By Dr. Douglas Kong
Research has shown that 80% of all businesses fail within the first 18 months and a whopping 96% of new businesses will fail within 10 years. This is pretty depressing if you are an entrepreneur or you plan to become one. Many articles have been written as to why entrepreneurs fail and if they succeed how they succeed. One of the commonest reasons cited as to why new businesses fail is the lack of resources, especially money. A secondary reason to do with money is that if new businesses fail to grow very fast, they do not grow organically large enough for them to access financial resources in terms of loans and other financial resources out there in the community such as loans.
There are other reasons as to why they fail.
It may be that they lack the skills, mindset and the ability to structure their business in a way that allows them to succeed. All these skills can be learned and acquired through learning and application made painless through the guidance of an Executive Coach and/or Mentor. As a new business owner, it is not enough to have a product/service you are passionate about and willing to sell to potential customers. You need to understand why prospective customers would want to buy the product/service you are providing, and why they should get it from you. Unless yours is a brand-new innovation, it is likely that there are existing suppliers who are hawking products similar to you. In truth, they are your competitors.
Yet in spite of all this, we know of several new businesses who have a promising start only to sputter and die after some time. What can you do to avoid being in the 96% failure group and ensure that you are among the 4%? Bear in mind though that an event that occurs with a frequency of 5% or less is statistically likely to probably be due to chance.
Is Entrepreneurial success due mainly to chance?
If it is due to chance, then it is like winning the top prize in a lottery or big sweep. If succeeding in a new business is due purely to chance, then it is beyond your control. But if it is not due to chance, then it means you can identify factors that you can control and maximise your return.
It is very much like investing in stocks and shares. Without the requisite knowledge, the probability of you making a profit is probably due to chance. If you were to invest and throw in your money at it without any reference to market conditions or share performance, you are likely to lose your money. However, with an in-depth knowledge of market matters, and using the appropriate tools, you may consistently make from it.
It does seem to me that a lot of business owners starting new businesses are throwing caution to the wind and putting in their money for a bet that their product/service will indeed succeed because they feel it in themselves. Going into business for many is an opportunity not to be missed. If they succeed, it is like winning the lottery; if not, oh well, it’s back to a regular job. Hence you can understand why many fail. Without the required skills, mindset and guidance, they will fail because they have not identified the factors that will allow them to succeed and work systematically at them.
What you can do to ensure success?
If you are a new or fairly new business owner, seeking to make a success of your business, you may want to review the following. They are meant to serve as a guide and help you to see what you can do to ensure a better chance of survival and winning instead of leaving it to chance. You are strongly advised to seek the guidance of an Executive/Business Coach who can provide you with useful learning to succeed.
Here are 5 things you can do to ensure that your business has a “better than chance” to succeed.
1. Define clearly your product/service and to whom you will sell
Some entrepreneurs are convinced that they have developed a “perfect” product/service and are surprised that they have no or few buyers. It is better to have an imperfect product that sells. You need to determine first of all that your product/service is wanted and by whom. This requires some research. If you have customers, ask them why they buy your stuff. If you are starting out completely new, ask friends, and hit the streets to do a random survey of strangers. If you have asked enough people you will get enough feedback to tell you who will likely buy your stuff and what their characteristics would be in terms of their demographics, location, as well as lifestyle and behavioural patterns.
2. Have a Business Plan
The unfortunate thing is that entrepreneurs will draft a business plan only when they are seeking funds from potential investors. I recommend that you have a business plan from the very start. A plan is like a road map that tells where you are going and how you are getting there. A business plan usually starts with a survey of the business environment, your competitors, and the challenges you are facing. It usually incorporates your business model as well as an estimate of projected sales and income. With such a plan in place, you can implement it systematically and if your real income deviates from your projected income, understand what is happening and revise your plan if necessary.
If your business plan captures accurately your strategic objectives and strategic positioning, implementing it will help you to achieve real results. The important thing about business plans: be sure to act on it.
3. Take stock of your resources
Your resources are more than financial resources, important though it is. Resources are everything that enables you to deliver your services/products at a price which you are selling. They include partners and suppliers that support you as well as recruited staff. Physical resources such as machinery, tools as well as skillsets specific to you or to employed staff are all important.Intellectual property rights are also a resource if you own it.
Resources are wide-ranging and resources can place you ahead of the pack when competition is keen. Therefore, know your resources and guard it jealously if that resource is scarce and valuable. These will give you a competitive advantage.
4. Track your cash flow
If you are unfamiliar with finance, you are likely to outsource your bookkeeping and accounting to professional accountants. Be sure to have a good talk with your accountant and try to learn the basics. Be aware that having sales may not mean that you are profitable, as profitability has to do with cash flow and costs. Most entrepreneurs starting off would have worked in their own business making all kinds of sacrifices. This kind of behaviour may bring with it a number of hidden costs. Be sure to know what they are. When your cash flow is healthy with good sales coming in, there is a chance that you can truly grow your business.
5. You need to talk to someone
You are your own worst enemy. And if you are alone in your business that’s a real danger. You fail to see your own biases. Your certainty about your views and conclusions is too subjective but you cannot see it, only another person seeing it from the outside or from another viewpoint can. Unless you have resources that can give you different viewpoints to a problem other than those of yourself such partners with different skill sets, you may want to engage an Executive/Business Coach to help you get the business off the ground with their professional inputs.
Starting a new business need not be a game of chance. If you arm yourself with suitable education and learning, and if you have trusted advisors and partners whom you trust, you are less likely to be bounded by views that take everything into consideration to help you reach the most viable decision and plan of action.
So, to all entrepreneurs and to-be entrepreneurs, my wish for you is that you may succeed to realize your dreams and beat that dreaded 96%.
I have designed a worksheet to help you develop your business plan in a systematic way. You can download it here. Click here