6.6 Success and Failure

Bureau of Labor Statistics shows that roughly 20% of new businesses fail during their first two years.  Almost half fail during the first five years.  What are the reasons for success or failure?

Success

• One key to success is hard work.  Entrepreneurs are committed to their business.  Some people underestimate the amount of work required.  One entrepreneur stated, “Yes, I only work from nine to five.  And then I go home and work from seven to eleven.”
• Another key to success is understanding the market and business.  It’s not enough to have a new product or service idea.  One must understand the customers.  What are they looking for, where do they shop, how much are they willing to pay, where do they get their information?  One must also understand the business.  How does the supply chain work?  What are the local laws and regulations?
• An entrepreneur must be able to work with others.  No one can operate a business by themselves.  That includes dealing with employees, customers, and suppliers.
• One attribute that stands out in successful entrepreneurs is persistence.  They don’t give up.  And if they fail, they learn from their mistakes and try again.
• And sometimes it comes down to a matter of luck.  The timing might be right.

Failure

• Top of the list of reasons for failure is obviously poor financials.  That could be poor sales.  It can also be poor profits.  The entrepreneur may not understand all the financials of the business.
• The entrepreneur may not have all the expertise or skills necessary.  Perhaps they have a great product idea but have no idea how to manufacture it or manufacture it at a reasonable cost.  Perhaps they think of an app but have no idea where to get the data for the app.
• As mentioned above, some new business owners underestimate the amount of work and cost required to run a business.
• The business owner may not have good accounting systems in place.  It’s important to know the costs of revenue and operating fixed costs.  A business owner may observe that they are making sales but have no idea why they are not making a profit.  The business owner may be good at marketing or development but they also need to stay on top of the financials.