes and great successes don’t come from linear thinking.

In searching for ways to get this message out, I came across a no excuse, no apology, new book by Brian Reich, called “Shift and Reset,” which makes some excellent points on ways to increase the range of change in a person’s thinking, or an organization’s results. Here are some key principles that he espouses and I support:

1. Force and expect change. Everyone knows change is hard and messy, and occasionally painful. But unless we force ourselves to change, innovate, and experiment with different ways of addressing serious issues, we won’t find solutions that are needed. Major innovation won’t happen without real commitment, sacrifice, and hard work.
2. Measure ability and results, not experience. Move to a model where people are measured on their deliverables, not how hard they are working, or how many years of experience they have. For entrepreneurs, this may mean more learning from experiments, and for organizations it may mean dumping a stagnant team to start over.
3. Don’t settle, demand the best. If you want to perform at the highest possible level, you need to hire the best people, who have produced consistent exceptional results. More energy needs to be spent on how the teams are organized and how the individuals work together. Leading an organization or a movement requires skills not taught in school.
4. Launch fast, fail quick, and learn more. Indeed, even the most capable, passionate, and well-supported entrepreneur will succeed only if he or she has a clear plan to follow. But don’t believe that any plan will develop and must remain unchanged throughout the execution process. Plan in your plan for constant change, with learning.
5. The time is now to think bigger. Great new ideas are emerging from the massive and frenetic coordination of people online and through connections. Let’s make sure they aren’t lost or ignored as we head into the future. Now is the time when smaller, yet dedicated groups can communicate and work to bring together disparate ideas.

Reich makes the point that everyone has a role to play in solving major issues, and driving greater innovation. The Internet and social media facilitates cooperation and collaboration, which is what we need to shift our thinking, then reset our goals and ways of attaining them. It’s much easier to challenge everything we know, and turn them on their sides.

Especially for change in serious social issues and infrastructures, it’s now easier to motivate people to care enough and take action. We will never innovate quickly by following the same, old, tired patterns. We need to realize what being connected really means, and makes possible. Now is the time to change.

Innovation begins with knowing your customer, so that’s always the first place to focus. The shift and reset in thinking applies to finding the solution, more than in defining the problem. Linear thinking on the solution can doom a startup or an entrepreneur. A good step in the right direction is to build a team with diverse backgrounds and perspectives.

This helps break linear thinking, and greatly reduces the probability that you’ll solve a problem in the same old way, or just like your competitors. Another approach is to bring in team members from outside your domain to challenge your thinking. You as an entrepreneur can either take the lead to make real change happen, watch it happen, or wonder what happened. You decide.

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” Many entrepreneurs stumble at this point, losing the deal or most of their ownership, by having no answer, saying “make me an offer,” or quoting an exorbitant number.

I’ve written about this before, but it’s a mysterious subject, and I’m always learning more. This time I’ll use a hypothetical health-care web site company named NewCo as an example to illustrate the points.

Two founders have spent $200K of personal and family funds over a one year period to start the company, get a prototype site up and running, and have already generated some “buzz” in the Internet community. The founders now need a $1M Angel investment to do the marketing for a national NewCo rollout, build a team to manage the rollout, and maybe even pay themselves a salary.

How much is NewCo worth to investors at this point (pre-money valuation)? What percentage of NewCo does the investor own after the $1M infusion (post-money ownership percentage)? Well, if the parties agree to a pre-money valuation of $1M, then the post-money investor ownership is 50% (founders give up half interest, and lose control). On the other hand, if the pre-money valuation is $4M, the founders ownership remains at a healthy 80% level.

So what magic can the founders use to justify a $4M valuation (or even the $1M valuation) at this early stage? Here are the components and “rules of thumb” that I recommend to every startup:

1. Place a fair market value on all physical assets (asset approach). This is the most concrete valuation element, usually called the asset approach. New businesses normally have fewer assets, but it pays to look hard and count everything you have. NewCo might be able to pick up an initial $50K valuation on this item.
2. Assign real value to intellectual property. The value of patents and trademarks is not certifiable, especially if you are only at the provisional stage. NewCo has filed a patent on one of their software tool algorithms, which is very positive, and puts them several steps ahead of others who may be venturing into the same area. A “rule of thumb” often used by investors is that each patent filed can justify $1M increase in valuation, so they should claim that here.
3. All principals and employees add value. Assign value to all paid professionals, as their skills, training, and knowledge of your business technology is very valuable. Back in the “heyday of the dot.com startups,” it was not uncommon to see a valuation incremented by $1M or every paid full-time professional programmer, engineer, or designer. NewCo doesn’t have any of these yet.
4. Early customers and contracts in progress add value. Every customer contract and relationship needs to be monetized, even ones still in negotiation. Assign probabilities to active customer sales efforts, just as sales managers do in quantifying a salesman’s forecast. Particularly valuable are recurring revenues, like subscription amounts, that don’t have to be resold every period. This one doesn’t help NewCo just yet.
5. Discounted Cash Flow (DCF) on projections (income approach). In finance, the income approach describes a method of valuing a company using the concepts of the time value of money. The discount rate typically applied to startups may vary anywhere from 30% to 60%, depending on maturity and the level of credibility you can garner for the financial estimates. NewCo is projecting revenues of $25M in five years, even with a 40% discount rate, the NPV or current valuation comes out to about $3M.
6. Discretionary earnings multiple (earnings multiple approach). If you are still losing money, skip ahead to the cost approach. Otherwise, multiply earnings before interest, taxes, depreciation and amortization (EBITDA) by some multiple. A target multiple can be taken from industry average tables, or derived from scoring key factors of the business. If you have no better info, use 5x as the multiple.
7. Calculate replacement cost for key assets (cost approach). The cost approach attempts to measure the net value of the business today by calculating how much it could cost for a new effort to replace key assets. Since NewCo has developed 10 online tools and a fabulous web site over the past year, how much would it cost another company to create similar quality tools and web interfaces with a conventional software team? $500K might be a low estimate.
8. Look at the size of the market, and the growth projections for your sector. The bigger the market, and the higher the growth projections are from analysts, the more your startup is worth. For this to be a premium factor for you, your target market should be at least $500 million in potential sales if the company is asset-light, and $1 billion if it requires plenty of property, plants and equipment. Let’s not take any credit here for NewCo.
9. Assess the number of direct competitors and barriers to entry. Competitive market forces also can have a large impact on what valuation this company will garner from investors. If you can show a big lead on competitors, you should claim the “first mover” advantage. In the investment community, this premium factor is called “goodwill” (also applied for a premium management team, few competitors, high barriers to entry, etc.). Goodwill can easily account for a couple of million in valuation. For NewCo, the market is not new, but the management team is new, so I wouldn’t argue for much goodwill.
10. Find “comparables” who have received financing (market approach). Another popular method to establish valuation for any company is to search for similar companies that have recently received funding. This is often called the market approach, and is similar to the common real estate appraisal concept that values your house for sale by comparing it to similar homes recently sold in your area.

Remember that all the components, except the last, are cumulative. Even if a given investor excludes some of the components from consideration in your case, your credibility will be bolstered by the fact that you understand his interests as well as yours. In any case, the analysis will prepare you for the heavy negotiation to follow.

Precision is not the issue here – the task for the entrepreneur is to build a company that is worth at least $50M before thinking about an exit — no investor wants to spend more than five minutes arguing the fine points of the last valuation dollar.

So what is a reasonable valuation for a company like NewCo? My advice for early-stage companies like this one is to target their valuation somewhere between $1.5M and $5M, justified from the elements above. A lower number suggests that the founders are giving away the company, while a much higher number may suggest hubris or lack of reality on the part of the owners.

Of course, we have all read about the “new” company with $100M valuation, but I haven’t met one yet.

What sparks paradigm-shifting innovation in any business? It’s a special mix of entrepreneur and company, regular in every respect except for having the courage and foresight to make an idea happen that was supposed to be impossible. As an entrepreneur in a startup, how do you know if you have this potential, and what are the steps to get from an innovation to a revolution?

The first step is to meditate on the examples set by others, like Steve Jobs of Apple, Jeff Bezos of Amazon, or Thomas Edison with the electric light. There are many others, like the one I just finished about Ratan Tata bringing out the Nano car in 2009 in India for less than $2,500. The book is called “Nanovation,” by Kevin & Jackie Freiberg.

These authors have studied many such examples, and summarize my own perspective on the characteristics of entrepreneurs they call “nanovators,” that produce true, life-changing innovations, which they call nanovations:

1. Get wired for nanovation. We all agree that innovation is an adventure into the unknown. If you want people to follow, you need to be able to convince them of three things: (1) your mission is worth supporting, (2) you have the competence to build a critical mass, and (3) you have integrity to look out for their best interests along the way.
2. Lead the revolution. Nanovators have more than the vision; they have the drive to lead, and the focus to stay on target. They are wired to win. Organizations don’t produce game-changing innovations; people do. They allow a leap of faith in their own ideas, as well as in the ideas and capabilities of their team.
3. Build a culture of innovation. You need a culture where restlessness is tolerated, curiosity is encouraged, passion is inspired, creativity is expected, and people are always talking about what’s next. Ultimately, the mind-set changes so significantly that innovation is natural, and no one is conscious of it.
4. Question the unquestionable. Outsiders ask a lot of questions because they don’t presume to know why something is done a certain way. Make your insiders think like outsiders. Provocative questions like “What if?”, “Why not?”, or “So what?” can help to get everyone outside the box.
5. Look beyond customer imagination. First-of-a-kind products empower customers to do things they didn’t even know they wanted to do, and now can’t live without them. The computer mouse, Tivo, and Teflon are examples. Listen to customers, but remember that they can’t always tell you what they don’t know.
6. Go to the intersection of trends. Nanovators pay close attention to the early warning signs that precede major cultural, societal, and market shifts. Where most people see an isolated trend, nanovators connect the dots by relating one trend to several others. They focus on next practices, versus best practices.
7. Solve a problem that matters. The key here is to resist the temptation to pay more attention to the technology solution than the problem. Some people create brilliant solutions to non-existent problems, like maybe Segway and satellite phones. These solutions may be nice to have, but won’t ignite a revolution to get there.
8. Risk more, fail faster, and bounce back stronger. When you pursue a creative idea that takes you beyond, fear tempts you to make compromises. If you can push through this fear and doubt, or bounce back intelligently from initial setbacks, you often arrive at something that has truly never been seen before.

Jeffrey Immelt of General Electric argues that the next big thing, like the Nano, could well be from “reverse innovation,” where instead of industrialized nations adapting their products for emerging markets, innovation in emerging markets will bring new paradigms to home markets. In any case, the future is defined by what we put off until tomorrow, so don’t wait too long to get started.

The Hype Cycle was a concept put forward by Gartner, Inc. back in 1995 meant to apply to technology product evolution and acceptance. As I was reading about it recently, it occurred to me that the concept relates directly to how investors see startup opportunities and potential success as well, at least those with technology in their offerings.

For those of you unfamiliar with the concept, the Gartner Hype Cycle characterizes the over-enthusiasm or “hype” and subsequent disappointment that typically occurs with the introduction of new technologies. Hype curves then show how and when technologies move beyond the hype, offer practical benefits and become widely accepted. A hype cycle in Gartner’s interpretation always comprises five phases:

1. Technology trigger. The first phase of a hype cycle is the technology trigger or breakthrough, product launch or other event that generates significant press and interest. This is the “truly disruptive technology” that startups often claim.
2. Peak of inflated expectations. In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications and startups using the technology, but there are typically more failures.
3. Trough of disillusionment. Technologies and related startups enter the trough of disillusionment because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic.
4. Slope of enlightenment. Although the press may have stopped covering the technology, some businesses continue through the slope of enlightenment and experiment to understand the benefits and practical application of the technology.
5. Plateau of productivity. A technology reaches the plateau of productivity as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. Startups can now truly define a problem, and position their solution for rapid growth. Investors love this stage.

For the latest info, Gartner recently released their Hype Cycle Special Report for 2011, detailing some of the biggest trends in technology this year. This report evaluates the maturity of more than 1,900 technologies and trends in 89 areas. New this year are application services and outsourcing, cloud application infrastructure services, cloud security, privacy and smart cities. It’s definitely worth a look.

According to the report, private cloud computing, NFC and Internet TV are at the moment overvalued. While, in the field of social media, social monitoring and activity streams as well as shopping communities, have moved into the Peak of Inflated Expectations. Other newly featured high-impact trends include big data, and natural language question answering. Disillusionment, on the other hand arises in the case of augmented reality.

There have been numerous criticisms of the hype cycle, one of which is that it is not a cycle, and that all technologies don’t really have the same outcome. Another criticism is that the shape of the line has not altered or accelerated in ten years, even though all the evidence suggests that the half-life of new technologies is getting shorter, and the number of competing technologies is increasing.

So, of course you have the option of ignoring hype cycle predictions, and pushing forward with your latest technology startup. Just don’t be surprised if you get investor pushback while early in the cycle, and be prepared with counter arguments. Great startups always beat the hype.

The first question most people seem to ask when contemplating a new startup is where they will get the money. That’s certainly a valid question, but all the money in the world won’t make your business a success if you hate what you are doing, and you aren’t prepared to do the job. I suggest that there are several other questions even more important than the money one.

The best way to assure the success of your startup is to do something you love, as opposed to something that will make you a lot of money. Of course, all these things and many more are critical, so it’s important that you keep your priorities straight. Here are the right questions to ask yourself, in the right order, before asking others about money:

• Do you understand and aspire to entrepreneur lifestyle? Being a startup founder is not a job, but a lifestyle, like getting married versus staying single. In fact, it’s more like being single, since founders usually have no one to lean on, no one to make decisions for them, no one to blame, and no vision to follow but their own.

• Do you have a passion for your idea and business opportunity? There is no joy in starting a business, if you can’t stand the people, business climate, or the day-to-day responsibilities of the job. Some people relate to service businesses, while others are more comfortable with manufacturing or construction.

• What type of business startup best fits your mentality? Beyond the traditional new product or service model, you can always buy an existing business, purchase a franchise, join a multi-level marketing (MLM) company, or simply go out on your own as a consultant. Each of these has their unique challenges and payback. Ask around.

• What level of experience and training do you have for this business? Be wary of stepping into an unknown business area, just because it looks easy or promises a big return. The real secrets of any business are not in textbooks, and you can’t believe everything you read on the Internet. Experience is the best teacher.

• Do you have real self-confidence and self-discipline? Starting a business is hard work and will require sacrifices. You will be operating independently, making all the decisions, and shouldering all the responsibility. Will you be able to persevere and build your new venture into a success?

• Do you have a viable plan? If you haven’t yet written down a business plan, you probably have no idea how much money you really need, or even if the opportunity is real. I believe the process of writing the plan is more valuable than the result, because it forces you to think through all the elements, and make sure they fit together and fit you.

• How much money do you really need? From your plan, calculate the absolute minimum amount you need to make your plan work, and then buffer it by 50%. Consider the non-cash alternatives, like offering equity instead of cash and bartering for services. Fundraising is extremely difficult, which is why most entrepreneurs do bootstrapping.

If you have made it this far, it’s fair to now start asking people where and when you can find the money you need (if any). Professionals will tell you that the sequence is friends and family first, angel investors second, and only then venture capital. Each of these has a cost in time an effort.

The process for all of these is networking (not email blasts or cold-calling investors). Start with the local Chamber of Commerce, industry associations, or investor seminars. Just attending doesn’t work. Use your entrepreneurial spirit to start some exchanges and relationships that can lead to your next step.

Starting a business is a marathon, so do your preparation and training before you ask for that bottle of water. Finding money is tough, but it’s not the hardest part. The hardest part is to do it all while enjoying the journey. Get busy, and have fun.

We can all dream about what it takes to make our startup a success. From recent survey feedback, it seems evident that the urban legends leading to success are wrong. The average entrepreneur is not the one who dumped a promising career, sketched his idea on the back of a napkin, and accepted millions from an investor to make billions of his own.

I was just perusing a more realistic report from the Kauffman Foundation for Entrepreneurship, titled “Making of a Successful Entrepreneur.” They surveyed 549 successful company founders across a variety of industries, and gathered their views on success and failure factors. Many are predictable, all were interesting, and a few even surprised me:

1. Stick with the business area you know. We all have a tendency to think that the grass is greener on the other side of the fence, but 96% of these founders ranked prior work experience in their business area as an extremely important or important success factor.
2. It’s the learning; not success or failure, that makes the difference. Successful founders try and try again. 88% attributed their success to prior successes; 78% attributed success to prior failures.
3. The management team is critical. In looking back on their success, 82% of the founders attributed their success to strength of the management team (not the idea, business plan, or money). No surprise here.
4. A little luck never hurts. Surprisingly, a full 73% said that good fortune was an important factor in their success. 22% even ranked this as extremely important. Perhaps we can discount this a bit for humility, but there is nothing like being in the right place at the right time.
5. Don’t discount the value of your network. Professional networks were deemed important in the success of 73% of the founders. 62% of the respondents felt the same way about their personal networks.
6. Dropping out of school is not recommended. 95% of these founders had earned Bachelor’s degrees and 47% had more advanced degrees. 70% said their university education was important, so only a few said skip it. Born to be an entrepreneur may not be enough today.
7. First-timers usually fund their own venture. Venture capital and private/angel investments play a relatively small role in the startups of first-time entrepreneurs. 70% said they had to use personal savings as a main source for their first business.
8. Advice from investors is not worth much. Of the entrepreneurs who received advice from their company’s investors, only 36% ranked it as important, and 38% said it was not important at all. Surprisingly, even in venture-backed businesses, 32% said it was only slightly important. It sounds like founders want to make their own mistakes.
9. Willingness to take a big risk. When asked what may prevent others from starting their own business, the highest ranked factor by 98% was lack of willingness or ability to take risks. Founders clearly found entrepreneurship to be a risky endeavor.
10. Huge time and effort commitment. Along the same lines as the previous item, 93% felt from their own experience that the work and time challenges were a major barrier (no support for the part-time, work from home, get rich quick crowd).

Hopefully, by understanding what entrepreneurs think and believe, we can foster more successes, fewer failures, and better guidance, to those of you who haven’t taken the big step yet. If you are already committed, take heed of the advice of those who have been there and done that. People who don’t learn from other’s experience pay a high price just to get to the starting point.