Why Businesses Fail

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Dear WAHFAQ,

I want to start a business, but I’m scared to death of failing. At this point in my life, I just don’t have the energy to start something without knowing for certain it will be a success. How can you tell if something will be successful or not?

First of all, as an entrepreneur you need to get comfortable with being uncomfortable. You many not know what you don’t know, and it’s important to take on a sense of curiosity and willingness to learn. If you feel like you’re going to fail, you probably will. But, is “failure” really that bad? If you approach the business as a huge learning experience, you’ll gain much more throughout the whole process.

That being said, there are some key missteps that entrepreneurs can avoid right from the beginning:

Jumping in Head First without Researching the Business

Let’s face it, people will spend more time planning their vacation than their own business. Before you open the doors, make sure you come up with a plan on how you’re going to market your products and services, how long it’ll take for you to break even, your expenses, if there is a market for what you’re selling, and any learning curve that you need to overcome.

Don’t even think about joining a direct sales/ MLM/ network marketing company without thoroughly researching the model and industry. Find out if there have been any complaints filed against the parent company, what others think of the business, and take the time to decide if you like the products. Simple as this: Do your homework.

Unrealistic Goals/Expectations

It takes time to build your skills. It takes time to become a leader. It takes time to develop relationships. Every business, EVERY. BUSINESS. requires some skill, capital, and time to grow.

So many people are looking to make a lot of money with little effort. This just isn’t how business works. Put yourself in a continual state of learning, and open up to new books, methods, and ways of doing things. Create your foundation, and build your business on concrete, not sand. People who have invested time and effort over the long haul are the ones who reap continual profit.

Lack of a Duplicatable System

If you’re going into business, you want to be McDonald’s. Well, in terms of their system, anyway. You want a business that is easy to follow, and has been tried over and over again with success. If you’re starting your own company, do informational interviews with others in your industry (but in different areas) to see how they operate. You don’t want to be out there all alone trying to forge your own path. Noble as it may be, it’s longer and rougher terrain.

If you’re joining a network marketing company, get a hold of their system. Find out exactly what’s required, and if you can actually see yourself following their plan. You don’t want a sponsor that’s sponsored a million people with none of them being successful. You want to be sponsored by someone who knows how to train leaders. If you have your own ideas, that’s great too, but make sure that you follow the proven system first. After all, when you start sponsoring people, you’re going to want to have a system in place that will allow others to have success.

Lack of Funding

Plenty of business opportunities claim it takes $0 to start. They’re lying. Most likely unintentionally, but many fail to realize and/or articulate that a business does need some sort of capital to grow. Marketing materials, training, products, or even just time to learn the business are all necessities. There are plenty of investors and peer to peer lending groups to help you with big or small loans regardless of your business size. Don’t let a lack of capital stop you from pursuing your dream. Likewise, don’t charge head first into a business without properly determining how much funding you need, and finding the resources to get it.

Not Tracking Your Progress

It is imperative that you track what you do, and the results you bring. You can’t change what you don’t acknowledge, so get out there and track everything you do: Find out how much you’re spending on leads, advertising, and customers. Figure out what your average customer spends: from this you can determine how much you can invest in advertising. If you’re prospecting, track the number of times you call someone, and how often you follow up before you get a sale.

Fear of the Phone (or email or networking or…)

Does anyone out there actually like making cold calls? Many will spend endless hours trying to find a way not to pick up the phone or write that introductory email. It can be almost crippling. When you’re running your own business, you need to develop relationships. If you can’t meet face to face then the phone, Zoom, or Skype is the next best thing. People rarely read promotional emails, and texting for business is a bit intrusive.

The main source of fear is the unknown. Just remember that the worst thing that can happen is someone hanging up on you, and then the painful process is over. Try practicing with friends or family or other small business friends. The more you try it, the easier it will become.

Refusal to Adapt

It used to be that all you needed was a business card or brochure to market to your customers.  Now, you need a website, email newsletters, Twitter, Facebook, Instagram, YouTube, Pinterest, LinkedIn, and so much more. Beyond being able to reach and connect with customers, many businesses fail to see changing needs, put themselves ahead of the trends, or even just keep up with the competition. In order to be successful in business, you don’t just ask, “What does my customer need/want now?” but what they will want in the future, and how can you anticipate their needs and position yourself to meet them.

Refusal to Ask for Help

Many business owners are experts in their field – but they’re not necessarily experts in how to run a business. There can be a huge learning curve, and sometimes entrepreneurs just don’t want to appear like they’re unknowledgeable about anything, so they don’t seek out help – or be open to help when offered…thinking they can do everything on their own. Solo-entrepreneurs can be extra guilty of this because they don’t have the cash-flow to hire people, so they feel like they have to do everything on their own.

Get Excited to Fail Forward Fast

As an entrepreneur, you’re going to make mistakes. Don’t get hung up on being perfect, or think that you have a limited amount of time to reach your goals. Embrace the concept of failing forward fast: Get through your learning curve as quickly as possible and remember that entrepreneurs need businesses to practice on to be successful. If your first venture doesn’t work out, just try again.

Unfortunately, COVID-19 has put many small companies out of business. Some of these closures simply weren’t preventable – for example: the business didn’t have enough cash-flow, they couldn’t get PPP funding, or pivot to a profitable model. But, that doesn’t have to mean that the business owner themselves will never own a business again. Taking this time to learn, adapt, and grow could create a much stronger foundation for a business in the future.