The research about the percentage of new businesses that fail each year, or within a certain period of time after launch is widespread and generally confusing depending on the study you’re reading about. Suffice it to say that, according to most of these studies, most new businesses have a tough road ahead of them.
Why? The reasons are many. Some, that I’ve observed, researched, written about–or even committed myself–include:
- Doing it for you, rather than for them. The bottom line regardless of what type of business you’re going into is that you have to have a market–you have to have a clearly defined group of people who are likely to want what it is you have to sell.
- Not knowing what it is your customers are buying. That’s an important statement: not knowing what your customers are buying. You may think you know what you’re selling, but these two things are not always the same. As Victor Kiam famously understood, he may have been selling a razor, but his customers were buying a smooth shave. What are your customers buying? If you don’t know, you can’t possibly deliver it to them over and over again.
- Failing to read the tea leaves. Many business people that ultimately fail in their efforts to succeed will shake their heads and lament that they “just don’t know what happened.” Other, more insightful business people will admit that they ignored a number of warning signs along the way.
- Under-capitalizing. As the old saying goes “you have to spend money to make money.” Often that under-capitalization is exhibited through lack of focus on two key areas–employees and marketing. Your employees have a direct impact on how your business is perceived; if you underpay or make quick decisions here you’re likely to regret it. Similarly, your marketing efforts need to be designed to make your target audiences aware of what you have to offer and informed about why what you have to offer is better than other alternatives.
- Ignoring the competition. You will have competition. In fact, the better your product or idea, the more likely you will have competition–and quickly. Ignore the competition at your own peril. To succeed long-term you need, to be continually updating, upgrading and reinventing what you have to offer.
- Cutting corners. Particularly during tough economic times it can be tempting for businesses to “cut back.” They generally feel that they’re cutting back on the little things, but sometimes those little things can make a big difference. It can be difficult to quantify the value that customers place on some of the value-added attributes they enjoy as they interact with the businesses they frequent–the exceptional service, the no-questions-asked guarantee, the free shipping. Difficult, that is, until those little things are taken away. They it becomes quickly apparent.
- Losing interest. You’ve probably interacted with businesses that seem to lose their energy and enthusiasm over time. Their products become stale and outdated. Their service becomes ho-hum. Their marketing materials become irrelevant. Their employees–even their owners–become complacent and out-of-touch.
- Losing touch. Does anybody use a typewriter any more? Who owns a VHS machine? And whatever happened to Borders? There are examples all around us, stemming back for decades, of successful businesses that failed to identify and respond to disruptive innovation that threatened their livelihood. On the other hand there also are examples of businesses that have been around for hundreds of years: CIGNA (insurance company) since 1792, Old Farmer’s Almanac since 1792, Jim Beam since 1795, Dupont since 1802 — and there are a host of others. The fact that they’re still in business suggests that they’ve found a way to remain relevant, to defy the competition and, importantly, to continue to meet the always changing needs of the markets they’re serving.
These are just the tip of the iceberg when it comes to the many impacts that bombard companies large and small as they attempt to remain relevant and valued by the markets they serve. When you think about the “best of the best” and the “worst of the worse” which names come to mind? And, if you were to arrange these companies or products along a continuum, where would yours fall?