Why do so many businesses fail?

 A lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.

According to business owners, reasons for failure include money running out, being in the wrong market, a lack of research, bad partnerships, ineffective marketing, and not being an expert in the industry. Ways to avoid failing include setting goals, accurate research, loving the work, and not quitting.

1. NOT HAVING AN EFFECTIVE BUSINESS PLAN

If you don’t have an effective business plan, you can’t properly communicate your vision to your team. Tony Robbins advocates not just having a business plan, but having a business map for entrepreneurs to take their small businesses to the next level. Your business map will help you master vital stages of the business cycle, like scaling. Explosive growth can be tempting, but not scaling in a mindful manner is one of the biggest reasons why businesses fail – you have to strike the right balance between growth and infrastructure.

2. NOT PUTTING THE CUSTOMER FIRST

One of the top reasons why businesses fail is that they fall in love with their product instead of their customer. To circumvent business failure, fall in love with your client and figure out every single way you can meet their needs. Anticipate what they want, what they need and, when possible, determine what they might not even know they need yet. Turn your customer into a raving fan – somebody who will tell everybody about your product or service or company. Once you grasp that your customer’s life is your business’ life, you can truly envision how to succeed.

3. NOT HIRING THE RIGHT PEOPLE

Hiring the right people has a massive effect on nearly every area of your business. One of the most obvious examples is sales: If you don’t have enough sales, you can’t pay your team or yourself and you cannot grow. Confident salespeople are a key to increased sales. It’s also astounding how many businesses fail due to inventory mismanagement. Hiring someone who is skilled at inventory management or using a good inventory management software is an easy way to solve this issue.

 

A business plan with marketing and financial model  

4. DOING IT ALL YOURSELF

Yes, you are an entrepreneur, but that doesn’t mean you have to do everything on your own. A business is only as strong as the psychology of its leader – and the ability to let go and trust others is an essential leadership trait. If you need to control everything, it’s likely you won’t succeed over the long term. Delegating is a top skill to manage a business effectively: it helps you manage your time, focus your energy on what matters most and spot potential up-and-coming leaders within your company.

5. LACK OF FLEXIBILITY

Remember Blockbuster? Radio Shack? Tower Records? These giants of their industries all fell victim to the same reason for business failure: inability to adapt to a changing market. Entrepreneurs who fall in love with a service or product and refuse to change directions when the market demands it are likely to fail. The key to long-term success – in business and in life – is flexibility and a willingness to pivot when necessary.

Today, everyone has heard of Apple. It’s one of the most valuable companies of our time, with a market cap of nearly $2 trillion and a stock that is soaring above its competitors. But it wasn’t always that way. Apple is actually the perfect example to look at when considering why businesses fail.Apple’s founder Steve Jobs was fired from the company in 1985. Before re-hiring Jobs in 1997, the failing business operated at a loss and inched toward bankruptcy. In fact, Michael Dell was advising decision-makers to shut Apple down and give its shareholders their money back. But Apple persisted, and Steve Jobs asked himself one of the most critical questions in his lifetime: “What business are we really in?”

At first, the answer seemed obvious – Apple was in the computer business. But how were they supposed to win back customers when 97% of all computers across the United States were run by Microsoft?

That’s when they realized that no matter how good their product was, Microsoft was embedded and entrenched in the masses. After all, it was one of the main reasons Apple found itself in bankruptcy.

So Jobs asked, “What business do we need to be in?” And Apple decided that it needed to be in the business of connecting people to their passions – to their photographs, their music, to each other. When he did this, he avoided one of the top reasons why businesses fail: lack of flexibility.

Answering this question created one of the most life-altering shifts for Apple. The company transitioned into building basic, cool technology that connects people to what they love. Upon rehiring Jobs, the company arranged a partnership with Microsoft which signaled the company’s turnaround. When Apple launched the iMac just one year later, the firm returned to profitability and made its mark. Before long came the iPod and iTunes, then the iPhone. Their net sales soared. Since that point Apple has never stopped innovating, and their marketing campaigns have propelled the company to an entirely new realm. Had Jobs viewed his firing as the death toll of his career (and company), the firm would have never experienced its revival.

Today, is Apple really in the computer business? Only 10.4% of their business is computers, which means almost 90%  is not – the vast majority is made up of iPhone, iPad and Apple Watch sales. Honestly answering the question “Why do businesses fail?” was vital for Apple to change course and become profitable.

If success is about innovation and marketing, then you have to decide who your customer is, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business, because the answers will ultimately allow you to change your offer. As we say, change your offer, change your business – and change your business, change your life.

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