Jul 2, 2009

3 Reasons Why Business Startups Fail

Why do 9 out of 10 businesses fail within the first 5 years?

I believe there are 3 main reasons the typical would-be, giving-it-a-try entrepreneur all too often fail.

1) Becoming overwhelmed by the complexity of running a business

One of the things I've seen over and over again as I've consulted with new business owners is the tendency to become completely overwhelmed by the enormity of the venture.

Whenever we're in the process of learning a new set of skills, developing new habits, or building a new business, it's easy to become overwhelmed with all the processes and tasks that sometimes overload our systems and cause us - like a computer with too many things running at once - to crash.

There's a lot that goes into building a new business. Especially if it's a business that one hasn't had much experience with in the past. There's going to be new skills to learn, new habits to develop, and new successes and disappointments that will no doubt bring some of their own corresponding emotional highs and lows.

For example, a couple I met with recently to discuss their new business venture explained to me that they would start one new habit, such as cold calling, and it would be going well for about a week. But between the time they started their new habit and the time they fizzled out, they'd acquired other new yet less-productive habits such as inputting data, tinkering with their web page, and drawing up new marketing fliers. In essence, they crashed with system overload. And the one thing that matters most in their particular type of business - cold calling - got squeezed out of the picture.

2) Spending too much on unprofitable, unfocused activities

One of the other common themes I find with unsuccessful businesses, is the tendency to simply throw money at problems in an effort to make them go away. Spending money to fix a problem that could be fixed with some education, planning, and a wiliness to get in and get dirty is more common for those who have money to blow - and most startups don't.

One friend of mine bought a fairly expensive distribution franchise and ended up going bankrupt as he kept pouring more and more money into non-performing marketing. He wasn't closing the deals from the leads he was getting; he figured the more he spent on marketing the more sales he'd get. But he wasn't managing his gross margin or his closing ratios close enough to see there was no way he could break even at the rate he was going. The lesson was learned only in hindsight and was one of the more painful lessons he learned.

3) Focusing too little on the things that matter most at the expense of things that don't matter

I know for myself, I've started many would-be businesses that never went anywhere simply because I refused to focus on the most important tasks at hand. It's easier to get caught up in details that don't matter, or that do matter but that aren't the most important. Chasing the urgent, quickie things that require immediate attention, usually always cloud out the most important things when I allow them to. Focus is very important in building anything, but especially a business.

This may sound harsh, but for now you've got to forget balance and lifestyle when you're in the building stages - those things have to come second. Balance is just another word for comfortable. If you're seeking balance, security, comfort or anything of the sort when you're supposed to be in the trenches, learning, struggling, and growing an enterprise, you'll most likely fail. No man can serve two masters. If you want comfort and security, you've come to the wrong place. If you want the heartache and personal growth that comes with building a business, then be prepared for the droughts that come with the pursuit of any worthy ideal.

Regardless of whichever road you choose, you'll be paying the price. Everyone pays the price. The price of pain now to enjoy a better tomorrow. Or the price of pain in your tomorrows as you look back on what you might have done had you only tried.

Jun 30, 2009

How Many Opportunites Should You Date Before Committing to One?

I dated a lot of girls before I met and married my wife Carly. 863 to be exact.

And of course, Carly is the best thing that ever happened to me.

For the 863 girls that didn't work out, perhaps -- I'm sure all 863 would probably agree -- I was the variable that needed refinement, adjustment and a greater dose of humility, preparation, and selflessness. Perhaps it just took time for me to qualify to be with someone in a marriage relationship - after all, it takes two or more independent people to make an interdependent relationship work.

One theory: I simply wasn't "marriage-worthy material" before meeting Carly. Dating lots of different girls helped me better understand who I am and what I needed to work on.

And so it is with business.

We sometimes jump wholeheartedly into businesses or investments without dating enough prospective deals, courting enough opportunities, and considering our own strengths, weaknesses, abilities and needs.

When Marriott got into security systems, theme parks, and cruise lines back in the 70's, it committed itself to businesses with little synergistic value, where there was no former experience or knowledge base from which to cross over. Sort of like marrying before really knowing the person you're courting. Marriott abandoned its own strengths, disciplines, and mind sets in an effort to diversify.

In marriage everything you have in common is an asset. Everything that you don't have in common is a liability. All too often, companies learn the same lessons apply to good business: the things you have in common with your acquisitions, new ventures and investments are more likely to be developed into assets. Conversely, the ventures that take you outside your circle of knowledge, expertise, and talent base are more likely to become liabilities.

So the 5 tid-bit lesson for today:

1) It's a numbers game. Date a lot of different opportunities, court a select few, marry wholeheartedly one (or at least one at a time).

2) Be selective. Commit only to those people or opportunities that you truly love, respect, and enjoy working with.

3) Work harder on you than the job itself. Prepare yourself and/or your company for "the marriage". Become the type of person or company you hope to attract - for teammates, customers, and investors.

4) Be willing to take risks. Opportunities come and go. The best ones may slip through our hands if we're not prepared for them, or willing to engage them.

5) Remember no one opportunity or person is perfect. Be willing to take an imperfect and awkward team member or a rehab business venture. Some of the best investments are the ones that need the most work.

Jun 29, 2009

America's Greed is Its Newest Worst Enemy

What do the following stats say about the way we as Americans think and behave?

Keep in mind that the U.S. represents less than 5 percent of the world population.

- The U.S. employs over 70 percent of the world's lawyers.

- 94 percent of the world's lawsuits are filed right here in America.

- More than 100 Million lawsuits will be filed this year in the U.S.

- If you own a business, there's at least a 1 in 3 chance that you'll be sued this year. Many of these entrepreneurs will loose everything as a result.

America, the land of opportunity?

Or the land of complaining, the land of the entitlement mentality, the land of what's-in-it-for-me?

I believe we as a country have grown in our expectations of what should be, rather than accepting what is and choosing to progress. We look to the government, the federal reserve, and others to solve our problems, bail us out, and assist us in our quest to live in our bubbles of comfort and pretend realities.

Is government intervention necessary at times for the sake of the whole? Sure, of course.

But when the spirit of service and genuine goodwill towards man, or in other words, the true spirit of entrepreneurism and freedom are stripped from a nation, in place of laws, lawyers, and thick bureaucratic government regulations, it is in that moment that we as a nation have failed the very spirit that bought us our freedoms in the first place.

Abe Lincoln stated, "Those who deny freedom to others deserve it not for themselves." And yet, our bailouts paid for by American tax dollars are going to assist the very institutions that deny freedom, the free market, and the small and medium sized companies that would otherwise be capable of challenging these bloated, freedom-sucking companies.

Unfortunately, many of the would be freedom-fighters of our country are fighting for an outdated model introduced by Adam Smith in which the "greed is good" philosophy first developed. Make no mistake, Capitalism served its purpose during the industrial age. But like Communism that fell at the dawn of the information age, Capitalism is now seeing it's own greed turn upon itself, and the unravelings are apparent and inevitable as we enter the age of wisdom.

Capitalism as we now know it, has failed and is failing.

Investments for gain, and ventures pursued for profit must be guided by internal values tied to principles such as service, humility, love, and faith in others.

Thomas Jefferson once said, "Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories."

Turning control over to the government in our time of fear is simply prolonging the inevitable unraveling. We keep pushing our problems and the consequences of our bad choices out into the future - enslaving our children and grandchildren with burdens and debts that don't belong to them.

We continue to fight to preserve lifestyle at the expense of human life.

In our pursuits to preserve the status quo, consume beyond our means, and borrow rather than lend, we jeopardize our freedom, our oh-so very fragile freedom.

Another quote by a great leader of our nation, Ronald Reagan: "Freedom is never more than one generation away from extinction...It must be fought for, protected..."

When does freedom most flourish - again, I like Reagan's answer: "Freedom prospers when religion is vibrant and the rule of law under God is acknowledged."

Solutions to our problems?

  • Change from within.
  • Accountability to a higher power.
  • A new commitment to serve one another, forgive one another, love one another