It’s bitter truth that most of the entrepreneurs fail and never taste success in their life as a successful business man. There is no single reason behind the failure of any entrepreneurs, there are tons of reasons to failure then to success.
“Build and they will come is not a strategy. It’s a prayer”—By Steve Blank.
Let’s discuss some of the major key factor for the failure of any entrepreneurs.
Risk Awareness and Risk tolerance Capability
Entrepreneurship is a game of risks.
By nature of the enterprise, us entrepreneurs are both dramatically risk tolerant and egocentric and that’s a minimum baseline to believe that you’ll be the rare exception to the rule.
That egocentrism can be a natural barrier to robust decisions.
But sometimes, it isn’t just about risk tolerance, but risk awareness. Making the hard decision to take the road less traveled on an experiment, but can also be very bold when presented with new information – like when the experiment isn’t panning out.
The ability to quit – to fail fast – is just as much a factor of the failure rate as the profile of the entrepreneurship class.
Analysis on Short, Medium and Long term goals & Self Discipline
Most entrepreneurs fail because they do not execute on their vision with clarity of purpose.
All tasks, no matter how small, require extreme attention to detail in order to make sure that short, medium and long term goals are accomplished.
The ‘self-discipline’ prevents a person from succumbing to their weakest impulses and losing sight of their goals.
A person that is self-disciplined and mindful will always keep their goals at the top of their agenda. ‘Self-discipline’ allows a person to plan ahead and adhere to a schedule.
The consequences of not keeping goals always in top of mind will lead to easy distraction and ultimately a failure to achieve a larger agenda.
All business leaders must learn to plan for the future and track objectives on both a short term and long term scale.
It takes ‘self-discipline’ to make sure that habits that are not productive are purposefully eliminated from a routine and habits that are beneficial are fostered.
Only ‘self-discipline’ can allow a person to maintain a rigorous schedule and only by maintaining a rigorous schedule can a person be more likely to accomplish a goal.
It is very important to be ‘self-disciplined’ to be able to compete in today’s challenging economy because only ‘self-discipline’ can keep important ideas always in the forefront of one’s mind.
Financial Backup or Cash Plan
The biggest reason why entrepreneurs fail is because of lack of cash or financial backup plan. Cash is the most important thing when running a business and its imperative for entrepreneurs to truly understand the cash flows of the business.
While revenue is incredibly important, entrepreneurs forget that some large companies won’t pay directly on-time, and instead, may make payments 60 to 90 days after invoice.
Entrepreneurs and startups need to understand this to prepare their business.
Additionally, it’s important to understand how the cash is being used, especially for businesses that invest heavily in working capital or inventory.
Predicting the amount of capital needed for production runs allows an entrepreneur to better plan for the future and understand how much capital a company may need.
Working capital and inventory is overlooked a lot as it’s not technically an operating expense.
Finally, it’s important to project a realistic marketing expense amount. Too many entrepreneurs believe in spending limited dollars in marketing, however it’s important to factor this amount in.
Lack of Business Plan
The business plan is sometimes seen as necessary only if you’re applying for a loan, but it has much more significance than just that. Going through the process of writing a business plan helps an entrepreneur to understand more about competitors, as well as their strengths and weaknesses.
Writing a business plan forces you to take a strategic look at the opportunity and set a road map that can be followed.
Without a plan, too many entrepreneurs get sidetracked or distracted, and spend their time and energy on things that aren’t the best use of their time.
Having a business plan can help to create a clear direction to follow going forward. Writing a business plan can seem intimidating, but it really doesn’t have to be that hard.
- Avoiding Risk Management
Most entrepreneurs take risk to pursue size before first proving out the model in a carefully risk managed way.
The result is they burn through their cash reserves too fast and take inappropriately large risks at the wrong time. The proper way to build a business is to first prove the model using rapid prototyping and test marketing.
Once profitability is proven then use marketing leverage, time leverage, systems leverage, and experience leverage to increase efficiency. The result is positive cash flow which reduces the cash burn rate.
As profitability is assured and risk has been managed by first testing and proving most aspects of the model then use leverage again to scale to size for the big win.
Unfortunately, too many entrepreneurs attempt to scale too early in the curve resulting in large losses and cash flow problems.
Check out this video.
- Lack of solid roadmap to generating Revenue
The reason most entrepreneurs fail when starting a business is that they don’t have a solid roadmap to generating revenue.
I think the key to success is to receive your first payment from a real customer as soon as possible. From there, become profitable as soon as possible.
There is a fallacy in the start-up World that you can create a business with no revenue, using investment dollars, attract millions of users and then exit after an acquisition by a billion-dollar company.
This may happen, but it’s not a realistic approach for most businesses any more than buying a lottery ticket.
Wasting time in early business days
Wasting time early business days one of the major factor of failure. Don’t spend weeks on a logo, vision boards, concepts and company names. Every single day is precious but too much time is usually wasted in the early weeks of development.
Treat your first few days of starting the business in the same way as the last few days before product launch. Priority is receiving first order from a customer as quickly as possible which means creating a product or service that offers value as quickly as possible.
Do not focus so heavily on analytics, but listen more to what your gut is saying. Intuition is absolutely key not only to making the bigger decisions, but to the day to day operations. This is to some degree that is very hard to teach to any entrepreneurs, this capability need to earn.
Hiring the right people, managing them and motivating them is imperative to the success of your business! Be diligent about it. This is the most difficult part of any job!!
- Not tracking your results
One of the common mistakes businesses make is that they get sidetrack by an increase in revenues.
Real growth must translate into an increase in both top-line revenue as well as the bottom line revenue. Otherwise, the company won’t be profitable. Not understanding your numbers.
You should at least understand the financial position of your company and the drivers creating growth for the company.
If you can’t properly and accurately track your daily operations, successes and failures, you won’t be able to track your business’s performance and opportunities for growth.
- Avoid Confusing Communication
Entrepreneurs must know how to communicate effectively in order to succeed.
Must spend and focus on quality communication with clients, simplifying the tax law for them and/or on stage explaining how the tax law works to a group of entrepreneurs or investors.
We are not taught how to communicate in school, either verbally or in writing, yet it is one of the most important skills for entrepreneurs.
- Biting more than chewing capacity
Being provoked by the successes of other businesses start-up entrepreneurs sometimes dive to catch the bigger fishes which are truly beyond their capacity.
This business act is simply suicidal, because businesses having bigger resources are capable of throwing away smaller investors from the pond. So, don’t go much over your capability.
You Must Read Below Article:
- Are Entrepreneurs Born or Made? Why?
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- Challenges may Freelancers face after Retirement
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