Entrepreneur coach Stefan Merath knows all facets of being an entrepreneur, from starting up to insolvency. Today, he uses his knowledge and experience to guide people on the path to personal and professional success. In this interview, he talks about why failure is good, how to overcome the first hurdles as an entrepreneur and why business plans are often thrown away.
Mr. Merath, what do founders need to do to grow in the long term?
Fail! Whether it's Sir Richard Branson or Elon Musk – their first attempts as entrepreneurs didn't work out. But that's the rule, not the exception. It is therefore much more important that founders learn from every failure and keep asking themselves the same question: What kind of entrepreneur do I want to become? When I founded my first company, I wish I had had an experienced entrepreneur at my side. As it was, I made every mistake myself. Today I know that failure also means being able to get up again afterwards – an entrepreneur coach would have told me that from the outset. Founders should already have enough reserves for the second attempt with their first company. This presupposes that you clearly limit your investment of money and time before the first start-up.
Does a well-prepared business plan help to limit the risk?
When I founded my first company in 1997, I thought to myself, okay, just get started. I was good at programming websites. So I sold websites to companies. But people didn't respond to my advertising because they didn't know what a website was. I couldn't have predicted that even with a business plan. So I followed people up on the phone and with each order I learned a little more about what was important to customers. From this perspective too, a business plan would have been good for the wastepaper basket at best.
So you've never made a business plan?
Yes, after three years. Because that was a prerequisite for getting venture capital. I looked for an external consultant for this. He could write the texts for the business plan, but he had no idea about business management and couldn't do the maths either. Nevertheless, I managed to attract investors with this plan. However, in the extreme phase of failure, the figures didn't match reality and I had to draw up a new plan every week. In my opinion, business plans only make sense if I can draw on experience, for example with franchise concepts. But if I come up with the idea of starting something completely new, I can only give advice: Only plan the few obvious things. And then just get started. Get in touch with customers as early as possible and collect feedback. You can always make detailed plans afterwards.
In your experience, what mistakes often occur in the initial start-up phase?
Self-indulgence, ignorance and overestimating oneself. I can say that because I've made these mistakes myself. The first phase is all about getting the product to market. Technical inventors in particular are often incredibly in love with their idea and invest a lot of time before they approach customers with it. Conversely, it would be better to go to the customer before you even have the product and then develop according to the customer's needs, not according to what you think is fancy or great.
When the thing grows, almost all founders make the second mistake: they continue to do specialist tasks. If you were a programmer before, for example, you shouldn't be one now. Because now they have to think about strategy, the type of management, the culture in the company and all things like that. Most founders don't have that on their radar. They go on and on – and their companies go down the drain.
And what is the third mistake?
I also know this from my first Internet company. I was convinced that I was a great entrepreneur. I had 30 employees, knew everything, could do everything. I thought consultants were idiots. That's often true about consultants. But exchanging ideas with other entrepreneurs, at least some of whom should be more advanced than you, saves you from many mistakes. You're stupid if you don't use the experience of others to develop yourself further. I was stupid for six and a half years. Then I had to file for bankruptcy and was beaten into wisdom.
You always emphasize how important the environment is for personal success. What kind of environment would you recommend to founders?
Definitely not something like industry associations, BDI, IHK meetings and so on. Everyone beats their chest and tells each other how great they are. To get ahead, you need something else: a learning environment in which I can openly say that things aren't going well for me at the moment! For me, such learning environments are brain trusts, seminars or, for example, the entrepreneur coach concept of the black belt entrepreneur. Just as a black belt needs to master certain kicks and techniques in martial arts, an entrepreneur needs to have strategic skills, leadership skills and competence in dealing with themselves and their fears.
In your experience, do founders approach planning too naively?
I think this naive phase is not only necessary, but also an important opportunity to learn. If something suddenly takes longer than planned, doubts or fears quickly arise. And then I am forced to deal with my fears, for example the fear of entering the market. This makes me stronger and prepares me for bigger challenges such as taking out a million-euro loan. In short, it's fine if the plan doesn't work – at least as long as you're prepared to learn from it, both about the plan and even more about yourself.
Times are changing rapidly at the moment. How generally valid are common strategies for a young company?
If common strategy means making a business plan and implementing it, then I would say that was nonsense even 25 years ago. The important thing is that you simply have to develop at least as quickly as the market develops, whatever the strategy. So it's about speed of change and adaptability. That's why I would currently rely on an agile strategy and go to the customers as quickly as possible to learn exactly what they want – and then adapt it again and again. Over time, you develop a clear idea of what you are doing. For example, it took me three years to develop the core of my entrepreneur coach strategy.
Are there industries that are particularly resistant to change?
Of course there are. The only question is how long they are actually resistant before they eventually go bust. When I had found investors for my first company, I wanted to take out a loan through Dresdner Bank in 2001.
to take out a loan through Dresdner Bank. But they had a hard time. They said: "We don't know whether they'll still be around in a few years' time. Looking back, I found it very funny that Dresdner Bank itself went under during the banking crisis in 2008. This example shows that no sector is super-resistant. Even companies that believe they will exist forever can die at some point. Or to put it in the words of a very good entrepreneur I know: "When the good Lord wants to punish an entrepreneur properly, he sends him seven years of success."
About the person:
Born in Stuttgart, Stefan Merath is a black belt entrepreneur, specialist book author and mentor. With his Unternehmercoach GmbH, he has been supporting founders and entrepreneurs on the road to success for 15 years. All information about Stefan Merath, his books and coaching offers at: www.unternehmercoach.com