7 Easily Avoidable Reasons Why Entrepreneurs Fail
Failure--and the importance of failing quickly and often--is a trendy topic. Learning how to overcome obstacles and setbacks is in fact incredibly important, but at the same time failure can also be incredibly painful, both financially and emotionally.
Lessons learned aside, when you own a business and it's your money and your future on the line, failure sucks.
That's why no one sets out to fail--unless, of course, they do one of these things:
1. Assume easy entry equals great opportunity.
Some businesses are easy to start. For example, anyone with a little time on their hands can build an e-commerce website and sell products that others will fulfill. E-commerce is easy to do, hard to make money doing.
The same is true with apps. One guy makes $400,000 off a game he developed in a week, so thousands of people try to create their own apps. Creating apps is easy to do, hard to make money doing.
Businesses that are easy to enter typically only pay off well in the early stages of a new industry. Excess profits breed ruinous competition--and so does easy entry.
Taking the hard road is generally the best way, if only because a lot fewer people will be walking that hard road with you.
2. Go contrary without a plan.
Every trend starts with people who go against the crowd. Dell ignored in-store retail. FedEx introduced speed where there was no existing demand. eBay predicted buyers wouldn't need to actually touch what they purchased. I can list hundreds of examples. So can you.
All of them went contrary--but they all had a plan.
Think you can succeed by launching a Web design business even though that service has largely become a commodity? Think you can open a funky little clothing store downtown even though many local retailers have gone out of business because foot traffic is down and unemployment is up?
You can but you better have a plan. Going contrary can be a great way to seize opportunities others ignore or miss, but that's only true when you develop a great plan to actually make those opportunities pay off.
3. Mistake your social media networks for your safety net.
Building a network of friends and connections certainly can be helpful. But face it: If you lose your job, most of your LinkedIn connections will not ride to your rescue. If you need financing, most of your Twitter followers aren't going to open their checkbooks.
Only your old-school personal connections will pick you up when you're down. When I lost one job I landed the next one because a friend and colleague talked his boss into granting me an interview. (Thanks, Randy!)
Absolutely spend time building social media networks, but spend more building old-school connections. Your Facebook friends might commiserate with you but your real connections will have your back.
4. Assume somehow, some way, your mileage truly will vary.
I'm willing to bet there's a building in your town that's housed four or five different restaurants in the past years: the Greek restaurant fails; another entrepreneur revamps the décor and opens an Italian restaurant (re-using all the fake columns, of course), and it fails; another entrepreneur gives the building a facelift and opens a trendy little sushi place... the cycle goes on and on.
Each assumes somehow his venture will be different, ignoring fundamental problems like a terrible location, limited parking, no real market potential, etc.
Assuming that your venture will be different just because it is your venture never works. If others have failed, understand why they failed and then determine the steps you can take to make sure you succeed.
The same is true with business careers. Most follow a typical path, and yours won't be markedly different unless you are willing to do things differently than the typical entrepreneur.
5. Confuse advice with knowledge.
Say you have an idea. You ask a friend for input. He says, "Oh, no, I wouldn't do that." You're discouraged.
Don't be: You haven't learned anything.
Ask more questions. If you want to open a manufacturing facility and your friend says the capital requirements are too high, ask why. Ask how he arrived at a figure. Ask what you can leave out. Ask how you can acquire facilities or equipment without making purchases. Keep asking follow-up questions.
Eventually you'll learn one of two things: You may find out your friend doesn't have a clue about manufacturing and his advice is worthless. Or you may gain greater insight into start-up costs and financing.
Never ask for advice unless you're willing to ask plenty of questions to uncover the reasoning behind that advice.
6. Play covert operations.
Several times a month someone says to me, "I've got a great idea for a business. I can't tell you about it right now, but you'll see... it will be awesome."
Why the secrecy? They're afraid someone will steal their idea.
Please. Ideas are a dime a dozen. Implementation is everything.
Most people keep their ideas a secret simply because they don't want to hear conflicting opinions, since conflicting opinions spoil the dream. If an idea can't survive the cold light of day then they think it's not a great idea.
Talk about your ideas. Talk about them a lot. At the very least you'll get helpful input.
You may even find a partner.
7. Let ego override reason.
A friend admitted the main reason he wanted to open a business was because he loved the idea of being able to decorate his own office. He didn't love the idea of selling, running an operation, and leading people.
Another opened a winery because, well, owning a winery seemed pretty darned cool.
Lots of people start businesses with their ego as the primary consideration, but offices and tasting rooms quickly pale when you don't enjoy the core of what you do.
Ego doesn't pay the bills. Success pays the bills, and success is based on making objective decisions.
Don't worry: Work hard to be successful and your ego will do just fine.