Discussing the myths and some facts, and opinions regarding why new businesses fail during the first year. According to the U.S. Bureau of Labor Statistics (BLS), approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years.
According to these stats: 25% of new businesses make it to 15 plus years or more. The BLS stats are fairly static, and have not changed since the 90s. About 23 million small businesses are single shingle (sole member/manager/employee) small businesses, meaning they are just jobs. You want success in business, you need to get some education; you can (and should) use the web, which is jam-packed with information (that we could only dream of a few years ago), with regards to business education. You need to tap into those assets, find a mentor and get educated. Also, you must believe in your success, and more, you must combine that belief with definite purpose, and focused action. Your beliefs cannot just be wishes, they must be convictions (a belief so firmly established in your mind that it is unshakeable). You must HUSTLE, GRIND, FAIL, GET UP, AND PUSH FOR SUCCESS no matter what.
Business is synonymous with risk and per the statisticians (also captured by the BLS and the SBA) 1/2 of the small businesses survive the 5 year mark, and only a little more than 1/3 of the small business startups get to the 10-year mark. The businesses that get to the 20 year mark or beyond, 20% or less (statistically).
Some myths about why companies fail are: 1) market demand; 2) Not enough capital; 3) Not the right team; 4) Competition; 5) Pricing and some of my truths about why companies fail:
You will hear and learn of business closing due to market demand (or lack of); this is probably the most vague reason talked about in business journals, etc.
You need to focus on whether your product or service solves a problem; whether your product or service can solve the customer problem, really comes down to what you believe. You believe, you can, you do not believe, you cannot; this is very similar to what Henry Ford said many years ago. You have a burning desire to and want to succeed, get convicted of the belief in your own ability and aspirations to solve problems in the market.
Moreover, there’s not been an easier time in history to do market research. The World Wide Web has opened the door to market research and is truly the great equalizer; there’s no reason not to be aware of the footprint you intend to make (and where you can make it for the max impact). Market demand comes down to the number of people seeking your product; how much they will pay for it; how much of your service/product is available to customers; what other competitive factors are in your market area that you can research, investigate and consider.
Not enough capital
Undercapitalization means not enough capital to conduct operations and or pay creditors. Not enough capital also means possibly, that you did not put in enough hustle or you did not know your numbers. As a business owner you must be ready, and aware at all times, of the numbers: costs of goods sold, your profitability, etc. You must also take action at extremely high levels to get whatever it takes to keep your business afloat. You will have to get comfortable with being uncomfortable. You do not get strong missing a workout, you get strong by pushing yourself with whatever you got, whenever you can, to hit your own professional targets, and that will require getting uncomfortable.
Not the right team
You can find many fascinating books, articles and posts about having the right team on the “business bus.” You need to remember that this bus DOES NOT STOP, and it ONLY MOVES FORWARD and there IS NO REWIND. You will experience people getting on and off the business bus, they will move up seats, change seats, and sometimes get off the bus (and the bus cannot stop for them). You will find the reason for so many books, articles and blogs, and posts, on recruiting and retaining the right team, is because there are going to be some amazing and remarkable people that come along on your journey. You may also find that the business of being a business owner is hard, and may experience that few will stay, because to be successful you must be kind, and at the same time, you have to be demanding; if you are not, you are literally taking profit from your family, and from your dreams, boss up! You may also find that some team members and colleagues will have life happen to them (pregnancy, a big move, a career divergence) and others will get “in the ditch,” and out of alignment with your company and in alignment with something else (the grass is greener phenom). You need to make your grass as green as possible, Boss, Employee, or whatever, clean the cobwebs of your fear, focus on and pull the weeds where you’re standing, and if you do not like where you are, as my brother Jeff Skinner would say MOVE!
Your notion that competition is preventing your success is a misconception, competition is everywhere, and it's most dangerous inside your head. Your competition is thick like weeds in an unkept garden, and it's everyday; especially in business, everyday you are locked in the greatest competition of all time, the competition with you, yesterday. Be better than yesterday! Additionally, you need to guard against the advice you may get, especially guard carefully following unsolicited advice, or advice that may be from people who are worried about seeing you fail. You need to get the right advice, mentoring, and leadership and business training!
You must guard against, and carefully consider some advice (especially unsolicited advice), from those less successful than you; this does not mean to discount it entirely, because there can be lessons from anyone at any time. You, however, must guard against those operating out of fear, or out of their status in safety and satisfaction, may truly believe they’re giving their best advice to you (and they probably are), to keep you safe; recall they are into self preservation and not into risk and making it big, so guard against and consider the advice that you’re getting from peers, subordinates, people less successful than you or who lack ambition or are afraid of personal risk, supervising employees, etc.
Pricing too high or too low is another business myth that can cause failure in the market. You will learn pricing really has little to do with pricing; it has to do with your hustle and relentless persistence (and even grit), in presenting, getting and pushing your product or service to the market. You should avoid learning in the school of hard knocks, (because it is the most expensive school you can learn in), although many, including myself, did this for years (hence why I recommend avoiding those lessons). You need to also know that while it is important to realize that knowing, or not knowing, what to charge could be an impediment to success, it is just as dangerous as charging too little as too much.
You need to know this though: the cheapest product or service in town will often attract the cheapest customer in town (and the worst collection rate for the work you/your business perform for those customers). You also need to know that the rate of collection for your work will have more to do with your survival than pricing. You cannot afford to do work and not get paid, better to not do the work.
You do need to be decisive about who or what company is your ideal customer; this absolutely needs to be considered and researched so you can tailor your marketing to that customer base. You also need to be constantly focused on the hustle; you need to be focused on generating, attracting, and retaining and collecting revenue. Napoleon Hill’s masterpiece Think and Grow Rich recommends that in exchange for the definite service you are providing, be definite in what you intend to give in excess of useful service in exchange for the money that you are getting for your product/or work.