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Knowledge is Power
“We couldn’t sleep, because we thought it was such a good idea.”
NEIL BLUMENTHAL, co-founder of online eyewear company Warby Parker.

BE an empire maker. But first you need an idea.
A really good one. Some might say brilliant.
Startup ideas can come from just about anywhere—truly. Let’s look at the most common sources: A theme or problem from your daily life An emerging trend A gap in a specific market A drive to help others in an inventive way A special skill or expertise that you possess
Which is best ?
We’ve asked scores of successful entrepreneurs and noted experts this very same question. And far and away, they agree:
It’s that first one, the problem or “pain point” that you personally experience on
a regular basis, that is the ideal motivation for starting a company.

While you can (and should) pull from any of the sources on the above list for your startup idea, it’s wise to draw primarily from your own need or frustration.

Why, exactly
? Starting a company will require long hours and seemingly endless focus.
Both are much easier when you feel a personal connection to the purpose behind
the company. “The advice I have for entrepreneurs is . . .
number one, you need to solve a real problem.
I look for those problems in my own life.

Mint was because I had a challenge managing my own finances using Quicken and Microsoft Money. So I built it for myself.” AARON PATZER, founder of web-based personal finance service, which he ultimately sold to Intuit for $170 million If you don’t have that burning, personal desire to see your concept come to fruition, we don’t recommend pursuing your startup idea.

That’s because the early days of starting a company are notoriously difficult.
You might find yourself questioning whether you’ve made the right call.
That’s especially true as the months or years drag on, and you’ve decided to quit
a lucrative career, invest personal savings, and sacrifice time away from family to
chase your dream.

(Many seasoned entrepreneurs, by the way, say it takes at least three years to find
your startup footing, and that many newbies give up too soon.) But beyond that,
there’s another reason why it makes sense to let your personal challenge lead the way.
Chances are, others are experiencing the same problem as well—even if they’re not entirely aware of it.

They’re called your customers. “I spent all my hard-earned money on this one pair of cream pants that hung there, and I decided to cut the feet out of control top pantyhose one day,
and I threw them on under my white pants, and went to the party. I looked fabulous, I felt great, I had no panty lines, I looked thinner and smoother . . . and I remember thinking,
This should exist for women.”

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SARA BLAKELY, inventor of Spanx underwear, whose net worth is now valued at more than $1 billion Of course, you might say to yourself: “Wait a minute. Yes, this is a personal frustration of mine. And others probably experience it as well. But chances are, someone else is already working on a solution.” Guess what: You’re exactly right.

In some form or another, nearly every idea is already out there.
But how you implement your idea, position your new concept, and execute your plan can be the defining factor of success. Countless billion-dollar companies are based on ideas that were just tweaks of what was there before.

Facebook, for example, is far from an original idea.
Social networks had been around for nearly a decade, in companies such as SixDegrees, Friendster, and Myspace. Facebook’s success didn’t come from the
idea itself but instead from countless iterations around how the product could reach customers and achieve a competitive advantage.

“Every company needs a starting point,” says Eric Paley, managing partner of seed-stage venture capital fund Founder Collective. I encourage entrepreneurs to focus more on falling in love with the problems they want to solve rather than their initial ideas.”

As founders dig deeply into that original hypothesis, they will learn, adapt, hit walls, adapt again, and build critical expertise that they never considered when starting out. “In fact, in many cases the original idea later seems humorous or at least incredibly naive compared with the lengths to which the startup needs to go to become successful,” Paley says.

Readers who are old enough might recall when Jeff Bezos launched in 1994 as a bookseller. Or when Reed Hastings co-founded Netflix in 1997 as a DVD rental service. Both have transformed their companies into something very different than their original concepts.

It’s important to remember that the startup you first set out to build will not resemble the company you are operating five or ten years later. Startups, and businesses in general, evolve and take on lives of their own—in large part due to technological advances or changing customer tastes. The most successful entrepreneurs always keep a finger on the pulse of the current market (more on that in Chapter 5).

After launching, they ask questions such as “How is the product performing ?”
“Is it easy or hard to sell ?”
“What kind of value does the product provide in the current climate?”
“Is it generating revenue or not ?”
“A vision . . . is the most powerful and unique asset any company has.

The original idea for my company started out of a simple pain point I wanted to fix:
Find a [fitness] class easily. As ClassPass grew, my vision expanded further into making fitness a way of life. We’ve pivoted our company a few times, and the most important reason was because it didn’t map to our true north. It’s hard to always predict how customers will engage with your product; when you see a behavior that isn’t aligned to your vision, you have to be able to shift gears.

Ultimately, your vision has to be at the core of everything you do, even if that means adjusting or iterating your product roadmap to make sure you get there.” PAYAL KADAKIA, founder of fitness startup ClassPass, a.k.a. the “Netflix for workout classes,” which has shifted its business model, raised prices, and discontinued its popular-but-unsustainable unlimited workout option, all since launching in 2013 Based on all that, you might find it tricky to come up with a brilliant business idea, particularly if you understand that your startup will need to keep changing and iterating.

That’s why some entrepreneurs also recommend coming up with a vision, which stays true even as your company morphs. FINDING YOUR NICHE The best business ideas come from your strongest areas of interest, says Ryan Robinson, an entrepreneur and writer who teaches people how to create self-employed careers. When the going gets rough (and it will), you need to be motivated beyond just the lure of dollar signs.

If you’re only in it for the money, you’ll either give up or be quickly pushed out of the market by people who genuinely care about what they’re doing and the people they’re helping—they’ll be more motivated than you. If you’re not sure what your interests are, or which of them may potentially lead to a profitable business opportunity, ask yourself the following questions. The answers may help you find your way.

What are your hobbies ?
What is the most meaningful part of your day ?
What are some topics you could enjoy writing a thousand-word article about ?
What do you love doing ?
What is an achievement that’d make you feel particularly proud of yourself ?
Are there any specific aspects or functions that you love about your current job ?
How about any childhood dreams you still find intriguing ?
If you had to choose just one thing to be remembered by, what would it be ?
Money Makers When mulling your business ideas, it’s always wise to consider where your idea fits in the general marketplace.

For instance, in 2017 Inc. interviewed experts and examined investment data to find the industries that are beginning to offer major opportunities for new ventures. Here are the ones that held the most promise. ​Meditation and mindfulness training. Increased corporate spending on programs to improve employee focus has helped boost an industry that research firm IBISWorld values at $1.1 billion in the United States. App-based training is bringing the practice to an even broader audience.

​Ready-to-drink coffee and tea. Consumers are ditching mixes and concentrates in favor of on-the-go coffee and tea, largely driven by health innovations. From 2013 to 2015, U.S. sales of these drinks nearly tripled, landing at $143 million, according to the nonprofit Specialty Food Association.

​Mobility tech.
This industry offers startups potential partnerships with and acquisition by large tech companies and automakers working on autonomous vehicles. Ford, for example, invested $1 billion in Pittsburgh-based Argo AI in its effort to develop a self-driving car by 2021.

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Pet care. Tech innovations are making over this industry, which is valued at $60 billion in the United States. Revenue for pet grooming and boarding alone was nearly $8 billion in the United States. in 2016, according to IBISWorld, which projects it to grow 7 percent annually through 2021. ​Construction management.

Global funding for hardware and software to streamline building projects, or to sell and rent construction equipment, rose to $254 million in 2015 from $51 million in 2010, according to researcher CB Insights—and analysts say it’s still an emerging industry.

​Synthetic biology. Health and environmental concerns have driven interest in genetically engineered medicines, foods, and fuel. It’s a costly and technical field, but payoffs can be huge for companies like DNA manufacturing company Twist Bioscience.

​Computer vision. Advancements in artificial intelligence have produced companies working to interpret and act on visual data. The technology, which attracted $522 million and 69 deals in 2016, can be applied to child development, social media networks, and web analytics. ​Brick-and-mortar retail technology.

Startups are helping modernize in-store operations. One notable example is London-based Iconeme, which created technology that pushes product information from mannequins to nearby shoppers’ smartphones.

Once you’ve pinpointed a pain point and settled on a vision, it’s time to start finessing your startup idea. The best way to do that is to seek outside perspectives. In other words, it’s time to hash it out with anyone who will listen. (For more on that, see “Building a Personal Team of Advisors,” page 14.

That list includes: Friends and family Work colleagues (including former co-workers or bosses) Classmates or professors Members of networking groups that you belong to Fellow entrepreneurs Potential customers We know exactly what you’re thinking: “But what if someone steals my amazing idea ?”

Guess what: Ideas, even the brilliant ones, are worth very little.
Unfortunately, too many aspiring entrepreneurs become fixated on the value of their
big ideas, declining to speak with others who might provide advice or feedback.
They believe sharing an idea with other people will hurt them.
This is a terrible mistake.

“For several years, I worked closely with a brilliant inventor named Natan Parsons,
who had almost a hundred patents under his belt and invented the mechanism behind automatic flush toilets. He would always solicit feedback about products he had in the works from prospective customers.

He’d tell people what he was doing, but not how—and it was the “how” that he patented. Remember: If sharing your idea gives away all its value, it’s probably not a defensible
idea to begin with.

ROBERT GLAZER, serial entrepreneur whose digital marketing firm, Acceleration Partners, works with brands that include Adidas, Bonobos, and ModCloth When you’re thinking about launching a new product or service—particularly one that is unlike anything else on the market—it’s critical to talk to others to understand potential customers’ needs and to gauge their feedback.

The worst thing you can do, many experts say, is to operate in stealth mode.
While you may think you need a patent, most experts say your limited resources are better spent on developing your business idea. Patents can offer value to companies. For example, venture capital investors might insist on them.

They can give an entrepreneur the legal standing to demand redress from someone who encroaches on the patent . . . assuming that the entrepreneur has the money to litigate the case and can come to a contingency arrangement with a qualified law firm. But, if you have limited funds, getting to market and creating revenue are more important steps.

There are other ways to stymie competitors. A better product, smarter marketing,
better customer service, and more effective business processes are just a few examples of how to get ahead of other companies. John D. Smith, an inventor and entrepreneur, wrote a book called Don’t File a Patent!, which comes from his experience developing and selling a hurricane window protection device.

He had filed other patents successfully, and tried to patent the hurricane window,
but the U.S. Patent & Trademark Office rejected the patent three times. The conclusion he reached was that he had spent “almost $25,000 in legal and government filing fees” to no useful end. He says that he would have been better off putting the money into selling the product.

If you truly need a patent, you can always begin the process at a later date. You have up to one year from when your invention is first made public (by being announced or put on sale) in which to patent it, according to Minda Zeltin, coauthor of The Geek Gap.

“And you can always file a provisional patent application, something like a save-the-date note for a wedding,” she says. It doesn’t commit you to a formal patent application, and doesn’t result in a patent, but it does allow you to claim your invention so that you can do a full patent application later.

For more information, including answers to frequently asked questions about patents, visit the USPTO’s site at Building a Personal Team of Advisors It’s never too early in your entrepreneurial career to surround yourself with good people.

“Many of us are convinced that we have to fly solo and figure everything out on our own,
the hard way—that having a support team and advisors is only for the powerful or wildly successful,” says Antonio Neves, a leadership speaker and former TV journalist.

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“This is foolish and naive. You don’t have to do it alone. In fact, you shouldn’t.”
People are more willing to help us accomplish our goals than we may think,
according to Neves. “In fact, they want to help,” he says. “The hard, challenging,
and vulnerable part is this: It’s our job to ask for their help.”

Neves recommends that newbie entrepreneurs form a “personal” board of advisors—a small but important group of professionals or experts that guide decision making and provide critical input and advice.

To find them, he recommends listing the areas where you’ll likely need additional
help and expertise (e.g., fundraising, marketing, design, etc.). Then, evaluate your network—LinkedIn connections, Facebook friends, current or former professors, family friends, etc.—to see who could fill the void in your gap areas. Next, ask for an informational meeting with your potential advisor.

Explain what you’re doing and why you’re seeking their help, as well as what type of support you need from them and what this might look like (such as weekly, bi-weekly, or monthly calls). “Once someone agrees to become your advisor, always treat this relationship with the utmost care, tact, and professionalism,” he says. “Be generous with your ‘thank yous’ and create as much value for them as possible.”

Large corporations with big budgets routinely conduct market research to see if it’s worthwhile to launch a new product or service. The good news is that gauging
customer sentiment doesn’t need to be expensive, according to columnist
Christina DesMarais.

There are plenty of informal ways to figure out whether there’s potential demand for your idea and, if so, who your customer might be or what your market size might be: Turn an industry event into a research venue. Attend a trade show or conference in your chosen field, which should give you an opportunity to talk with your target audience. Find out who will be attending and schedule face-to-face time with these people, if only for a few minutes.

Try social media to crowdsource your research. Pose a few targeted questions to your potential fan base on Facebook, Instagram, Twitter, or LinkedIn. It may not be the most robust research, and your audience may be biased, but it’s a good way to get simple questions answered. Use do-it-yourself tools, such as SurveyMonkey, to get quick and simple feedback. Or gather a few people for a real-life focus group.

Start small: You don’t need to talk to thousands of people if twenty or thirty will give you a good idea what direction to head. Consider a crowdfunding campaign. Yes, this is a fairly work-intensive way to raise early-stage funds (more on finding money for your business in Chapter 3).

But it’s also a technique to gauge whether strangers and your network are interested in your product or service. The most popular sites are Kickstarter and Indiegogo, and the most successful campaigns include pitch videos.  Find what’s already out there. You may be surprised what you can learn by searching the Internet for existing studies.

For example, a wealth of data exists on millennial consumers, such as how they like to be engaged, what social networks they use, and more. While the research you find may not be specific to your industry, you’re wasting money if you’re asking questions that have already been answered.

Lastly, don’t forget to log all your customer input. Any kind of feedback you’re getting—whether in person, through your emails, or via social networks—should be captured, so you can better study customer problems, habits, and lifestyles.
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<<<<<<​CASE STUDY​>>>>>>
Rent the Runway IN 2009, JENNIFER HYMAN and Jennifer Fleiss launched Rent the Runway, a website that allows customers to rent designer gowns and accessories at a fraction of the retail price.

The co-founders came up with the idea while students at Harvard Business School.
The two had witnessed young women, including Hyman’s sister Becky, agonize over what to wear to weddings and other events, despite having a closet full of clothes.
“We realized there was a real gap in rationality around fashion, where woman constantly want new things,” often when they have limited budgets, Fleiss says.

“Wouldn’t there be a great opportunity—rather than buying a fast-fashion knock-off—to get the actual designer dress through a rental model, where you only keep it for a day or two?” Hyman and Fleiss decided to see if the idea had merit.

The two bought hundreds of dresses at Bloomingdale’s (mostly in their size, as they figured they’d at least have fantastic wardrobes if things didn’t work out). “We first tested out our idea by going to Harvard with a trunk full of dresses that we let girls try on and rent. Next, we went to Yale and rented out the dresses but didn’t let women try them on,” Fleiss says. “

For the third trial, we sent out a PDF to students that said, ‘Call us if you want to rent this dress.’ Each time, we were getting closer and closer to what our actual concept was—an Internet dress-rental site—to prove that it was really going to work.” Fleiss estimates that they talked to thousands of young women before launching.

“A big mistake that many entrepreneurs make is being hesitant to share information about their concept with others,” Fleiss says. “Jenn and I did the exact opposite.
We shared our idea with as many designers, women, and investors as we possibly could and utilized their feedback to tweak our original idea.”

Fleiss adds that it was particularly important to talk to potential customers, as renting designer gowns via the Internet (at that time) was a new, disruptive concept. “We knew we needed to test our idea on the ground to see if we could actually promote ‘renting’ as a new consumer behavior,” she says. Getting outside perspectives paid off.

Today, Rent the Runway has annual revenue of over $100 million.
The company has raised more than $190 million in venture capital, and is opening brick-and-mortar locations in New York, Los Angeles, and other cities. Summarize Your Idea During the early stages, you’ll want to come up with a short description of your idea that you could share with anyone (and get even more feedback).

This can ultimately become your “elevator pitch,” a succinct and memorable recitation of what makes you special, which ideally resonates with the heart and the mind of your listener. For the unfamiliar, the concept is simple: If you happen to find yourself on an elevator with an investor or customer, you can communicate what you do in the short time (20 to 60 seconds) it takes to ride from the ground floor to your destination.

While the elevator scenario is a bit absurd, there’s no question that chance conversations can result in business opportunities,” says columnist Geoffrey James, author of Business Without the Bullsh*t, a book about essential business skills. “The CEO of one of the largest credit card processors in the United States once told me how he sold the idea for his new business to an investor whom he met at a wedding.”

James offers the following advice on what your “elevator pitch” should contain:
A carefully crafted sentence (that’s just one sentence, folks) that describes who you are and what you do. If your listener is interested, then proceed to explain why you and your startup are unique and different from the competition.

Reveal one or two facts that prove your uniqueness. Most people, by the way, confuse elevator pitches with sales pitches, but they’re completely different.

A sales pitch is a formal presentation,” he says. “An elevator pitch is a segue that takes place within a casual conversation.” Most typically, you use an elevator pitch when you run into a potential customer or investor at a conference, trade show, or social event.

If you don’t have a competitive advantage, don’t compete.” JACK WELCH, former chairman and CEO of General Electric It’s also wise to scope out the competition while you’re still forming your idea. (And here’s where you’ll likely discover that you’re not the only person with this fabulous concept.)

This is especially important if you want to tap into a crowded marketplace, where there are plenty of customers and many players—or a few dominant ones—willing to serve them. A competitive advantage, by definition, is that unique edge that allows your business to attract more customers or achieve greater sales than rivals. In essence, it’s what makes your business, your business.

And it can mean the difference between being an also-ran and leading the pack.
Your competitive advantage can come in many forms, including: Your prices Distinct or high-quality products Your distribution network Customer service Your own personal skill set, experience, or industry knowledge Strategic relationships or partnerships “In business, you have only two ways of surviving: Either your product is better than your competitors’,
or it’s cheaper.

There’s simply no other foundation on which to build a successful business. None. Better or cheaper, take your pick.” JIM KOCH, founder of Boston Beer Co., which now has a market cap of $1.7 billion One way to identify your competitive advantage is to take a look at the early feedback that you’ve obtained from outsiders or from your target audience. See if any patterns, trends, or commonalities emerge. Consider those themes to be potential “value propositions” as you continue to develop your idea.

While competitive advantage can be cut-and-dry for some entrepreneurs, others find it tricky to put their finger on. Some companies, in fact, take years to identify what truly makes them stand out. We recommend identifying your competitive advantage as soon as possible, so you nurture that advantage and effectively use it in marketing.

Famed Harvard economist Michael E. Porter wrote the landmark book Competitive Strategy in 1980, offering the “five forces” model to determine your unique advantage.
While much has changed since 1980, Porter’s analytical tools are still useful for anyone pursuing a new product or service.

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His view is that these five forces shape every industry, and can help you determine your strengths and weaknesses:
1. ​Threat of new entrants.
How easily could new competitors enter your space ?
Do others face significant barriers,
such as large capital requirements or government regulation ?
2.​ Threat of substitute products or services.
How readily could customers bypass you with other options ?
If you make aluminum windows, for instance,
you need to worry about makers of vinyl windows.
3.​Bargaining power of customers.
How much leeway do you have, in terms of pricing ?
If your customers are a lot more powerful than you,
they may beat you down on price or force you to provide free services.
4. ​Bargaining power of suppliers.
How much relative power do suppliers have to set prices and conditions
for doing business ?
If you are dependent on specialty suppliers or one or two dominant vendors,
you will have to pay whatever they ask.
5.​ Intensity of competitive rivalry.
How many powerful competitors operate in your space ?
Competition can be civil and subdued, or it can be vicious and warlike.
In a column for Inc., Porter says entrepreneurs can follow three basic strategies when it comes to achieving a competitive advantage and creating profits.

1.​You can have consistently lower costs than your rivals.
“As long as your product maintains an acceptable quality level,
that will lead to higher margins,” he says.
2.​You can differentiate your product or service from your competitors.
“That allows you to command a premium price,” he says.
“And provided you keep your costs under control,
the premium price will translate into a superior return.”
3.​You can position yourself in terms of scope.
“Some companies seek advantage in what might be called a broad scope:
They serve more or less all types of customers in an industry,” he says.

By contrast, “companies with a narrow scope . . .
dedicate all their efforts to one small niche or market segment.” In cars,
for example, Toyota is a broad, low-cost competitor, while BMW and Mercedes-Benz target the narrower premium segment.

The worst error, by far, is failing to choose any of these—price, differentiation, or scope—and “therefore not have any advantage at all,” he says. “That is what I call ‘stuck in the middle.’

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candidates at the Wharton School of business wondered:
Why weren’t eyeglasses sold online, for a heck of a lot cheaper than in stores ?
It wasn’t a completely random thought. One of them, Neil Blumenthal, had run a nonprofit called VisionSpring that trains women in the developing world to give eye exams and sell glasses.
“Why are glasses so expensive ?

I’ve personally been to the factories,” Blumenthal says.
“I’ve known that they didn’t cost that much to manufacture.
What were keeping prices so high in the U.S. ?”
Blumenthal and the others (Dave Gilboa, Andy Hunt, and Jeff Raider) began investigating.

“What we found is this industry is dominated by a few large companies that are keeping prices artificially high,” he says. Italian company Luxottica, for instance,
pretty much owns the eyewear business, controlling 80 percent of the industry
through brands that include Prada, Ray-Ban, and even Sunglass Hut and Lenscrafters.

After realizing that, the four begin thinking:
“We could come in and disrupt and charge one-fourth of what they’re charging—and hopefully begin to take market share,
” according to Blumenthal. And with that, a business model featuring a significant competitive advantage was born.

Two years later, the four launched, selling prescription glasses for $95—far cheaper than brick-and-mortar competitors who typically charged upwards of $500. Today, Warby Parker is worth more than $1 billion.

The company has always differentiated itself by selling online—it lets customers select up to five styles of eyeglasses online and have them delivered to their homes to test out for free. (Warby Parker has since expanded to 46 retail locations, too.)
Blumenthal believes that the Netflix-type model allows the company to handle shifting consumer preferences better than its competitors.

One unique advantage: It has attracted millennial consumers, who like to support socially conscious companies, with a one-for-one charity model. Warby Parker pledges to donate a pair of glasses to those in need for every pair sold. To date, Warby Parker has donated more than two million pairs of glasses.

As you move forward with your idea, you might ask yourself:
Do I have what it takes to be an entrepreneur ?
And what, exactly, sets the best entrepreneurs apart from the pack ?
Those are good questions . . . so good that a few years ago, Inc. staff writer Leigh Buchanan decided to examine them as we prepared the Inc. 500, our annual ranking of America’s fastest-growing private companies.

She noticed companies on the list were achieving impressive acceleration without tailwinds from the overall economy. “We talk about the Inc. 500 as a collection of elite companies, but what this ranking really honors is a collection of elite entrepreneurs,” Buchanan writes. More than 90 percent of Inc.

500 CEOs are also their companies’ founders.
The majority are serial entrepreneurs; about one-fifth started their first business before age twenty. “These people are, by their own proud declarations, ‘unemployable,’” she writes. “But not in the sense that other companies don’t want them.

Only in the sense that other companies can’t contain them.”
Yet when Inc. asked these entrepreneurs what made them successful, nearly three-quarters attributed their accomplishments to luck. “We’re not buying it,” Buchanan continues. “We’ve always assumed the leaders of America’s fastest-growing companies were not merely in the right place at the right time with the right resume.

Rather, we’ve believed them to be disproportionately gifted with the talents needed
to build businesses.”We invited our Inc. 500 leaders to complete the Entrepreneurial StrengthsFinder assessment, a tool developed by Gallup, the global research firm.

Some 150 did so. Gallup then compared the results with those from a national sample of close to 2,700 entrepreneurs. In every dimension, the Inc. 500 leaders scored higher. “In some cases, Everest-versus-Rushmore higher,” Buchanan writes.

Gallup found that Inc. 500 founders were more than twice as likely as the national sample to score high on all ten entrepreneurial strengths. Inc.
500 founders also proved themselves multi-trick ponies, on average scoring high
on six of the ten strengths.

The national sample scored high on just two. Sixteen percent of Inc.
500 CEOs earned scores high enough to be classified as exceptional by Gallup, compared with 2 percent in the national sample.
The Inc. 500 entrepreneurs excel in every area identified by Gallup.
But they absolutely dominate in three strengths—risk-taking, business focus,
and determination—compared with the national sample.
Those strengths are, not coincidentally, the ones most universally associated with business starts, survival, and scaling.


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