By Kenneth Surbrugg, Director of the Center for Entrepreneurship at Missouri Southern State University
“Never confuse a single defeat with a final defeat.” – F. Scott Fitzgerald
Starting and operating a business is difficult. It takes work, dedication, resources, and timing. It also requires offering a product or service that is in demand to a market that is capable and willing to buy. According to the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within the first year. By the end of year five, about 50% have failed. Only about a third survive after ten years.
There are many reasons for this and there are just as many reasons why some entrepreneurs never start their business. After doing some research, I’ve discovered many of the reasons why businesses fail and included seven of them below as well as some of the reasons why entrepreneurs fail to start in the first place. Take a look and see if you agree.
- Fear of Failure. This is a big one. There are very few people who enjoy failure. People don’t like to be wrong, so instead of admitting a mistake after the fact, they sit on their idea and never do anything with it. They fear failure so much that they don’t try — they simply decide not to try at all.
- Paralysis by Analysis. Similar to the fear of failure, these individuals imagine different scenarios and then try to create solutions for each scenario before a decision can be made. Individuals that have paralysis by analysis feel that better data is just around the corner and if they just wait, then they can decide. Often, individuals that develop paralysis by analysis have had a bad experience with failure, and so they hide behind the “what ifs.” This is a good way to stay stuck where you are and not move forward.
- Going It Alone. Another way to fail in business is to believe that you are the only one who can do the job right, so you have to do it all yourself. Individuals that believe this limit their capacity to grow and thrive. This also leads to frustration and burnout.
- Solving an Unimportant Problem. An entrepreneur finds a gap in the market and rushes in to fill it with their solution. Or the entrepreneur decides to follow their hobbies and start a business focusing on their own interests. Only after investing money, time, and resources, they realize nobody is interested in their business.
- Not Listening to Real or Potential Customers. This ties into the reason above. The “if-you-build-it-they-will-come” attitude is the wrong approach and not listening to customers is a quick way to fail in business. Without market research or customer feedback, how can someone justify the business investment?
- Underestimating the Necessary Resources. Entrepreneurs tend to overestimate their abilities to attract resources for their business as well as the timing to acquire the proper resources. It is difficult to succeed without them.
- Failure to Plan. A business plan will organize your thoughts and give you a structure to identify where you are at today, your goals for the future, and your intended strategy to get you from here to there. A business plan will help you understand your potential markets and the resources you need to deliver your service or product to interested and willing customers. A business plan can help you stay on track and plan how to identify future opportunities.
These seven reasons outline how businesses fail or never start. However, with information comes the power to choose. Use these reasons to your advantage and take the time to weigh the risks of starting versus the risks of failure. Plan on how you intend to stay in touch with customers, but don’t over-analyze every little detail. Maybe you can do this alone — maybe you can’t. In either case, try to find an entrepreneurial mentor or friend to share success and failures. Get involved in the local entrepreneurial ecosystem and get plugged in.
I never dream about success, I worked for it.” – Estee Lauder