The 7 Major Reasons Businesses Fail and How to Overcome Them
This year, over 800,000 of the approximately 2,000,000 start
up businesses will fail!
Nearly 1,000,000 of those remaining will fail within 3 years.
Why do so many businesses fail? Many studies show that
approximately 98% of all failures occur because of the
owners. The other 2% are a result of acts of God. Here are
the key reasons and actions owners can take to avoid and
overcome business failure:
Reason #1: The owner is not mentally prepared or
motivated to run a business. There are three different ways
to use your energy, and your physical and mental efforts to
earn money. I call them the three "Games of Work.," and
they define the types of relationships between people and
their work. The rules that players have to follow to succeed
for each "Game" are shown below.
1. Bureaucrats,: Do what it takes to protect or expand their
position; Will divert responsibility whenever possible, but
will take credit for desirable results of others; The success
of the organization is secondary to kissing up to those who
make decisions about promotions, salaries and job
security; Have virtually no control over their job security; And
are compensated for basically showing up.
2. Partial Entrepreneurs: Choose to be responsible for work
performed or results achieved in their specialized field, but
do not want responsibility for the total business. Have more
control over their job and its security; And are paid for the
specific results they produce. Examples of Partial
Entrepreneurs include; commissioned salesmen, multilevel
marketing members, franchisees, and real estate agents.
3. Business Owners: Take full responsibility for their
business; Are in full control over their job and its security
(whether they know it or not); Have no one in the
organization to kiss up to; Learn to pass on as much credit
as possible; Constantly focus on the success of the
business; And are compensated only from the profits of the
business.
As you can see, the rules of a Bureaucrat and a Business
Owner are completely opposites in all categories, and the
Partial Entrepreneur is basically in the middle. The mental
effort it takes to convert from Bureaucrat or Partial
Entrepreneur to Business Owner is much greater than most
people realize. Many business owners never fully make the
transition.
Action: Before becoming a business owner in the first
place, determine if you truly want and will operate under the
Business Owner "Game Rules." If you choose to, do so
IMMEDIATELY, and COMPLETELY! To survive, let alone
succeed, you must commit to operate under the Business
Owner Rules 100%. Otherwise, you should seriously
consider playing one of the other "Games of Work" that best
suits your desires.
Reason #2: The business owner is unable to operate a
business. The success or failure of a business depends
on the owner. As the head goes, so goes the body.
Running a business is completely different than any other
"Game of Work," but, believe it or not, the rules are the same
for all types of businesses. Far too many owners fail to take
the time and energy to improve their own ability to run their
business. This means that they need to grow as a person
first and enrich themselves and discover their true passions
and priorities to be able to have the maturity, drive, and
energy to allow them to manage themselves and a
business simultaneously.
Action: You will greatly enhance your chances for success
by finding methods of self-improvement in all aspects of
running a business, and continue the process throughout
your entire business-ownership career. Obviously, as you
become better at running your business, the success of
your business will also get better. Many resources are
available to you, including respected advisors, mentors,
partners, "Godfathers, " and coaches.
Reason #3: The business owner thinks he knows what it
takes to run a successful business and is convinced he is
fully prepared to jump in. This is rarely true. The
fundamentals of owning and operating a business
sometimes referred to as the "rules of the game," are rarely
taught in the U.S. school system. (See Global
Entrepreneurship Monitor, published by Babson College
and Kauffman Center for Entrepreneurial Leadership, July,
1999.)
We are led to believe that an education fully prepares us for
running a business. In truth, the U.S. school system only
prepares us to get a job, not create jobs. The fundamentals
of successfully owning and operating a business are very
different from getting and keeping a job. Unfortunately, most
business owners are left to learn these fundamentals
through the age-old process of "Trial and Error" with an
emphasis on error. This "Trial and Error" dependence
causes far too many serious and fatal errors, and leads to
stress, financial damage, and eventual failure.
Action: Learn the rules of the game of business, other than
through the "Trial and Error" method. The very best way is to
find and use trusted mentors, advisors, and/or coaches to
guide you through the process of learning how to improve
your capability to run your business to avoid the many errors
others make. Frankly, the rules are simple, easy to learn,
and are based upon common sense, and high integrity
Reason #4: The business owner tries to execute all three of
the three basic functions needed for a business to succeed,
alone and without help. (See The E Myth Revisited by
Michael Gerber).
The three key functions a business must have executed to
succeed are:
The Technical function, which is the execution of the actual
service or product provided by the business. For example
the drafting action of a drafting company, the auto repair
actions of an auto repair company, the production of a boat
of a boat building company.
The Managerial function, which is the organization,
coordination, and supervision of the people assets and
activity of the business on a day to day basis.
The Visionary function, which is the discovery, setting and
communication of the future goals and purposes of the
entire business. The leadership to get all parts of the
business flowing towards the long term goals established.
The level of success of a business is limited to the level of
the execution of the weakest link of the three business
functions described. A business that has two of the
functions executed in an excellent manner and the other in a
poorly manner will eventually level out no higher than poor.
Yet, entrepreneurs (budding business owners) and
business owners try to personally perform all three
functions themselves. One single person will have an
extremely difficult time performing all three functions at a
high enough level for the business to eventually succeed.
Michael Jordan, one of the best basketball players of all
time, could not translate his huge basketball skills into a
successful baseball career. He proved that the skills
needed to succeed at the game of baseball are much
different from the skills needed to succeed at the game of
basketball. And when he returned to basketball, he had to
work extra hard to re-sharpen his basketball skills to his
previous levels. Likewise, the skills of owning and
operating a business are specific and very different than the
other two "Games of Work."
Action: Get help from someone, a partner, an employee or
an outsourcing resource to perform at least one of the two
functions for the business. This way that function can be
executed at a very high level and will allow you to focus on
executing no more than the other two at a similar high level.
Normally entrepreneurs initiate businesses where they
bring the technical skills and motivation to the table.
The three skills necessary to win in the business game are:
Technical Skills of the business; Managerial Skills to
manage yourself, time, things, concepts, and people; and
Visionary Skills to set future goals and organize the
business so that current activities will contribute to them
(See The E Myth Revisited by Michael Gerber).
You probably bring Technical Skills to the table, but to
succeed, you will also want to master the Managerial and
Visionary Skills. You are not born with these skills; you
learn them. You are born with natural talents towards
certain skills, but you have to work to perfect them. Michael
Jordan, and Tiger Woods were obviously born with
unbelievable talents, but they became successful only
because they worked very hard at developing the skills they
needed to win. Likewise, you will want to work to develop
your Management and Visionary Skills (from the Business
Owners Perspective) and continue the process throughout
your business ownership career.
Reason #5: The owner starts a business for the wrong
reason: "No one can boss me around;" Or; "I will create my
own job;" "If he/she can be successful, so can I;" "I will buy
a business and enjoy the fruits of ownership;" "I want to
pursue my passion for serving others." And so on. The
stresses and problems resulting from running a business
for the wrong reasons can become overwhelming,
especially when you generate little or no profits.
Action: "The only reason to have your own business is to
Make a Profit." Though this may sound cold and greedy, you
will realize rewards and compensation only from your
business profits. If your business doesn't make a profit, you
get nothing. You might even discover you have been
working for nothing, or worse, working to increase your debt.
This does not mean you have to avoid meaningful, and
emotional reasons for living. Not at all. The profits and
personal time gained from the business will provide you the
resources to pursue your life goals. Even religious
institutions require profits and time to pursue their passion
of serving others.
Reason #6: Business owners do not completely consider
the perspective and motivations of potential customers.
Customers' perspective must be addressed so owners can
entice enough customers to buy their products or services
at a price over their costs to produce the desired profits.
From the very beginning, owners should be focused on
enticing customers to buy. Owners who do not know,
understand, or appreciate their potential customers'
perspectives will most likely see their business fail.
Action: Learn as much as possible about your potential
customers. Design and provide products or services,
delivery methods, pricing, and ways to communicate with
them around their perspective. This might require that you
get help stepping out of your own perspective and into
someone else's.
Reason #7: Business owners insist on going it alone
without asking or accepting outside help. The sole
business owner has one of the loneliest positions in the
world. Many owners have difficulty confiding in their
employees, vendors, customers, lenders, or competitors,
for fear that any one of them will take advantage of revealed
weaknesses. Most owners try to go it alone by working IN
their business, and not near enough time working ON the
business. Consequently, they are not aware of what they
are doing, where they are going, or why! (the "Trial and
Error" method).
Action: Find and use Advisors, Mentors, Coaches, and/or
Trusted Partners who have the knowledge and desire to
educate and guide you, with your best interests at heart. All
professional athletes have one, if not several, coaches,
advisors, mentors, who help them become much more
successful than they ever could be on their own. Coaches
evaluate your ability to run your business. They will bring
you outside the stress, money, and time pressures you feel
from working IN the business, to help you make the
changes to result in improving your profits and reducing
your pressures. You will become much more successful
with advisors. Asking for help is not a sign of weakness, but
a sign of your desire to improve. Learning from the trials
and errors of others is an enjoyable and profitable
experience. Once you find the right advisors, you learn to
prevent and correct mistakes you might otherwise make.
Provided as an educational service by Bill Dueease of The
Coach Connection, where "connecting great people with
great coaches" is their goal. You may receive a free copy of
the article "10 Insider Secrets Most Business Owners Never
Learn" by contacting The Coach Connection at
800-887-7214 or 239-415-1777 or
coaches@findyourcoach.com, or at
http://www.findyourcoach.com/0o-business-coach.htm
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