Reasons for business startup failure
07-04-2017, 01:59 PM
Great thread. I will briefly add that I find Simon Sinek's "Start with Why" a compelling overview of why some companies succeed or fail. The TED talk 'How great leaders inspire action' has inspired me. He also relates to the Law of Diffusion of Innovation or the product / idea acceptance cycle which begins with innovators, then early adopters, late adopters, early majority, late majority, and finally laggards. Each group of person required a different trigger to accept or buy what you're selling. "Crossing the Chasm" is a great book that goes into detail on this and a multi-millionaire (possibly billionare) customer / mentor recommended it to me.
The 80/20 rule, Pareto's principle, applies to all aspects of life and business definitely. Identifying your key value proposition, finding and retaining customers, getting testimonials and referrals to build up your brand, and telling a story that draws people in to you. You need to observe what you do that gets results (and what doesn't) and adjust course as needed while staying true to your key purpose and core values.
I have given my business a public face via YouTube videos and a blog plus live events (less now but a lot in the early years). Like it or not, you need to connect with people emotionally and authentically along with having a solid technical / rational reasons to buy your product or service instead of going somewhere else.
I have recommended the book "Is Your Genius at Work?" in other threads. It ties to the idea of why you are doing this business. If it's not an extension of your values, something you can relate to passionately, then you won't be drawing support to you - whether customers, money, or mentors. I don't think enough founders really understand the philosophy of what drives them and how their business is / needs to be a natural extension of that.
I read most of 'The E-Myth' which points out every success business needs a visionary, a manager, and a technician. I think many failures are from inadequate degrees of one or more roles, or people who didn't accurately estimate their ability or willingness to act in those functions.
Successful businesses are rare likely for a similar reason not everyone climbs an 8,000 meter peak. It's a demanding expedition with no guarantee of success but for business there is actually no clear road map. But I don't think most climbs at altitude go off according to plan either! You need to adapt, be flexible, be willing to gamble sometimes and play it safe at others. You have to make bad decisions and live with them, plus celebrate your successes but not too much - there's always another challenge to overcome. I think you have to like chaos at least a bit to succeed in business, so you learn patterns and can weather storms. You develop patience and wisdom which aren't skills taught in school nor eally encouraged in present - but that pendulum is swinging back as this 4th Turning progresses.
You need to learn to read people quickly and empathize with wherever there are in their journey. This is where an introvert can actually do well but being outgoing is an asset for a founder so it has to be a combination. I've seen a few business people who were just ego-driven fail and partly because they couldn't STFU and listen to their customers - or just get back to work.
I will invoke evolutionary psychology here (my limited understanding of it) and say you need a K-type and r-type in some balance within yourself, or in key leadership positions. These would be people who feed off each other in a way that brings together innovation, excitement, and dependability.
I've likened having a business to being pregnant and raising a child. As a man this is the only kind of birth (other than books or ideas) I can give from my own creative potential. It's helped me as I've come to anthromorphize my business. I see my limitations and capabilities, strengths and weaknesses. If someone starts a business without realizing they must grow as their business does, they will resist or even unconsciously allow it to fail (as was sagely pointed out above).
Having a business is entering directly in life and commerce without the safety net of being an employee. It seems exciting and is, but is also dangerous and promotes stress. Having a system well-adapted to constant stress and learning to manage and feed off it will give you infinite fuel/motivation. Not many people are wired this way. Good intentions, a college degree, deep pockets, or a brilliant idea do not a successful business make. You've got to know yourself, be intrigued with others, or at least passionately commit to creating what you know is good, true, beautiful, necessary to move the world forward.
Obviously I'm sharing from my perspective and other businesses owners I've known and worked with. 11+ years in I am a far different person and certainly a better business owner than when I began as an inexperienced, wide-eyed dreamer. I have also noticed that my scope and market has narrowed and focused every few years, as I've also developed royalty / residuals from licensing my products to other companies for retail / wholesale. I prefer to focus on R&D and let others handle basic logistics like volume web sales, customer support, etc. While not an easy decision but I knew I was getting tired of me day to day grind (technician / manager roles) without being my real visionary self. There are fairly long cycles at work in any business (say 2-4 years). I believe working with those cycles is crucial to stay inspired / interested and also to move your company / vision forward.
P.S. I think over investing in space, personnel, product (volume purchases for best discount), or capacity is a key reason businesses fail. Being too optimistic, especially when you have deep pockets or are connected to lots of funding, will make you feel you're going to change the world overnight. You might get some small market share but you could also set yourself up for big problems in terms of staffing, regulations, supply chain, customer support, fulfillment. If you run a business with the idea that sales can increase or decrease 25-50% from month to month, or year to year, how would you manage that? Not an easy point to ponder but worth considering from my experience.
