But First, Why Do Businesses Fail?
Depending on the source, the failure rate of businesses in their first year is huge.
Bloomberg suggests that 8 out of 10 entrepreneurs or startups, fail in their first 18 months. Other sources put that number slightly lower – regardless, there is consensus across respected authorities from the USA, UK, Canada and Australia (and I am sure most countries), that failure is prevalent in the startup space.
So, you really must ask yourself why is this? What are the factors that lead to business failure and can these be avoided?
Well, of course much has been written about this topic and I am sure will continue to be written, but some of the factors that have led to business failure that I have seen over twenty-five years are things like:
- the personal reasons for starting a business were wrong
- the business concept was not well thought out (lack of market research, lack of planning)
- inability to market the business
- inability to service the business
- inability to scale the business
- inability to change the business
Now most business books or courses, address these factors as they are largely technical skills that can be learned. However, there are several aspects which are more behavioural that I see repeatedly, starting with these three at the top of my list…
Passion Does Not Guarantee Success
Firstly, entrepreneurs are passionate individuals. They want to change the world in their own distinct ways and passion is critical for this, as it keeps your focused and drives you to achieve your goals or big dream. However, it also tends to influence you to do the things you get the most pleasure from and avoid those things you frankly well, just do not like doing. If not kept in check, you can become myopic to everything else around you – you become your own worst enemy!
The second aspect is that businesses do not fail because of lack of information. In fact, there is so much information available and some of this is contradictory or not relevant for your specific circumstances! So, what this means is that it can be confusing or down right overwhelming. That’s why it is critical for you to be able to decipher what’s important and what is not important today.
The third behavioural aspect that I see frequently is the tension between striving for “perfection” versus disciplined consistent execution over time. Did you know that there are some people who will not do things until everything is perfect? Maybe you know these people very well! You see, that was my problem when I first started out and I see this all the time – analysis paralysis!
“You have to get moving, build momentum and keep at it – and I know that it is tough when in the early days, you may not be getting the results you seek”
The 5 Fail Safe Tips
That’s why when I work with my clients, we focus on these five capabilities which help in countering the negative side of these behavioural aspects, to instil a working rhythm in the core of the business – it’s operations…
First: When you are a business of one, you do everything right? Well not always – you still need to be very clear about the roles and responsibilities. Then as you start to scale and bring in new people, there is never any question as to “who has the ball?”.
Second: However, knowing who is doing it, is different to knowing “how do I do it?” and this is where things like guidelines, procedures and standards are essential as you grow. This insures people keep to their swim lanes and while there is still room to move in terms of creativity, they are not out deviating from the direction you want the business to be heading.
Third: Next, metrics, score cards, and benchmarking assist you and your business in knowing “how are we tracking?”. Not only internally with your own expectations, but also against external standards and benchmarks so that you can compare yourself for a reality check.
Fourth: Management operating systems that drive day to day performance, continuous improvement, and innovation more strategically, are key and goes to the heart of “are we moving forward?”. You see eve if you are a business of one person, things still must happen on a regular basis.
Fifth: Finally, my fifth behavioural aspect I discuss with my clients is leadership. Because at some point as your business grows, your team will ask themselves “why should I follow this person?”. Never kid yourself that just because you may pay people a higher salary or give them additional benefits, that you have established a team.
“Successful entrepreneurs must become successful leaders – so as you build your business, you need to build on your leadership”
Bill & Warren Says You Need To Focus – So Focus!
I recently read a story about Bill Gates and Warren Buffett, two of the world’s most successful and also influential business people. They were asked to write down the “one word” they felt was key to their success and perhaps on reflection, it was no surprise that they both wrote down separately the word “focus”.
Now I have never met Gates or Buffet, but I have read relatively extensively about them and viewed many interviews and presentations by them, so I feel it is safe to say their one word “focus” can also mean focusing on the right things, at the right time, by the right people, in the right way.
Passion Plus Disciplined Consistent Execution Multiplied By Time
Remember, these are behaviors and not technical skills that need to be mastered. So do not let your lack of financial numeracy influence you to not starting a business (or any other technical skill by that matter)! You have everything you need right now to setup, scale and sustain a business in The New Economy. You just have to go about it the right way, to some extent methodical, but importantly, take your passion and apply disciplined consistent execution over time!
Take Your Step Forward
So, take on board what I have said, and write down a few notes that first comes to mind. Structure this into a plan and get going. Then take another step forward, but only this time, a little more refined than your first step because you are now wiser for it. Then repeat, repeat, repeat!