According to CBInsights, the most common reasons businesses fail are because there is no need for the product, the company ran out of cash, or it had the wrong people trying to execute. Knowing that--why are failures so common?
Starting a business is certainly tempting--and the majority of entrepreneurs have a desire to make the world better through the product, service or concept that they believe they are able to bring to life. For the lucky few who manage to get their idea off the ground in the first place, there are no guarantees that they'll even find their first customer.
On the site, StartupsAnonymous, every other post is about a business that is failing or is about to fail. A few examples:
"We are in a dead end. Situation is stable, but going nowhere. None of my 10 employees realize this. Just me."
"I started a children's retail clothing store several years ago with my wife. I quickly learned she had no financial sense running a business. Almost ruined our marriage when we had to file bankruptcy less than 1 1/2 years in. I blame myself."
"My start-up is floundering. Up until this quarter, I was confident in our business model and knew we only needed funding to succeed. This quarter has been deadly. While we need to be growing 5X, instead our sales are shrinking."
How can you avoid the same fate for your business?
Well, the first step is making the most of every resource available. That includes stories like the ones posted on StartupsAnonymous. Thankfully, there are plenty of other resources available as well. There are a plethora of post-mortems strewn across the internet, leaving remnants of their failed companies like the ruins of some ancient civilization.
There are archeologists for this information, too. CBInsights includes an analysis of the internal reason for the failure, a link to the company's fundraising and press profile (if available), with the most important information highlighted. Autopsy.io is another simple database of start-up failures, categorized by their elevator pitch and their ultimate reason for failure. Failory is an alternative that conducts interviews with the founders, getting the information from them directly rather than waiting for a post-mortem announcement.
These are all great for pinpointing trends that broke down other companies, and taking note, so you won't make the same mistakes. And if you want to do more research, The Failure Institute has mapped over 1,500 failed businesses around the world in multiple categories. You can drill down the list by gender, age, business type, and other items, to learn everything you need to know about what not to do.
After combing through post after post, I discovered useful information about the issues that plagued these broken businesses. Here are some tips for how you can learn from their failures and find success:
1. Stop worrying about the competition.
Competition is actually market validation--if you have a more successful competitor, that means it will be easier for you to get into a market. Additionally, no matter how similar you are to them, your competitors aren't you. Focus on what you know how to do, not what other people do.
2. Raise only what you need.
Whether you're raising money from investors or taking on new clients, scaling before you're ready can sink a business. As soon as you sign any contract or term sheet you'll have to meet the terms of that agreement, so if you're not ready or able to do it, find another way.
3. Build something people want.
Too many people build products for themselves because they think they have identified a problem and have the only way to solve it. Then, they shut themselves away to spend months--or years--building it. Unfortunately, they miss the mark by not actually checking to see if anyone wants the problem solved.
So, what if you're already past the point of failure?
Well, you can always fill out the Failure Institute's survey, or write your own post-mortem. Maybe someone else can learn from your mistakes.