One element of the “American Dream” is owning a business. While the entrepreneurial drive is a powerful force, the sad reality is that according to the U.S. Bureau of Labor Statistics, 25% of America’s 32 million small businesses will shut down within the first year! And after five years this number jumps to almost 50%.
Failure is the greatest training ground for future success. That is…if you learn from your mistakes. And more importantly…if you apply the lessons others learned from failure! So, if you’ve failed at a business (and I have myself) you have attempted something greater than yourself.
Apply the lessons learned, forget the failure, and move forward. As William Durant, co-founder of General Motors wrote, “Forget past mistakes. Forget failures. Forget everything except what you’re going to do now and do it.” To improve your odds of success, avoid these five pitfalls:
Little planning.
Many businesses fail for lack of planning. As Benjamin Franklin wrote, “If you fail to plan, you are planning to fail.”
Successful entrepreneurs research the business they want to start. Considering the significant risk of failure in the early years of a business, it is imperative to learn all you can about business plan writing.
Seek competent professionals to evaluate and coach you in drafting your business plan. There are numerous resources to research for this, from SCORE.com to professional business plan writing firms.
Lacking advisors.
John Ballinger — a Chattanooga insurance broker, serial entrepreneur, leadership trainer, and risk management expert with over 20 years of experience — has coached 250 business leaders and conducted more than 1,000 risk assessments for companies of all sizes. “The number one reason entrepreneurs and leaders come to me,” he shared, “is to learn the principles of enterprise risk management.
“One of the key lessons I teach is how to develop a strong advisory team to guide them in making sound business decisions. Since most business owners have a focused area of expertise, an effective advisory board should include professionals with backgrounds in operations, finance, law, and leadership. “
Hiring the wrong people.
Businesses also fail because they hire the wrong people. Having an effective hiring process is the cement that creates a dedicated team. As Mark Grey soundly wrote, “A team is only as strong as its weakest link.”
It is imperative to have a competent HR process and develop a culture that matches your vision. I love what Vaughn Aust, EVP of Integrated Solutions wrote about creating a success culture: “Happy employees lead to happy customers, which leads to more profits.”
Poor money management.
Financial mismanagement is one of the key reasons many businesses fail. According to a U.S. Bank study, over 80% of small businesses fail due to cash flow issues.
Cash flow management, unpaid invoices, unsold inventory, and revenue shortfall affecting payroll, additional orders, and other expenses all contribute to businesses failing. If you can’t afford a CFO, hire an outsourced part-time CFO.
Poor market research.
Failing to conduct market research on evolving trends in business can kill your business. Blockbuster Video was a company that rented videos in their own stores but streaming videos put them out of business.
If you fail to conduct market research on new products or fail to conduct proper research on your competitors, this could happen to you as well.
In conclusion, anything worth doing is worth the risk. Seek wise advice and follow what has worked for other successful business owners. As Walt Disney said, “The way to get started is to quit talking and begin doing.”
Reen Waterman is a business coach, national speaker, writer and communications professional. Certified by the Charleston School of Protocol, he trains businesses and corporations in effective marketing and communications strategies. He can be found online here.