18 Reasons Why Businesses Fail
It’s Saturday afternoon hanging out with the crew at the local watering hole and BOOM it comes to you like a bolt of lightning. You don’t know where this spark of genius came from just that it’s swirling around your head (like a flock of seagulls on a discarded bag of hot chips)
You think to yourself “that’s it, this is the best idea since slice bread, I can’t believe I haven’t thought about this before”
You excuse yourself and head to the restroom (the best place for quiet contemplation) open the door and take a seat on the throne.
“I’ve had these thoughts before, but this is different”
“Should I tell everyone or just keep it to myself?”
“What if it’s no good, what if …?”
“This is just to good to keep in, I must I must tell them”
After 5 minutes of deliberation, you’re back with the pack and announce, “hey everyone I’ve got it”. Looking at you like dear eyes in the oncoming headlights they listen to your (cure for mankind’s ailments) and are poised for the big finale’ “so what do you think?”
Applause, pats on the back, girls screaming like you’re a rock star on stage (well maybe not that dramatic) but a complimentary “cheers, I’m buying the next round” from your main man, gives you the nod and the green light to tell your conscious mind “I need to do something with this, no one else has even thought about it” .The “seed” of inception is planted.
The Beginning of the End
The little implant all Entrepreneurs start with. The weekends over and you’re back to reality working for the man except something’s different; something’s just not the same. You’re looking at the game from a different perspective.
Your boss comes past “hey what’s happening with that project?”
Normally it’s harmless enough it’s just a status update except now there’s a hint of resentment. As he walks away you have this, “I do all the work and he gets all the cash” moment.
And before you know it the thought of waking every morning and doing the same, same just isn’t cutting the mustard.
You’re already calculating that if you leave or get fired you are good for at least 2 months. Add the savings over the past five years and going into business is a good choice after all. No one can tell you what to do anymore.
You tell yourself “All I have to do is cover what I’m making and that’s it, I can live on a lot less”. “Did 4 years of uni on falafel rolls and no frills soda”
By now you’ve asked “Google”, spoken to everyone you know, checked out “Flying Solo”. The seed has turned into a monster (like the Alien in Sigourney Weavers belly) ready to break out and rear it’s head.
Your employee days are behind you and just to add icing on the cake you see that the law of attraction is alive and well when you come across the “business awaits you – just do it” post on Facebook. “This must be fait. The post is a sign”.
Your life savings plus another sum from the oldies retirement fund and you’re off. The vast ocean is ready for the taking.
However not all is smooth sailing.
A few months into it you’re setting up the office, unwrapping all the Ikea DIY furniture, not forgetting the “Everything you can conceive you can achieve” poster, you begin to feel like maybe the “honeymoons” over. Lots of cash spent but nothing coming back in.
Now a while back while checking out some sites, showing off the idea and speaking to your partner you noticed a few little what I call “tremors”. You know the little internal emotional vibration that just makes you do the mental double take? Remembering the conversation you had with yourself and others that went some thing like this.
“So what if I can’t find much info on it, this means that it’s even more special” after looking at the research.
That partner discussion – “What do you mean by “do you think people will be into it?”
The friendly neighbor chat – “Why wouldn’t they pay that little extra for it?”
“There’s something similar but nowhere near as good”. You’re telling yourself
“Forget about it” you tell yourself (doing your best Donny Brasco)
You’re positive, you’re pumped and this is your baby. It’s the “one”! It’s in the vision board of your future. The big boat, the Ferrari and the pad on the water.
“How could I not do this, everybody needs this, it’s just a matter of time” and by the way, didn’t you read that no one makes any money the first 2 years in business?
The Calm before the Storm
12 months goes by and the enthusiasm has turned to despair. You’ve hit your parents up for some more dosh, murdered the Credit Card that was there for the “just in case” and the business you set out to conquer new worlds with isn’t going at all on the trajectory you were expecting. You’re telling yourself “what have I done?”
As a Holistic Business Coach in touch with business owners all over the country I wish this was just a story, a figment of my imagination. Instead it’s the reality for thousands of business owners in Australia and I would confidently say millions around the world.
Here are some small to medium business revenue and failure stats according to the U.S. Department of Commerce, Bureau of Census.
- Less than $250,000: 93.1%
- Less than $25,000: 57.1%
Small business failure rate:
- Year 1: 85%
- Year 2: 70%
- Year 3: 62%
- Year 4: 55%
- Slowly reducing to 35% failure rate after 10 years.
Similar stats are shown globally give or take dependant on population, economic conditions etc. The indicators are alarming to say the least…right?
Experts will tell you that the usual story that it’s about cash flow, lack of planning, location and so on. Even though they’re really important factors, perhaps the story doesn’t end there.
Perhaps the truth’s deeper than that, much further beneath the surface. The rabbit hole so to speak goes much deeper.
I believe in the following
Here’s the 18 reasons why businesses fail!
(They are in no particular order)
1.You Start Believing Your Own Story
There is a distinct difference between believing in yourself and believing your own story. The first is about being passionate, focused and committed where the later is about justifying that whatever you’re idea is it must be the best and that’s it.
Let me explain.
I met a young Entrepreneur about a year ago that was showing me an idea he had that in his eyes was going to revolutionize the soda industry and he wanted to take on Coca Cola. It was a pill delivery system (similar to the Berocca vitamin model of dry tablet mixed with water when needed) except his model had been done in the 60’s already with a product called “Soda Stream”.
Now I’m all for “innovation” and “renewal” heck I’ve written an entire book on it but the difference in this case, the product just didn’t really solve the solution, in his words “ the need to carry the soft drinks from the car”. You still had to carry bottle’s of water in. But now you had a product that taste’s nothing like the Cola giants.
Cut a long story short. I continued to ask him two questions
- “Have you done your research?”
- “How much funding do you have?”
“Yes I have”
- “My friends think it’s amazing”
- “I have $20,000 my parents are lending me”
Now if you’re reading this blog I know that you have already understood where this story is heading. See he believed his own story. He had already spent $30K in the development phase without doing the research and just didn’t want to end up another statistic.
Take Away: Look at any business as if you were an investor, be partial and non-attached to start with. Ask questions and look for flaws in your story. This will show you the way
2.You Shouldn’t Be In Business
In my eyes not everyone is suited to business. I mean let’s face it, it’s tough. If it was as easy as all the internet guru’s would make you believe it would be called “easy” rather than business (busi – ness). It takes skill, juggling time and unwavering commitment to create the initial momentum needed to take it to the next level.
One of the business owners I met said she hated selling and every time she was put into that situation be it at a Networking event or at the store she always felt “awkward”. When I asked the reason why she said “I hate it when I go into a store and the salesperson asks me if they can help or try to sell me something”.
Now I don’t know about you but if you’re in business isn’t that one of the foundational principles to sell a product or a service?
Take away: If you’re finding it difficult to market or sell your business to everyone that you meet and you believe belief that they need to have whatever it is you’re selling, you need to re consider being in business. Business is about selling period!
This is by far the most widespread of challenges. It helps create the basis of why businesses fail. Fear has a way of carrying itself through into your personal life and permeates every cell in your body. The interesting observation is often in business (as in personal life) fear is just a belief that creates what you deem as “truth”. Fear incapacitates you to make the decisions critical for your business. You may have experienced this around spending money for marketing or borrowing for that new piece of equipment and so on.
Business as an entity has a massive portion of it in the unknown. So regardless of how much analysis, forecasting, planning and so forth you do eventually you just need to take that leap of faith, the complete opposite of fear. So a combination of fearful decisions can lead to catastrophe.
I have seen this many times in business and experienced it first hand.
Being mindful about your thought patterns allows you to understand that often the “fearful belief patterns” we experience are almost always based on previous outcomes i.e You did the marketing campaign and it just didn’t work so your decision is now based on an action you took in that particular point in time.
Take away: Fear is eliminated through high levels of certainty. This is achieved through a combination of diligent research and faith. You need to tell yourself that rather than being a hostage to the outcome you can either.
- Prosper form it or
- Learn from it.
There is nothing written in stone that will guarantee success.
4. Your Business Isn’t Your Passion
As I’m writing this post a great friend of mine calls me and were discussing his major brand recognized franchised coffee business that he bought about a year and a half ago. He came from a very successful real estate background, moved to the coast for a sea change and saw that the new venture business was systemized and runs itself with a good return (and so he was lead to believe).
I asked him when he purchased the business. Is coffee your passion?
“I drink coffee, I think the coffee in the business is OK but I’m not in love with it”.
Today’s call was of a different nature he shared that the business is on the market for hundreds of thousands of dollars less than the purchase price and that the restaurant has been loosing thousands monthly.
The despair in his voice you could cut with a knife. See he didn’t like being in the restaurant, the business he had purchased for his wife and teenage daughters to be a part of, has now become this place where he hates going and family don’t want to be part of. He shares no passion for that business itself.
Takeaway: If you’re running a business or are inheriting one passed down from a family member and you’re not passionate about it, do your self a favor and just sell it. Life is too short to live everyday with something that you just don’t love. The litmus test I like to share with my clients is ask yourself these 2 questions
Would I do this for free?
Am I happy to dedicate the next 10 years to?
5. Don’t do what you say you’re going to do
If you follow through with your original commitment to your business then you will never fail. That’s a bold statement right? Well it’s true isn’t it?
See when you first started in your business you didn’t say “I’m starting this business so it can fail” or “I’ll see how it goes and if it fails oh well” or at least I hope you didn’t!
You did everything in your power including investing X amount of time and money, blood, sweat and tears.
Then what happened?
A few bumps in the road, a slump in sales and you began to give up on the business and started to believe that this was your reality.
Business is like running back to back wither emotional, mental or physical marathons. It takes commitment and long term dedication.
Take away: I have a simple way of dealing with it. Just imagine your business is like owning a pet or having children. What do you do, give up on them? You can’t send them back, there is no choice but to persevere through the good the bad and the ugly. Remain what I like to call “solution based focused”. Your business needs that level of commitment. If you do you will always find a way!
6. No Real Time Experience
Whether you’re looking at an online or offline business the territory is critical. The military do surveillance well in advance of any type of combat insurgence. However that only tells them a portion of the story. As such their personnel continuously train on the ground to foresee any of the real time threats they need to deal with.
Often failure comes from not really understanding the business territory. Each have a unique set of circumstances that need to be dealt with accordingly
Example: If you’ve established an online business and don’t exactly understand that it takes more than just a website and an email address because you haven’t worked in or coached by an owner that is successful in that field then you simply can’t see the obstacles.
It’s the same in an offline endeavor. Like my friend with no experience at all in the restaurant business. Systemization and processes can only count for x amount of the picture. The essence comes from being in the day-to-day activity.
Take away: If you’re looking at a new business, go and spend a year working with a similar business even if you have to do it for FREE. Believe me it will cost you a hell of a lot more to find out the hard way. The alternative is to find a mentor (in your chosen field) that can take you under their wing. Experience is paramount.
7. Don’t Want To Be There Anymore
A sure fire way to cause your business to fail is if you’re looking for excuses not to be there.
I have a personal story to share.
I was in business with a friend and business partner when 6 months into the new venture he decided to leave the business and wanted a large sum of money to do so.
Fast forward a year later and the relationship became sour to say the least (common in partnership disagreements). It got to the stage where he pursued legal action which resulted in an initial closing and a subsequent sale of the very successful business for a fraction of what it’s potential worth.
In the process, which lasted about 3 months, I had lost the “will” to continue to contribute towards the energy that the business needed to maintain growth. Everyday I would look for excuses not to be there, leaving it up to the staff to “take care of business”
Take away: If you feel that you have lost the passion or lack the energy, the hunger to stay in business it’s better that you get out. It’s not about shame or blame, (I felt that for 3 months) it’s about clever decisions that benefit your life. It's the same on a personal basis if you’re in a relationship that you don’t want to be in it’s simple you have the power to choose!
8.Unwilling To Take Risks
Some people are wired differently. They love stability in their life. A regular pay cheque and things in order and a general flow. So when the business needs a different set of rules to operate under the situation becomes highly volatile.
In business there are “calculated risks” once all the necessary ground work has been done. With it comes a certain “value set”. So if stability is top 5 and risk is at the bottom of the list you now have internal conflict happening.
I see business owners live with this conflict that eventually leads to indecision (procrastination) around making decisions that involve x amount of risk such as a marketing campaign, sales strategy, expansion strategy and so forth.
Your value sets are engrained deep into your operating system. They’re present to give you a guide about what works for you.
If risk is tough for you to deal with “job stability” of a regular pay check may be the better outcome.
Take away: Life and business are all about risk. Nothing is written 100% one minute you're here the next well… In business you are required to adapt to the outcome and learn for the next. This is called experience. I like to use a sheet of paper with a + and – at the top. Write down all the positives and the negatives then way up the option. The most important aspect is then to use your inbuilt compass. Your gut feeling and your intuition.
You know when it's worth the risk!
9. Not Willing To Grow And Look At Themselves
Change is the one constant throughout the universe. It’s in us, around us and everything exists because of it. A major part of business success today is learning to understand the changing face of it. Adaptation and growth go hand in hand.
Think of it: Selling Rubix Cubes (for people reading this that don’t know what they are look up the “Oracle” called Google) back in the eighties was great business, now I’m not sure about how successful they would be now.
What I am leading to is a lot of business owners are stuck in their ways and not willing to adapt. Dealing with such things as technology or online retailing etc for some are very daunting situations.
Here’s a story: My sister works for a guy that wants all the accounting done the “old school” way in handwritten ledgers, because he refuses to use a computer. He says, “ I’ve heard the stories of people finding out what you earn”. “I don’t want to use email either” As his business is dominantly cash based there are other consequences he refuses to deal with as well.
The results of this mindset are starting to show the cracks through out the business with sales being at an all time low, growth steadily decreasing, communications restricted (still uses fax rather than email) and unhappy vendors. This guy still goes into the local Bank to pay them in cash rather than using an online facility.
Take Away: What worked in the past isn’t now. It's important to ask yourself
- How much personal growth have I experienced in my business?
- What systems do I need to update to deal with the times?
- What am I resisting and why?
10. The business owner is the worse thing for the business
The example above is only one instance where personal growth stops the business from evolving. And “if your not evolving your devolving” ending up in the inevitable failure.
What I want to share with you is that in many cases of business failure the cause is the business owner. The lack of respect for staff, the constant negative energy surrounding customers, the stress related symptoms that come with a lack of trust and many more are all the parts of the failure puzzle.
I have worked personally with a business where the business owner constantly lied about the financial position of the business, would constantly blame others for his inability to do simple tasks and would never admit to or take responsibility of his actions.
In business is it critical to understand your strengths and build upon those. It’s also critical to admit when you’re in over your head and would be better if you delegated the particular task or job role to others that are capable of it.
Sharing negativity with employee’s that are looking for leadership is a major cause of dysfunction and distrust. It shifts the energy of the culture. Dealing with clients as a number rather than your lifeline leads to you being out of business.
Take away: Look at your role as a business owner within the company. Analyze your skill set using a SWOT analysis and question your leadership. The key is not to be offended or take it personally if you’re business would be better off with someone else leading. It’s still your business except you are getting the best out of other people and combined the results can be outstanding.
Now if you’re a Solopreneur then look at your best traits and work on other necessary skills.
11. Lack of Business Mindset
Similar to an Olympic athlete so too is the mindset of an Entrepreneur. It takes mental resilience and commitment to deal with the rigors of running a business.
For some this challenge alone is met with resistance let alone embrace. Not being able to multi task at some level is detrimental for business especially in the early stages where you need be a “jack of all trades”.
Now a business mind can be developed however the will to learn needs to be present. As an example I find people that are more right brain orientated around creativity find the “left brain” around business acumen much more challenging to grasp. In today’s environment a combination of both are much more in line with the environment.
For many business owners “doing business” becomes overwhelming leading to anxiety, depression and not dealing with the tough sustainable decisions.
Take away: You have options here. Either get someone on board as a “sounding board” i.e a business coach that can help with the skill that you may need. Alternatively a partnership may work best if you are the creative type ensuring the partner skill set is based in business. Also today you have the ability to take shortened courses such as MBA essentials, accounting, management and so on that come in very useful. Investing in yourself pays dividends in your business.
12. Worrying about what if?
“What if” is a prelude to many amazing things in life that could have happened and possibly didn’t. It creates a sense of tension in business and ensures a level of hesitancy. I’m not saying that you should proceed haphazardly; I’m saying it would better to change the approach
This allows for a broader scope of possibility and enhances creativity to solve challenges within the business. “What if” is the same as using a “pre nup” in my books. It’s there as a prelude to failure. Setting up the mindset for defeat. Master Yoda from Star Wars says it perfectly “either you do or you do not, there is no try”.
“What if” paralyses progress because usually the words following are along the following
- I do this marketing campaign and it doesn’t work
- We grow to big and I can’t handle it
- I fail and I can’t pay back that debt and so on
Now I’m by far not saying that this is always the case.
It’s human nature to be cautious though as we discovered earlier taking calculated risk is a part of the business territory.
Take away: Every time you go to use the word “what if” for the next 30 days substitute it with “how can I” and measure the difference in progress. You’ll be surprise how this simple change can have a massive effect on your business.
13. Comparing Yourself To Others
This is a common thread amongst business owners. Worrying about what’s on the other side of the fence.
I remember watching an 80’s movie called Cannon Ball Run where one of the drivers said the following as he rips off the mirror on the new sports car “first rule of Italian driving, who cares who’s behind you”
That has stayed with me since. If you’re spending so much time worrying about what others are doing (by looking in the rear vision mirror) how can you have time to work on yourself or your business?
The results simply lead to frustration, jealousy and incapacitation. Now it’s important to do due diligence on your competitors however being obsessed with others people’s business is unhealthy.
It has become a human past time through T.V medium’s such as The Young and The Restless, Big Brother, Wife Swap, The Kardashian’s and so on. Looking at what others do like “lab rats” getting caught up in their so-called reality and comparing them to our lives.
As a business owner what YOU do yields your results.
Take away: Do your due diligence and know what your customers and clients behavior patterns (this helps with marketing and sales). Market analysis is critical however it’s not the whole story. Be clear about what your business offering is. Importantly give thanks to your competition it brings a better you out and elevates business in general.
14. Invisible Hurdles
Buried deep in our mental and emotional programing lye what I call “invisible hurdles”. These are by far the biggest cause of business failure. They come in all shapes and forms here’s an example:
Self Worth: Many business owners in the service industry charge by the hour for the services they render. However many are undercharging for the amount of study (you see this in the holistic wellness industry). You study for 6 years plus, spending thousands of hours in books, clinics and lectures to charge $50-$100 per hour at best.
What’s wrong with that you may be asking?
Research shows that the average practitioner earns around $9-12K per year, not even enough to make ends meet, however the industry is a $750 billion global playing field.
So it boils down to what you “believe” you are worth. I have worked with many highly skilled practitioners that find it difficult to charge accordingly and often it is a belief about helping others called a “memetic” structure. An imbedded belief that is implanted somewhere in the earlier years around “self worth”
There is an experiment that sums this up perfectly. A researcher placed a grasshopper into a glass and covered it with cellophane. The grasshopper in it’s attempt to jump out kept on meeting the plastic “ceiling” over and over again. About 20 min later the researcher removed the cellophane only to find the grasshopper kept on jumping only to the point of the created “false ceiling”.
We do the same. We create false ceilings around self worth and money. Self worth and relationships. Self worth and Self expression and so on. The result of which often causes inner conflict and tension. These invisible hurdles can be dealt with in time by uncovering the invisible hurdle through reflection and dealing with the underlying issue’s most of which lead to LOVE.
Take away: Ask yourself the following
- What is your self worth?
- How much are you worth in your business?
- What are your “false ceilings”?
- How much inner conflict is this causing?
15. Not enough energy to get through “The dip”
Seth Godin explains it perfectly in his killer book called “the dip” (go out and buy it!!) Basically it’s about energy management. As a business owner you need to be prepared to have enough clout behind you to push through what I call the “business gravity”. The initial challenges to gain momentum to push through those stages where everything feels like it’s at breaking point.
Money’s tight, sales are a little slow, marketing campaign hasn’t produced the result. You know what I’m talking about …right?
What get’s you through “the dip” are 2 things
- Stop before you get there. Give up the idea, the business, the stress and challenges that come with the territory.
- Have a big enough burning passion in your belly and a large enough goal to shield you from the everyday business operation in your quest to change the world. Seth says “be the world’s best”
How much energy are you prepared to devote to your business?
Success is never easy or should I say long term success is a process that takes time and energy.
Takeaway: Ask yourself what are willing to
- give up
- Not give up
To make your business a success.
- What are your plans over the next 3-5 years and how much energy to they require. Whatever the score multiply it by 5 and then you’re in the park.
I hope you choose to give it your best efforts. The world needs you and your passion. The people you touch everyday are there for you. You just need to push through to the other side!
16. No Rituals Or Routine
There is a side of business that most of the world never gets to see. From the outside most of the public see a shop front of well arranged products, promotions and sales people at the ready. Online they see websites full of colour, information and offers. But just like a big concert production there is the “behind the scene’s” work that takes hours and hours to make it happen.
In today’s changing speedy economic environment every new entrepreneur is drawn by the fast set up, fast cash model. Site up and running in 2 weeks and get selling. A small majority successful (less than 5% globally) though the vast majority comes with a taxing price.
This is also prevalent on the offline world as well with the power of the internet in creating logo’s, printing , product and so forth your business can be up and running in a fraction of the time it used to take.
However sustainability is about doing business over time.
Example: following up calls, sending email responses, stacking shelves, dealing with distributers, uploading product, marketing etc. these are the daily routines that if you as a business owner are after longevity have to be done day in day out.
See many business owners start off this way doing everything that needs to be done daily regardless of how boring the task is but after a while they get busy doing “stuff”.
The routine then broken and which leads to being off track. This is the exact time holes start to appear in your business.
“Oh I forgot to pay my tax bill”, oops “I didn’t send that confirmation to the printer, now the marketing campaign can’t be sent”…
There is another side to this equation and it’s about your personal ritual. Anthony Robbins describes it perfectly “your hour of power”. This is the time that you take daily to set you up, reflect on the day, goal setting, focus on the day ahead, exercise, grooming and so on.
I can’t stress enough the importance of personal and business rituals. It equals freedom to know what you’re doing on a daily basis, it keeps you focused on the task in front of you and the outcomes measurable. No routine equals a scattered approach with no consistency. Business is all about consistency not boring but consistent!
Take away: Design your daily routines / rituals with an Accountability Chart. Ensure that regardless of the situation YOU come first. Spend at least 30 -60 min daily getting set UP for the day ahead and then 15 – 30 min before you sleep simply reflecting on the day and thinking about your goals. I have personally witnessed the power of rituals in many businesses including my own.
17. Not clear about who you are and your message
Have you ever attended a networking event and heard people introduce their business only to waffle on for 10 min about everything bar what their business does?
So if you’re unsure about your business message how is anybody else going to know what you do and the benefits you offer him or her?
Often the sticking point for business owners is precise delivery of information. When your traditional (elevator pitch) is shaky and not to the point your business reflects the same way.
Not having a clear understanding of what your message and business offering are causes repercussions in your marketing efforts. Understanding target audiences and the playing field in general.
Contrary to what most marketers believe that it’s all about niche approaches I believe you have a choice to either niche or be the niche. The critical component is laser like clarity and focus on your message and how it helps solve a need for your future prospects and clients.
Takeaway: Work on a simple 3 stage version of your message in the form of a story. A 10 second, 30 second and a minute story like delivery of your message and offering. Another great source of information is to read Power Stories by Valerie Khoo.
18. Don’t Want It As Much As Breathing Air
Business is a massive part of an Entrepreneurs life. Even if the guru’s are banging on about how to work an hour a week and do whatever for the rest of the time. In some way shape or form we are always doing business.
The question remains “how bad do you want it?” http://www.youtube.com/watch?v=UizlkbS61mQ
Any thing in life that is worth something to you is worth committing to, worth everything that you’ve got. Business is no different. You spend a good chunk of your time in it so you may as well be doing something you love doing and giving it your best shot!
Remember you are the backbone to your community that is now global. We need more businesses to bring innovation, competition and bind communities or as Seth Godin says create “Tribes”.
Your business impacts many people whether you know it or not. So give it your best shot, your passion, your knowledge and share your vision with others often.
It’s not how many times you fall as fall you will it’s how many times you get back UP and go again –
This guest post is courtesy of Nick Psaila Holistic Business Coach/ Author/ Speaker http://www.nickpsaila.com