Why do 90 percent of entrepreneurs’ businesses fail?
Entrepreneurship has become the general dream job for both the employed and the unemployed. Business opportunities are springing up everywhere, beckoning you and calling you to take the leap of destiny into the wealth and opulence you have often dreamed of. It is also noteworthy that 9 out of 10 companies collapse within 2 years of starting up. Even the best well-read gurus cave in before numerous tests that would have heralded the enthronement of a famous business idea.
Despite numerous complaints about the challenges of building businesses in Nigeria, some are still becoming formidable forces of reputation. Therefore, it is important to know the necessary factors that affect the entrepreneur, his idea and his growing business.
Disregarding pests!
Pests are crazy little creatures that cause immense damage to food and materials in a home, store, or office. Ok, I’m not talking about local pests, but in business jargon it means Political, Economic, Socio-Cultural and Technological environment; factors that are not necessarily under your control. Some other standard business books offer their own academic variations.
PESTLE/PESTLE: Political, Economic, Sociological, Technological, Legal and Environmental.
PESTLIED: Political, Economic, Social, Technological, Legal, International, Environmental and Demographic.
BELL TOWER: Social/Demographic, Technological, Economic, Environmental, Political, Legal, Ethical; Y
ASLEEP: Social, Legal, Economic, Political and Technological.
This considers external factors, which if not well considered, can take the life out of any aspiring business. I remember the story of the Sokoa Chairs Center (Nigeria) in which they explained how the National Government’s import ban nearly bankrupted them. His ability to navigate his business through the murky waters of challenges became the foundation of the world-class company he runs today.
Political: political stability, security, press freedom, fiscal policy and regulation, and trade and tariff controls
Economic: Stage of the business cycle, economic growth, inflation and interest rates, unemployment and employee turnover, impact of globalization (global financial crises)
Sociocultural: education and social mobility, market demand, public opinion, trends in social attitudes,
Technological environment: impact of emerging technologies (automation, internet, e-commerce, etc.). Compaq recently released a 24 hour laptop battery, while DELL was busy putting the finishing touches to launch their 16 hour laptop battery, if DELL were a runaway company, they are grounded!
Eating your investment, and not profiting
As soon as a small business starts to move up a notch in terms of revenue, our wonderful entrepreneur starts thinking about moving up a notch and status. He buys a new car, a wardrobe, changes offices, all with the profits from the business, which is really the capital and not the profits. When spending, it pays to separate personal funds from business ones. The business pays you your money, and you must learn to live within those means. The problems occur when the initial deposit is given for the business only for our aspiring businessman to go celebrate the great success of his business.
An entrepreneur looking to build a business must understand the separation and marriage between business and personal life.
mishandling of reality
When entrepreneurs do venture out, they are usually motivated by a deep passion, whether it be for themselves, their idea, getting rich, an opportunity, or some other object of excitement. Armed with such passion, they take chances and navigate against unexpected signs of reality.
However, passion tends to distort reality. The ability to succeed in business depends on the ability to adjust plans and dreams to the prevailing conditions. The idea that challenges will bow before their plans and dreams will consume the time, energy and money of the entrepreneur who pursues an ill-defined endgame without a realistic path. And when problems start to arise… expenses don’t turn into expected results, potential customers aren’t as excited about the product, missed deadlines, poor sales, objectivity and reason become even more blurred by the hallucinating distractions of doubt. fear and disappointing responses to investors. Entrepreneurs are found to give in to this kind of pressure without realizing that it is a bias toward the bright light of achievement.
When personal failures affect business
The defects, habits and personal failures of an entrepreneur are usually evident, especially when he has many people at his command. Inability to manage funds, lack of detail, and poor people management skills are some of the indirect factors responsible for the high rate of business bankruptcies. Entrepreneurs, like any pioneer, have their own lapses, but they must know how to manage them extensively. I know a businessman who doesn’t negotiate the price but leaves it up to his financial manager because he never manages to negotiate a profitable deal. Many entrepreneurs succeed in spite of themselves. The key is to work well and enjoy yourself, fully understanding your weaknesses and mitigating potential risks.
Good at starting businesses, bad at running them.
This is very true for many entrepreneurs, as most of them are powerful starters but lousy managers. Most are more interested in making money than building a business. Most techies think that because they understand your product or skill, they will automatically turn those ideas into businesses. Most of them have this great obligation to run their business and become a great manager. Working in a company and working in a company are two different worlds. While the entrepreneur works in his business, the technician works in the business. He feels that if he gave in more, if he worked harder, he would gain. How fake!
Here are some of the factors I’ve considered that you’ll love to think about as you think about, plan, start, and run your business. Don’t forget too, of the top 20 richest men in America, only 4 are employees.