Know the Pitfalls to Stop Your Business From Failing

For some entrepreneurs, the worst aspect of a lost business is that they were not mindful of what was actually going on until it was too late. This is quite logical, as if these entrepreneurs understood where they were at fault at the time, they may have been able to salvage the company. Some entrepreneurs are quite clear about their errors. However, many are in denial…

What Can We Learn From Failure?

As Bloomberg notes: “8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn.”1 So after you have organised a company formation, what can you do to avoid this massive failure and not fall into the same trap? Firstly, it is important to acknowledge that the cracks in the woodwork are there long before the collapse of the company. So now, let us put the spotlight on some of the reasons for these catastrophic collapse statistics. You must know the pitfalls to stop your business from failing and avoid being one of the 80%.

Reason No 1

Insufficient planning is a major cause for trouble later down the line. Many companies fall by the wayside due to the lack of short and long-term preparation on their business plan. It is crucial to make a map of where the business will be from the first few months after your company formation, up through the following few years.  All results and goals should be included. A good plan will also incorporate certain to-do lists, along with deadline and dates. Be well aware that your business is very likely to suffer if you fail to do this.1 “The goal is to keep it concise. “Don’t treat it like a business school project… You can do a great business plan in one or two pages. There are a number of excellent books which can guide you, and show you how to draw up a business plan. These include: “The Secrets to Writing a Successful Business Plan” and “Successful Business Plan.”2

Reason No 2

Not partaking in deep dialogue to connect with your customers. According to entrepreneur expert, Eric Wagner: “An amazing thing happens when an entrepreneur sees a potential opportunity in the market, or dreams up a new idea for a product/service: they retreat to a cave.”1  Clearly, this is a disastrous scenario, as in order to be successful, you have to fully understand your customers. You also have to appreciate that markets and many products and services are in a state of flux, with all kinds of constantly changing dynamics, therefore, customers’ wants and needs evolve, so you have to stay on top of this. As Wagner says: “in my mind, entrepreneurs must walk 1,000 miles in the shoes of their customers. Not 10. Not 100. One thousand. Your customer holds the key to your success deep in their behavior, dreams, values and the jobs they are trying to accomplish.”1

Always be mindful of the fact that conversations are key.  A tweet is nowhere near sufficient. You need conversations with real clients through appropriate channels, whether it is social media, email, face to face, or over the phone. For example, if they are phoning your company, be ready with some questions. Or if you send out regular emails, news letters, and product news, include some questions that they can reply to, and email back. ‘Nail It, Then Scale It,’ the book on successful business by Nathan Furr and Paul Ahlstrom, begs the question: “Which would you rather do – talk to customers now and find out you were wrong, or talk to customers a year and thousands of… [pounds] down the road and still find out you were wrong?”1

Reason No 3

Not having enough unique value propositions can be a serious problem. To that end, calculate the real value of what your company offers in terms of what is different and unique to your competitors. What sets you apart from the rest? Unusual items, services that cannot be found anywhere else, product quality, excellent customer service, low prices, regular discounts, money off offers, informative or instructional newsletters? If you cannot answer yes to any of these, then put your thinking cap on, and see what you can devise.1

Reason No 4

Failing to communicate by not putting forward value propositions in a succinct, straightforward and persuasive manner, is another cause for disaster. As an entrepreneur, there is no point in working around the clock to find a point of differentiation, only to fail because you have not been able to put across your message effectively. Yet turning this dilemma around is not so difficult, as all you have to do is to learn how you can communicate effectively.1

Looking back at Reason No 2: “If an entrepreneur is truly engaged in conversation (read: dialogue, not monologue), then you’ll learn the language of your customer.1  Listen to the words they use, and then use them right back at them.” You can do this by concentrating on these 3 points:

  • Always be crystal clear (are your clients not clear regarding who you are, and the value that they receive from you?).
  • Be concise (when you write messages are you clear, yet ramble on unnecessarily?).
  • Be compelling (are your clients being persuaded to do what you have suggested by the way you say things?).1

Reason No 5

Is there weak leadership and poor decision making at the top of the company? Is it impinging success? This form of company breakdown is extremely common, and you only have to read the daily papers to find such stories. As the company’s founder, you are in the driving seat. You are the leader, so you have to accept responsibility and negate this problem. Whether you are running the company alone, or employing thousands of people, if you do not have the ability to strongly relate to others, then you need to acquire the essential skills to turn this negative situation around.1

If you are not calm and balanced, and tend to get angry and behave in a negative way, then take a short anger management course. This will empower you with successful techniques which you can use in the workplace with great results. While it may come as a shock, the fact of the matter is that many successful entrepreneurs have undertaken some form of personal development courses, and have sent their teams for similar training. The personality and temperament of a company founder is very important to venture capitalists and angel investors, and they always make inquiries about this prior to investing in a company.1

Reason No 6

Not being able to nail a business model with proven revenue streams and good profitability, is a guaranteed disaster. So unless you are able to find a precise market/product fit where achieving a good revenue is feasible, then you are done for. As a start-up, you need to take quick action without having to lay out a fortune for trying to discover what could work. By taking advantage of free methodologies and tools, all of which can be googled, you can learn about lean marketing and experimentation, minimum viable products, and a whole lot more. As Wagner says: “think and move quickly, ‘fail fast’ if you’re going to fail at all, and nail your business model. Otherwise, you’re in the 80% bracket.”1

Reason No 7

Bad financial management. In order to avoid this common dilemma, opt for easy to use professional accounting software. Ensure that you maintain records of all financial transactions, and only ever arrive at decisions by considering the information which is gleaned from real data. Always know the company’s financial position. If you accounts are perplexing, then contact a professional in the field of finance, and pay them to spend a few hours with you explaining various aspects, and training you so that understand the basics.This will prove to be money very well spent.

Reason No 8

Ensure that you do not lack the necessary focus. Without this, your company will lose its competitive edge. Be aware that: “it is impossible to have a broad strategy on a startup budget. What makes startups succeed is their ability to quickly pivot, and the lack of focus leads to the inability to make the necessary adjustments.”2

Reason No 9

If you do not have a Mission Statement, then put a great one together. This is basically a short statement which lays out why your company exists. While writing it may sound daunting to some, it is easy if you just take a look at the mission statements of a few successful companies in your field. You can also google mission statement examples. Remember that it should be your corporate reason for being. It should describe the products or services that you offer, as well as your target market. It should only be a few sentences long, yet if done correctly, it will communicate the great aspects of your business.2

 

References:

  1. Wagner, Eric T. (2013). “Five Reasons 8 Out Of 10 Businesses Fail.” https://www.forbes.com/sites/ericwagner/2013/09/12/five-reasons-8-out-of-10-businesses-fail/#37785b146978
  2. Mszaros, George (n.d.). “Why some businesses fail while others succeed.” https://www.successharbor.com/why-some-businesses-fail-while-others-succeed-02132015/
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About Dequiana Jackson

Dequiana Jackson, CEO of Inspired Marketing, Inc., is a small business marketing coach who shows women entrepreneurs how to use solid marketing strategies to turn their life’s passion into a profitable, service-based business. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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