According to Bloomberg, 8 out of 10
entrepreneurs who start businesses fail within the first 18 months. A whopping
80% crash and burn.
But why? What can we learn from the
colossal amount of failure with small business that we can apply to our own
business aspirations?
Thus I give you 5 reasons for
failure and more importantly, what you can do to avoid it happening to you:
Reason
#1: Not really in touch with customers through deep dialogue.
An amazing thing happens when an
entrepreneur sees a potential opportunity in the market, or dreams up a new
idea for a product/service: they retreat to a cave.
In my experience, this is the worst
move an entrepreneur can make because complete understanding of your customer
is imperative to your success. Listen — in my mind entrepreneurs must walk
1,000 miles in the shoes of their customers. Not 10. Not 100. One thousand.
Your customer holds the key to your
success deep in their pain, behavior, dreams, values and the jobs they are
trying to accomplish.
Your Solution: In 1999, four smart guys wrote a book called ‘The
Cluetrain Manifesto’. Although the book is a tough read in my opinion,
there is one silver bullet piece of wisdom shouting from the pages.
Markets are
conversations.
Dialogue is key. And 140 character
tweets don’t count. Real dialogue with real customers (via whatever channel is
best for them).
Nathan Furr and Paul Ahlstrom,
co-authors of the book ‘Nail It, Then Scale It’, said it best:
Which would you rather do — talk to
customers now and find out you were wrong or talk to customers a year and
thousands of dollars down the road and still find out you were wrong?”
Reason
#2: No real differentiation in the market (read: lack of unique value
propositions)
Entrepreneur.com just put out a story
entitled “Why Everyone Will Have To Become An Entrepreneur”. If this
holds true (and I think it will), instead of your competition being 5,000 other
Tom, Dick and Harrys, it will soon be 50,000 of these guys.
Meaning? Plenty of noise and chaos for
those without uniqueness fighting for the bottom scraps. Most times this is a
slow killer of businesses. Barely hanging on, entrepreneurs with some customers
and some revenue skimp along for months or even years. Every painful inch
wondering to themselves if this is all there really is.
Your Solution: First, agree with me right now this is a core element which
must be addressed. Entrepreneurs who take this lightly end up in trouble. Grab
a tool like Alex Osterwalder’s ‘Value Proposition Canvas’, stick it on
your wall and work it. Dig in. Figure out the true value you bring to the table
which is unique and different than others in the marketplace.
For example, if you read my stuff
you’ll immediately notice I write different than others. It’s not the same. You
may or may not like the writing style, but it is unique. It sets me apart from
other writers on Forbes and thus, it’s one of my personal UVPs.
Now go uncover yours.
Reason
#3: Failure to communicate value propositions in clear, concise and compelling
fashion.
Next up is the debilitating disease
called ‘failure to communicate’. For those old enough to remember the classic
1967 Paul Newman movie ‘Cool Hand Luke’, seared on the brain is a key
line spoken by the prison warden to Newman who plays the maddeningly defiant
inmate named Luke. “What we have here is a failure to communicate…”,
upon which Newman is shot in the neck and on his way to exsanguination (aka
bleeding to death).
Many entrepreneurs work hard to
discover a point of differentiation then blow it because they do not
communicate their message in a clear, concise and compelling manner. I watch
many entrepreneurs bleed to death through their failure to communicate.
Your Solution: It’s pretty simple. Learn how to communicate better. Again,
I reference point #1 above. If an entrepreneur is truly engaged in conversation
(read: dialogue, not monologue), then you’ll learn the language of your
customer. If they speak Russian, then please stop trying to speak French to
them. Listen to the words they use and then use them right back at them. Do so
through focus on these 3 points:
- Be clear (are your customers unclear about who you are and what value you bring to them?).
- Be concise (are you somewhat clear but go on and on and on in your messaging?).
- Be compelling (do the words you use persuade your customers to take the action you want them to?)
Reason
#4: Leadership breakdown at the top (yes — founder dysfunction).
You see it all the time in the media.
Right off the deep end goes another athlete with unbelievable talent. Painful
to watch the self-sabotage of the likes of a Lance Armstrong, Mike Tyson or
Aaron Hernandez, all of which fell short from truly remarkable success because
of their poor decisions.
Now startup entrepreneurs who go down
hard might not have their names splashed across the headlines of tomorrow’s New
York Post, but I submit to you their reason for failure is sometimes the same.
Self-sabotage through extremely poor decision making and weak leadership
skills.
Your Solution: Wake up to realize it’s your baby. You’re the founder.
Which makes you the leader. Matters not if you’re a business of one, or 1,000.
Lack the ability to strongly relate with people? Gain the skills necessary to
do so. Struggle with anger issues? Solve it with anger management.
Entrepreneurs who succeed spend time with personal development. I have never
once met an angel or venture capital investor who doesn’t investigate the
character of a founder and his/her team before whipping out their checkbook. It
still amazes me how many business owners who actually have good ideas with the
ability to execute them — crash and burn because of their own dysfunction.
Please don’t be one of them.
Reason
#5: Inability to nail a profitable business model with proven revenue streams.
In the end, this is the sum total. Fail
to accurately achieve product/market fit where money gets made, and you’re
sunk. Entrepreneurs can actually have each of the four above reasons solved,
but still miss the business model boat. Twitter is a perfect example of this
(although 2013 may be the year they finally turn black in the profit/loss
column).
Your Solution: Startups need to move swiftly without spending tons of cash
to figure out their secret sauce. Using tools and methodologies such as Minimum
Viable Products, Lean Marketing and Experimentation is critical.
A perfect example of this comes from
Tony Hsieh’s book ‘Delivering Happiness’, wherein he describes the early
days of Zappos. He and his co-founders weren’t even sure back in the late 90’s
that people would dare order shoes over the Internet. So they ran a quick test:
Up goes a website with shoe images taken from manufacturers’ websites, some buy
now buttons and watch to see what happens.
Cha-ching. Order comes through, one of
the guys sprints to the local shoe store, buys the requested shoes at full
retail, and then scurries home to ship them out. Did they lose money on every
pair of shoes shipped? Yes they did. But did they quickly ascertain whether
they had a potentially viable business idea? Yes again. All with zero inventory
or fulfillment capabilities.
Think and move quickly, ‘fail fast’ if
you’re going to fail at all, and nail your business model.
Otherwise, you’re in the 80% bracket my
friend.
SOURCE: FORBES
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