Tag Archives: business failure

When Is It Time to Call it Quits?

Cat at Window

 

 

 

 

 

 

Have you ever had days like this when your life just wasn’t going quite to plan? Problems with customers, cash flow, employees, vendors, investors, and on and on… it sometimes feels like the whole world is hosing you down.

I’m sure everyone in business has occasionally felt like the poor fellow above… but what if it starts happening on a regular basis?

Obsession and passion are prerequisites for becoming a successful entrepreneur, and so is perseverance—up to a point!

But, if your business is just not performing according to your planning, and you have tried everything you can think of, maybe it’s time to change your plans.

Continue reading When Is It Time to Call it Quits?

5 Reasons for Business Failure

Business failure is a subject most people never want to discuss, or ever hear about. I even had a Business School administrator once tell me that business failures are so minimal they needn’t even be considered.

Yet, of the 6+ Million new businesses the Kauffman Foundation tells us will be started this year … most of them will fail!

Dream vs. Reality-4.75

 

So, I have to ask the question: “Why do so many businesses fail?”

I think a possible clue lies in the frantic questions I periodically receive from business owners asking for help with their failing business … or from aspiring entrepreneurs who are lost in the morass of trying to start a business.

Interestingly, the cause for these questions—and I believe the underlying cause of most small business problems—can be found in one of the following reasons for business failure.

Let’s take a look:

  1. Lack of Passion. Every entrepreneur believes they have the passion to start a business. Unfortunately, very few of these people understand the meaning of “sustained” passion. That is usually because they have no idea what pitfalls and roadblocks lie ahead of them, and that their passion will be sorely tested. Far too many new business owners lose their passion after a few “reality checks.”
  2. Lack of Knowledge. In almost every case, the questions I’m asked indicate a basic lack of business knowledge. If you cannot understand and analyze financial statements—or create Pro forma statements for your planning—you should not start a business until you can do both. The same holds true for planning, marketing, managing employees, and all the other aspects of running a small business. Find a mentor, read business books, attend small business classes—whatever it takes to get the knowledge you need.
  3. Lack of Planning. “I don’t need no freakin’ Business Plan” is a common response when I ask someone with a business problem, if they have a business plan I can look at. Very few entrepreneurs have any written planning, they just want to get their business started, because they “just know” the business will succeed. If you do not do proper—and constant—planning for your business … you will fail. Period.
  4. Not Understanding the Market. “If you build it, they will come” is the worst possible approach to starting a business. More businesses have failed because of this belief than any other. Study your potential market; test it; survey it; research it—whatever it takes to learn all there is to know about who you are going to sell to, and what it is they need or want. A little extra time spent here can often mean the difference between success and failure.
  5. Lack of Commitment to Hard Work. Rare is the new entrepreneur who has any idea about the amount of hard work required to build a successful business. Most aspiring entrepreneurs envision a life of leisure where they only have to work a few hours a week and let others do all the real work. However, it is you, the business owner, who must create the fruits of your labor before you can start to take it easy and begin to live off those fruits. Most people want quick gratification, without putting too much effort into the process, which is—the formula for failure!

 

You will notice that I did NOT include “lack of capital” in the above list of reasons for small business failure. In my opinion, that is usually a cop-out because the entrepreneur is lacking in one of the 5 reasons listed above.

If a new entrepreneur can overcome the reasons for failure listed above, they will be able to find money for their new business—even if they have to resort to Bootstrapping.

So, if you are a new business owner or aspiring entrepreneur, I highly suggest you review the above topics and make sure you have an understanding of what makes the difference between success and failure of a small business.

What do you think? What is your opinion on why most businesses fail?

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Business Survival Rate–The Great Mystery

Does anyone really know what the true statistical probability is for an entrepreneur to have a business failure in the U.S.?

The answer is NO—there is not even a close guess! This is because the people and agencies that attempt to determine these statistics use “selected” data, which ignores some 70% of all U.S. businesses.

Why is this even important? Why should an aspiring entrepreneur, or small business owner, even care what the survival/failure rate is?

Well, there are three groups of people that should care a great deal:

  1. Government policymakers should care. They are the ones who make the laws and regulations that affect our businesses. These people should know the true facts and not rely on half-truths and erroneous data about small business survival when considering new, possibly more damaging, regulation.
  2. Business investors should know what their chances are of making or losing money before they invest in our businesses. They should be looking for reasons given by us as to whether or not they should believe we would overcome the statistics and make our business successful. But first they need to know what the statistics are.
  3. Every aspiring entrepreneur and business owner should care, and understand what they are up against statistically, so they can use that information to better apply themselves when preparing their business for starting up.

As an exercise some night, watch Shark Tank on TV and observe the naïveté and lack of planning the wannabe entrepreneurs bring to the sharks. Then switch over to Restaurant Impossible to see what happens when business owners don’t plan, or they become complacent, or they go into denial.

Maybe just knowing how close all small businesses are every day to becoming a statistic could jolt business owners into doing better planning, rise from their complacency, and make smarter decisions. Maybe even work a little harder.

This brings us back to the question: Just what are the survival and failure rates of businesses in the U.S.?

Don’t’ pay too much attention to the numbers being thrown around by business pundits, academics, and writers—their numbers are based on surveys from a selected group of businesses representing less than 30% of the total business population … often less than 10%.

Worse than that, the promoters of these numbers often quote from each other and the numbers tend to change depending on who is doing the telling.

The fact is, that the actual numbers do not exist. No one really knows what the survival and failure rates of the entire population of American businesses actually are.

Although I have been interested in this area for quite some time, I too have not been able to determine an accurate rate of survival and failures for businesses in the U.S. But I do believe that my research and findings come closer to reality than anything I have seen so far.

In addition, I have put all my research and findings into a report called Business Survival Reality: The Mystery of Business Births and Deaths in the U.S.

You can obtain a Kindle copy of this report by clicking here.

One thing I want to instill in readers minds as they read the report, is that even though the failure rate is high—that is not a bad thing!

All entrepreneurs will have failures throughout their lives, for example:

“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life, and that is why I succeed.” — Michael Jordan

Many will have their entire business fail—some multiple times:

“Would you like me to give you a formula for success? It’s quite simple, really. Double your rate of failure. You are thinking of failure as the enemy of success. But it isn’t at all. You can be discouraged by failure or you can learn from it. So go ahead and make mistakes. Make all you can. Because remember that’s where you’ll find success.” — Thomas J. Watson

So, my advice to aspiring entrepreneurs and small business owners is to properly prepare your business for success. Do everything in your power to succeed. But if you do have a failure—embrace it and learn that it is not just a part of the cost of becoming successful—but a part of life.

Consider this:

“I really don’t think life is about the I-could-have-been. Life is only about the I-tried-to-do. I don’t mind the failure, but I can’t imagine that I’d forgive myself if I didn’t try.” — Nikki Giovanni, Poet and Teacher

Most importantly, regardless of how many failures you may have over time, you should never, never quit—and never lose sight of your dreams.

Have you ever had a business failure? Let us hear about it, and how you overcame it.

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