Why
do these reasons remain untold? Simple. Most of the time, the business owner
doesn’t realize that these reasons are what caused their failure, and
consultants generally don’t ask the kinds of questions that would identify
them.
There
have been many articles written on the subject of why businesses fail, and most
of them point to the same reasons, such as:
·
Inadequate
funding
·
Bad
location
·
Lack
of a well thought-out business plan
·
Poor
execution
·
Bad
management
·
Expanding
too quickly
·
Insufficient
marketing or promotion
·
Inability
to adapt to a changing marketplace
·
Failure
to keep overhead costs low
·
Underestimating
competitors
These
reasons are widespread and no doubt cause many businesses to fail. However, the
reason for a company’s failure is not always something so obvious. Here are 6
lesser-known reasons why a business might fail. Why do these reasons remain
untold? Most of the time, the business owner doesn’t realize that these reasons
are what caused their failure, and consultants generally don’t ask the kinds of
questions that would identify them.
1)
Focusing on Short-Term Profits Rather than Building Long-Term Value
It’s
important to be profitable, but NOT when short-term profits come at the expense
of the long-term value of the business and the lifetime value of the customer.
In
other words, a profitable business opportunity consists of people who have dire
wants that are being unmet so much that they will jump to buy your solution
(product or service). A profitable business opportunity can be compared to a
lake with thousands of starving fish. All you need to do is throw in the bait
and it turns into a feeding frenzy.
It’s
important to consider the lifetime value of a customer. Repeat business is way
more valuable than short-term profits. Saving 20 cents on a smoothie today will
cost you big in the long run.
2)
Ego Business vs. Business Opportunity
The
foundation of a good business is a good business opportunity. As an
entrepreneur, you want to fill a need in the marketplace. Unfortunately, many
businesses are started solely to fulfill an entrepreneur’s ego (or, to put it
less harshly, to satisfy one of the entrepreneur’s interests).
This
can often be seen in the restaurant & bar industry, where too many
entrepreneurs open shop because it’s a “cool” thing to do. Such businesses
rarely succeed.
The
success of a business solely lies in being able to fill an unmet need in the
market, unfortunately many entrepreneurs engage in business due to personal and
selfish gain controlled by their egos. This also drives us to realize that many
entrepreneurs are driven to start a business because their friends/colleagues
are doing the same. There is nothing more destructive than to pick a business
which you can’t fully embrace or which costs you a lot of money to sustain.
3)
Lack of a Business Plan:
Business plans are critical for setting goals and mapping out your
plan to achieve those goals. They are also critical in order to raise capital.
Whether you are seeking a bank loan, or capital from angel investors, venture
capitalists or corporate investors, a formal business plan is simply a
requirement.
One of the absolute keys to a successful business plan is to
create the right business plan milestones. Doing so is essential to securing
investors and making real progress towards achieving your goals
4)
Bad feedback & white lies
People
like spending time with friends and family.
Unfortunately,
when it comes to business, friends and family members don’t always give the
best advice. This is especially true at the birth of a business. Nobody wants
to be a buzz-kill. No one wants to tell an entrepreneur their idea is bad, or
their location stinks, or anything else negative. Most people are conditioned
to be supportive of their friends and family regardless of the situation.
Plus,
nobody wants to be wrong. Imagine your friend has an idea that you think is
terrible. You share your objections, but the friend goes ahead with the idea
anyways, and it succeeds. Now you’ll always be the naysayer that never believed
in them. Nobody wants to be that person.
That’s
why you’ll rarely get honest, objective business advice from friends or family
members. And yet, oftentimes friends and family are the first people
entrepreneurs turn to for advice.
5)
Maybe the owner is just a jerk
There
are a lot of great people in the business world, but there are also some jerks.
And these jerks sometimes start their own companies.
A
jerk, in this case, is someone who a lot of people can’t get along with. Maybe
it’s because they’re a super-perfectionist, or they yell a lot, or they demand
that everything be done in a certain way, or they constantly complain. Or maybe
they’re annoying in some other way.
The
key is that nobody -- not employees, customers, partners, suppliers, clients,
etc. -- wants to give 100% for a jerk. Clients and customers will be turned
off, and employees will start cutting corners. Most people believe that life is
too short, and don’t want to spend their time working with someone they can’t
get along with.
6)
The entrepreneur never took the full leap
In
most new business attempts, the entrepreneur never leaves their day job, or
they create a back-up plan, or they have a job lined up in case the new
business fails. In these cases, failure is an option, as the entrepreneur has a
safety net to fall back on. In cases where failure is NOT an option, and the
entrepreneur depends on the new business to provide food, shelter and clothing,
the business has a greater chance of succeeding.
Every
business can be compared to a baby that needs nurturing and protection from the
owner to ensure that it grows and lives. Therefore, concentrating on two
different things at the same are most likely to affect the growth of that
business.
“Your time is limited, so don’t waste it living someone
else’s life. Don’t be trapped by dogma - which is living with the results of
other people’s thinking. Don’t let the noise of other’s opinions drown out your
own inner voice. And most important, have the courage to follow your heart and
intuition. They somehow already know what you truly want to become. Everything
else is secondary.”
(The late Steve Jobs, co-founder of Apple and Pixar)
Finally here's something really cool that you should LIKE. Its good to Get on The EDGE!
Refreshing new perspective.
ReplyDeleteGreat Article on business Muthuri, I second you on that... If you don’t know your ultimate goal, you will never get there. If you team doesn’t know the ultimate goal of your business, they can’t get it there either. Be like Steve Jobs, who lived a legacy and left a legacy at Apple, of radical or even magical products and experiences - Forbes
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