Finding Failure: An Entrepreneur’s Magic Weapon

In today’s business community, we have a lot of stigma attached to the word “failure.” You will often find new upstarts will attempt to stay away from those who have failed like they have the plague! But I’m going to suggest that instead of running away from those who have failed, you seek them out and run towards them. While this may sound counterintuitive to some who are new to business, many seasoned entrepreneurs understand immediately why it makes sense to glean as many lessons as possible from those who have been there and done it.?

For those of you who do not yet understand, I will break it down like this:

I hate to hurt your feelings, but your idea is not new.?

One theory states that 2.5 percent of the population has the mindset required to innovate and create solutions to problems. Another 13.5 percent can either be early adopters or innovators themselves. While this approach is overly simplistic, it gives us a starting point to think about our ideas. Why?

There are 7.7 billion people in the world, and 330 million people living in the United States at any given time. If we take 16 percent of those people as potential innovators, it means there are around 50 million people in the U.S. and around 1.2 billion people on Earth that have the right mindset to come up with innovative ways of doing things or challenging the status quo. All this to say that someone, somewhere, has likely thought of your idea or approach. Of those who thought about it, there are likely people who have even tried to create a business out of it. If they are not around it means they failed. If possible, it is your job to do the due diligence to understand why, so your business has a better chance of avoiding the same pitfalls and becoming a success story.

Why do failures happen?

Okay, I’m going to have to say something that you may not like hearing: As you look to grow a business, you have a higher chance of going out of business than you do of being wildly successful. I’m sorry if it hurts your feelings, but it is better that your feelings are hurt now, than your bank account being hurt later.?

The fact of the matter is that 11 out of every 12 high-growth startups fail. That’s 92 percent that don’t make it.?

If you are starting a traditional service-based or transactional small business, your likelihood of surviving ten years is 33 percent according to data from the Small Business Administration.?

While these are not great odds, there is a bright side…

Entrepreneurs who were part of a community and who sought out advice from subject matter experts, current business operators, or those formerly operating businesses in their industry, were almost 40 percent more likely to be successful.?

That’s right, you have almost a 50 percent better chance of finding success if you approach your business with the frame of mind that you don’t know everything. And this is important because starting out...YOU DON’T!

To illustrate this point, here are the commonly agreed upon top reasons why businesses fail:

• Not enough money (working capital, cash flow, flexibility funds, runway, etc.)
• Spending too much on customer acquisition before honing in on the product-market fit
• Investing in the scalability of the product before honing in on the offering and testing its reception with target audiences
• Focusing too much on profit maximization too early
• Planning and executing too much without a regular feedback loop
• Not adapting the business model to a changing market
• Inventory mismanagement
• Lack of sales
• Poor management skills
• Hiring the wrong people
• Not having a command of business accounting
• Ineffective marketing

What you will notice is that none of these have to do with whether or not you are good at your craft. That is a given. Most people find the confidence to take the risks of starting a business for that exact reason...they know they are great at what they do. And that is usually true! However, it is the “everything else” that can kill your bank account and dreams.?

My advice

Approach your business from the perspective of gathering as much information as possible from those who are familiar with your field. Whether they may have “failed” or just got tired of it and moved on, they likely have incredibly valuable insights that can help you avoid the same fate. Seek out, do not run from, or look down upon, those who were in the industry. They might just be the reason for your future success.?

Often, it’s what you don’t see coming that kills you. Learn what you don’t know from anyone who might have seen it. You’ll thank me in 10 years.??

If you have questions about how to best find experts who can increase your chances of success, shoot me a message or come visit us at the Better Business Bureau of Greater Kansas City.?