Chances are, you’re going to fail a lot before you build a successful business. Everyone has heard the numbers before:
95% of all businesses fail within their first 5 years
If you know people who started their own businesses, they are probably just getting by or they have already boarded up and shut down their business. It’s just the reality of running a business.
Why Do Most Businesses Fail?
I’m sure that there has been plenty of research and analysis into why businesses failed but if you just look at it objectively, I think it makes sense.
- Most new businesses are coming into an existing market and their competitors have a big head start on each part of the business
- Any obvious profit opportunities have probably already been discovered and exploited by these competitors
- Competitors in the market have real experience with what works and what does not
- While the product is the most important part of the business, entrepreneurs need to know how to do everything in a business (accounting, marketing, sales, customer service) and there is a bit of a learning curve with these activities
You Don’t Know What You Don’t Know
One of the biggest things to remember when setting up your business is that you don’t know what you don’t know. As much as you plan, you can’t plan for things that you don’t know you need to care for.
You Need Money
One of the things that I get asked the most is how to take some of the first steps without any money. Unfortunately, I don’t think it’s very possible. With all of the mistakes that you make, you’re going to need money to help get you through the bad times until your business finds its way. Your competitors probably have more experience, more time, and more resources than you so you need some money to keep up with them.
The advantage that you have is that you’re more nimble and don’t have as much of a cost structure that they do. It is much easier for you to change direction until you find what works for you and your business. If you’re using your only resource, time, instead of money, you lose that nimbleness, your only advantage.
Some Businesses Get Lucky
Some businesses are successful when they start but this is usually because they were able to change their direction as they went. If you look back on them, they didn’t have the answer but they were able to buy enough time to figure out how to get their operation running successfully:
- TiVo’s initial business model was based more around of the concept of being able to apply super-targeted advertising options to clients. Now, they’re more of a subscription-based option, which is much simpler than the original vision
- Google was always a search engine from the beginning but there was never any plan on how they would capitalize on their search engine for several years. Even their Adwords program, which is their primary revenue stream, took several iterations before they got it to work successfully.
If you talk to just about any successful entrepreneur, I’m sure you’ll find that there original vision didn’t match up to what they became. There were changes that they made along the way to get to that point.
Accept that you will make a lot of mistakes (whether it’s multiple decisions in your businesses, or multiple failed ventures) until you gain the experience you need to be truly successful. And don’t be afraid to drop some of your ideas as soon as you realize that they aren’t going to work.
Speak your mind