Tag Archives: failure

Why Businesses Fail

Man with empty pockets

 

In a prior article I gave a few general reasons why businesses fail. Those reasons seem to be the common ones being bandied about by “experts” and pundits in the business community. They are also somewhat generic in nature.

Since then, I ran across a more in-depth study done by CB Insights that provides very specific reasons for business failures.

CB Insights took a seemingly unusual approach to finding the answers to why businesses fail—they directly asked a group of over 100 owners why their startup businesses failed. Continue reading Why Businesses Fail

When Failure is Imminent!

Sorry, We're Closed

A while back I posted an article titled “When is it Time to Call it Quits,” but, just picking a time to close your business is only a small part of the process of calling it quits.

Oh sure, if you had tried to run a small home or Internet business, and it just didn’t work out while it was still young, you could probably simply ignore it and let it die off without any fanfare.

But, if you had a more established business with customers, creditors, employees, investors, and the like, it is a completely different story. This is especially true if you intend to start another business (and if you are truly an entrepreneur—you will).

So, if failure is imminent, here are a few things to help you get through the failure so you can move on to your next new venture:

  1. Use Your Outside Counselors.In the article mentioned above we discussed the importance of using outside counselors when trying to decide whether of not to shut down your business… it is just as important to continue using them for advice and feedback when you are going through the process of closing.
  2. Share everything.Everyone involved with your business needs to know exactly what is going on, including employees, investors, lenders, your advisors, and, especially, your family. It would be devastating for your spouse to have a process server knock on the door and serve papers to them saying you were losing your house. Don’t hold anything back just waiting for the “surprises” to happen.
  3. Have an orderly shutdown.If you decide to shut down your business, try to make it as orderly as possible… don’t just live day-to-day while circumstances close your business for you. Make a list of all the things you need to do to shut down your business; from coordinating with your landlord and utility companies, to having a parking lot sale. Schedule your closing events and approach them like any other project you do.
  4. Never, Never say: “I failed.”Failure is an event, not a person. Your business failed—you did not fail. This is never an easy concept to grasp—our business is personal to us, but it is important to separate business from emotions, especially when shutting down your business.
  5. Start the next one.Any true entrepreneur will be preparing to start their next business while they are closing down the old one. To put this into perspective, think of this: “Most great people have attained their greatest success just one step beyond their greatest failure.”
    — Napolean Hill

Failure is not a popular subject in the business world… it is often dismissed as “insignificant” in the overall scope of things. Unfortunately, it is all too real, and most of us will be faced with failure in some form, whether it is in product development, services performed, or an entire business.

It is important to understand, that having a business fail is part of the entrepreneurial life. In fact, it is an important aspect of entrepreneurship.

Here is what Thomas J. Watson Sr. had to say about business failures: “If you want to increase your success rate, double your failure rate.” The point Watson was making here is that you must constantly be putting forth a concerted effort at entrepreneurship.

The important thing to remember is that failure is not fatal. More important, I believe the following sums up what is truly important in our lives when facing a failed business:

“I really don’t think life is about the I-could-have-beens. 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 (Grammy-nominated American Poet and Author)


Note: For a more in-depth presentation and checklist on the process of closing a business, read my online report on Closing a Business.


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Why Plan—If Nobody Reads Your Plans?

I have been following an interesting discussion in one of my groups on LinkedIn, about whether or not a beginning business should have a Business Plan.

One lot says a Business Plan is essential—and another lot claims that planning is important, but a formal Business Plan is not always necessary.

Then, there is the third (and largest) lot of new entrepreneurs that think “planning” is a time suck and unnecessary … they just want to get their business started—they have all the details in their head.

Back in early 2009 I wrote a post about why new entrepreneurs should write down their plans instead of just keeping them in their head.

Here is a recap of that post, with a few additional comments thrown in:

  • Some time ago, a study by Yale University found that years later 3% of their graduates had more wealth than the other 97% combined.
  • A study by Harvard Business School 10 years after student’s graduation found that only 3% of them were financially independent.
  • A study by the Ford Foundation discovered that only 3% of the population achieved their goals 89% of the time.

What was the significance of the 3% in each of these studies?

In every case, the 3% of successful people wrote down their goals and plans.

In addition:

  • The SBA has stated “Entrepreneurs who completed their planning were six times more likely to actually start a business [than those who did not have a written plan].”
  • Then, of course, if you ever intend to seek investor money, you must have a written plan—or else.

So, here is my take on all of this:

You don’t need to write a formal Business Plan unless you are seeking investor money or a loan.

However, I also believe it is absolutely essential that you write down your “planning” somewhere—if you want to have any hope of success with your business.

People tell me that they get lost trying to write a Business Plan according to all the formal standards and advice that’s published regularly by the business gurus and experts, and so, they simply give up in frustration after awhile.

I agree completely and in upcoming posts I intend to discuss how to plan in a simple manner—and how best to write down those plans.

So, each week, watch for more articles about small business “planning” … there’s more to this topic than meets the eye.

For a preview, take a look at the “Planning” section of my Business Solutions website—click here.

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Planning–Do I Have To?

It seems, of late, that I have been running up against the idea that planning is a waste of time. All too often, I see the admonishment to “just-do-it,” instead of taking valuable time to write down a “plan.” Besides—so we are told—plans quickly become obsolete, and entrepreneurs do not have time to keep them up to date.

Thinking about this, I recalled some studies on the subject of planning that I ran across some time ago. These studies have been published many times in many places, but I thought they were worth repeating here. The first one is from a study sponsored by the Ford Foundation:

  • 23% of the population has no idea what they want from life and as a result they have very little.
  • 67% of the population has a general idea of what they want but they don’t have any plans for how to get it.
  • Only 10% of the population has specific well-defined goals, but even then, 7 out of 10 of these people reach their goals only half the time.
  • The top 3%, however, achieved their goals 89% of the time.

Why is there such a drastic difference between the top 3% and all the others? It doesn’t stop with this one study either. Let’s look at a couple of other studies:

  • Some years ago, Yale University conducted a study that found 3% of Yale graduates had more wealth, years later, than the other 97% combined.
  • Harvard Business School did a study on its students 10 years after graduation and found that only 3% of them were financially independent.

What is the significance of this 3% number that keeps popping up in various studies? Well, it is quite simple really…in every case of the successful 3%—they wrote down their goals!

Dreams and wishes are not goals until they are written on paper as specific desired results. In some real sense, writing them down materialize them and brings them to life. The experts claim that the act of writing makes an imprint on the brain that helps set the direction of actions by a person.

Therefore, it stands to reason that as we visualize our enterprise, if we write these thoughts down in an orderly fashion, as goals or action steps, the better our chances are of successfully achieving them.

The question you need to ask yourself then, is “Do you want to be one of the 3% who fulfill their goals in life, or will you be among the 97% who generally fail?”

“Life will not go according to plan—if you do not have a plan.”
—Gary Ryan Blair (“The Goals Guy”)

Do you think writing a business plan is a waste of time? Let me know what you think.

What Can We Learn From Costco?

In their November 2008 issue, Fast Company magazine featured an interview with Jim Sinegal, CEO and cofounder of Costco. While most retailers are whining about the economy, in August Costco had an increase in same-store sales of 9%. The reason for this is very simple; there are no secret programs, or special incentives to buy there…just good old-fashioned business sense. Here are the key points in Jim’s interview that we can all learn from.

  • Don’t gouge your customers. The interviewer pointed out that some suppliers still balk at Jim’s policy of not marking products up more than 15%. So much for supply and demand marketing.
  • Treat your customers well. Jim: “Customers shop with us for value. They don’t shop with us for cheap prices on cheap merchandise. They expect us to deliver value on quality….The final analysis is, the customers vote at the checkout.” This is something for all of us to remember.
  • Treat your employees well. Wall Street complains that Costco treats its customers and employees better than they do their shareholders. They pay their workers an average of $17 per hour, and 90% of health insurance costs, for both full-time and part-time employees. Yet, revenues have grown 70% in the last five years, and their stock has doubled.
  • Know your competition. Jim: “Hardly a week goes by that I’m not in a Sam’s.” Do we study our own competition that closely?
  • Try new things. Sales on Costco’s e-commerce site are expected to hit $1.6 billion this year, a 33% increase over 2007. Coffins are one of their big e-commerce sellers. Who would have thought?
  • Do not be afraid to fail. Jim: “You don’t have enough space in your magazine to talk about all the things that we’ve tried that didn’t work out.” How bold are we about trying new things?
  • Manage by walking around. Jim: “You know, there certainly are days when I’ll visit 12 (stores). I will be traveling to our warehouses every single week between now and Christmas…I try to approach the visits from the standpoint of the customer. Does the building have the right goods out? Is it well stocked and clean and safe? Nothing is a bigger turnoff than poor housekeeping.” Spending quality time with our customers and employees is going to be one of the keys to surviving this recession.
  • Be innovative. Jim: “We just reconfigured our cashews. They were in a round canister, and we put them in a square canister. It sounds crazy, but we saved something like 560 truckloads a year of that one product.” In today’s chaotic world, innovation is not optional.
  • Keep overhead low. Jim answers his own phone and sends his own faxes. I read somewhere else, a while back, that Jim uses the same desk, in the same small office where he started 25 years ago. Many of us can take a lesson from that.

Obviously, Costco is a reflection of its CEO and the values he brings to his business. But then, aren’t all our businesses a reflection of the values of the owner?

Something to think about.