50 Reasons Why Some Businesses Fail While Others Succeed
THREE PART SERIES: PART THREE
By George Meszaros
Cofounder – Success Harbor https://www.successharbor.com/
Why is it that so many businesses fail while so few succeed?
One of the great mysteries of entrepreneurship is why businesses fail. Some people start one successful business after another while others fail to succeed.
Why some businesses fail while others succeed?
The worst part about a failing business is that the entrepreneur is unaware of it happening until it is often too late. It makes sense because if the entrepreneur really knew what he was doing wrong, he might have been able to save the business. Some entrepreneurs live in a land of denial while others are unaware of their mistakes.
One thing for sure, a business almost always fails because of the entrepreneur.
“It’s not the plan that is important, it’s the planning.” Dr. Graeme Edwards
There are over 28 million small businesses in the United States, according to the SBA.
It’s an impressive number. The sad reality is that only about 50% of them survive. What’s worse is that only about one-third survive 10 years or more. The life of an entrepreneur is unforgiving. It is a constant challenge. There are many moving parts. Any one of them could put you out of business.
Here are some effective ways to turn your idea into action:
34 – Believe that you can do it. I don’t mean fooling yourself into anything, but the only way can you make it happen if you believe that it will happen.
35 – Reach out to mentors. There are many successful people within your own existing network, and you can also make new connections. Connecting with mentors helps you hear what it takes to be an entrepreneur.
36 – Minimize risk, but understand that it is unavoidable.
37 – Give it due time. Ideas are fast, but making them happen will take time. Even if all goes well, almost everything you do in business will take longer than expected.
38 – Get others to believe in you. Successful entrepreneurs are great at selling their visions. You might have to convince vendors, partners, landlords, investors, employees, or a list of more people.
39 – Prepare to fail – Do not fear failure. There is one thing for sure, you will fail before you succeed. Expect failure but don’t fear it. Think of it as a normal part of your business. It is necessary. It is good for your business. It teaches you. It helps you make the right decision the next time. It is super important that you don’t associate failure with quitting. Only those that take action fail and only those that take action succeed.
40 – Pivot, rinse and repeat – Successful entrepreneurs are always adjusting. There are many reasons to adjust. Your customers might ask for a new software feature. Or, the recession might have put your best customers out of business. The price of raw materials might rise one day. Your business and its environment are dynamic. If you are good, you develop a keen eye for changes and make quick adjustments. Most businesses that fail do so because they ignore the world changing around them.
41 – Focus on your customer – You customer keeps you in business and puts you out of business too. If you listen to them, you can improve your products or services. If you ignore they fire you. Customers don’t disappear, they go to your competitors. Reach out to your customers. Ask them questions. Ask what they like or dislike. Welcome negative feedback. Don’t be defensive about it. Negative feedback gives you a chance to improve.
42 – Stay profitable – Staying profitable will solve many problems. The lack of profit could put you out of business even if you have record sales. Forget sales. Forget your revenue. Forget the total number of customers. Always be mindful of profitability.
43 – Manage cash – Entrepreneurs that fail often confuse cash flow with profit. The two are not synonymous. It is possible for you to go bankrupt with record cash flowing into your business. To succeed in business you don’t just need cash flow, you need positive cash flow. With positive cash flow happens when the cash funneling into your business is more than the amount of cash leaving your business. It is simple yet often ignored. The companies that ignore this end up with negative cash flow. This happens when the outflow of cash is more than your incoming cash. You should never allow negative cash flow.
Here are 10 of the most profitable companies in the world:
- Exxon Mobil
- Wells Fargo
- J.P. Morgan Chase
- Berkshire Hathaway
- Johnson & Johnson
- General Electric (GE)
Here are a few ways to improve your cash flow:
44 – Get paid in advance, ask for deposits or full payment in advance.
45 – Be very selective in offering credit to customers, avoid it if possible.
46 – Increase your sales.
47 – Offer incentives for early payment.
48 – Secure loans for emergencies.
49 – Disasters do happen – Even though Warren Buffet has a hands-off approach to managing his portfolio of companies. He does require the CEOs of each of his companies to have a one sheet in case of an emergency. The sheet of paper contains information on key aspects of the company. While the one sheet of paper might be overly simplified the point is that you have to be prepared for the worst.
50 – If you will succeed in business, you must figure out how to deal with the unexpected. It’s not that “what if it happens“, but “when it happens“. What if your best salesperson quits tomorrow? How long before you will replace her? Do you have a system in place, so when you hire a replacement she can sell?
Systems are crucial to recovering from a disaster. Formal procedures are key. Identify the key parts of your business and think about what it would take to recover losing any of them. For example, if your company relies on your e-commerce website, develop a system to recover your site even if your current site crashes and your hosting company goes out of business within the same day. You don’t have to be paranoid about it, but create systems of key parts of your company.
Few places are less forgiving than the business world. Eventually, everything adds up. If your customers prefer your competitors, your employees would rather work for someone else, your partners no longer believe in each other or the business, and the many mistakes you can make along the way. And that is why businesses fail.
Yes, it is true that most businesses fail. It is also true that many of them succeed. Those that succeed are not the result of miracles. Entrepreneurs who lead businesses to success understand that it takes a carefully planned and executed strategy. A little luck also helps.
THREE PART SERIES: PART THREE OF “50 REASONS…” WILL APPEAR IN THE NEXT ISSUE OF THE SOUTHERN OREGON BUSINESS JOURNAL
George Meszaros is the editor and co-founder of Success Harbor where entrepreneurs learn about building successful companies. Success Harbor is dedicated to document the entrepreneurial journey through interviews, original research, and unique content.
George Meszaros firstname.lastname@example.org