Why most Businesses Fail

Yes, the potential for business failure is high - over 70% of businesses don't make it in the long-term. This has less to do with the economic climate, but numbers do vary according to different industries.

Why most businesses fail

It is not surprising that most businesses fail if one thinks about it. Most ideas, when tested in reality, are bad ideas and should fail or at least serve as 'feedback' for continued evolution.

Businesses are not much more than 'a coordination of skills and resources, in trying to add unique, meaningful value to the market or society' - All tied to ideas. And to survive in this hyper-competitive world, the value you deliver (ideas) has to evolve with the changing market. Do any of this poorly and you risk business failure.

Of course you never really 'fail' at something until you throw in the towel. We've all read countless stories of great inventors, artists, entrepreneurs etc who followed their heart and tried 10,000 different ways or put in 10,000 hours until they hit on the winning formula.

The point is that they never gave up and believed they were getting closer to the mark, with time and each failure. The silicon valley titans adopted this mindset in their early stages and continue to follow this philosophy in their product development initiatives today.

After decades of experience/analysis, we've found that business owners or management teams who 'fail', commit the following cardinal sins;

1. A weak overarching Vision / Purpose / Mission - Having a strong 'Why' to your business is crucial to driving your (and your team's) enthusiasm, direction and momentum forward. Simply having framed posters or web pages creatively outlining your 'Vision and mission statement' does NOT tick this box! If you think about it, this should determine the type of talent/people you enlist, it is part of what sets the cultural tone of the business. Passionate staff = Passionate Customers. There is a growing breed of investing titans that look to the culture within a company, as a key indicator of continued success...

2. Not providing unique, meaningful Value - Your value, your product and end-to-end experience you deliver, is at the heart of your business. This area is crucial, in fact this is where top entrepreneurs like Jeff Bezos and Elon Musk are known for spending up to 80% of their time. The world's most successful businesses deliver the most value in the eyes of their target market. As a manufacturer/producer, this means having a strong sense of how the leading products/offering in the market could be dramatically better or more cost effective (or both). As a merchant/retailer, this also means knowing your customer, knowing what matters most to them. You then build a unique and meaningful value proposition from there. If you're not adding as much (if not more) value than your competitors, then you need to rethink your approach.

3. Poor Financial Discipline - this isn't an indicator of whether you come from a finance background or not. I have seen highly qualified finance professionals commit the most basic mistakes, because they had poor discipline. This is more a character and self-control thing, than a knowledge thing. Without vigilance, accept that all costs are expected to grow beyond what you really need or beyond the comparable value you could get elsewhere. You have to keep on top of these or at least have a trusted finance head to do so. Related to this is Pricing Discipline. You must price your product/services according to the value derived by your target customer. Lastly, Cash is the lifeblood of any business - so if your team doesn't have a strong handle on it, you're flirting with disaster.

4. Weak or outdated Systems - Assuming you have a great value proposition, are you able to deliver on it and keep your promises, time and time again? What quality control systems do you have in place to ensure you keep your promises? What financial control systems do you have in place to limit the risk of fraud or error? How often are you revising your systems and processes, as your business grows to become more complex? Many businesses don't invest in the proper scaling of their systems and infrastructure. They become constrained, suffer financial loss, become operationally constrained and soon fall behind the competition. Systems leverage your (or your management team's) time to enable them to remain focused on the mission and work on the business, not in the business.

In Summary

Business is tough. It is an endless battle of problem solving and decision-making. It isn't everyone's cup of tea. Many people go into it with delusions. But it's those who know what they're getting themselves into, are inspired to take the tough road ahead and most importantly who fail forward and never give up, that make it...past 10 years. After that, the only way to get out is to sell-out or close-out.

We at Excelerate work with and buy into businesses requiring specialized attention, to take them to the next level. Should you wish to release some equity and work with us - please make contact with us for a confidential discussion.