Entrepreneurs and Business Failure – Part 2


Entrepreneurs with know-how seem destined to succeed in business. At least that is what most of them think. However, evidence and statistics show that they fail at high numbers, almost at 50%. The causes of business failure can be classified into 2 factors: internal & external. Internal factors means causes that are within the thinking and behavior of the entrepreneur that are related to the personality. External are about causes outside of the person. Managing both the internal and external factors will determine the success or failure of any business.

Let us first discuss the internal factors and see why these have higher priority.

The internal causes of business failure:

Many business persons underestimate the concept of "First Things First", which is all about priorities. They may think of themselves as suitable for  one kind of business, and they may have some tools to make it succeed, tools like cash, hot technology, new innovative idea, advanced university degree,…etc. Once they have these tools, they get enthusiastic for their project to the extent that they neglect the internal factors. They think what they have in hand is enough. In this process, they do not set their priorities as they should. They may proceed and succeed for a period of time until they stop and go out of business completely. This trend is becoming more common and frequent, in many industries and many countries. This is why we have to look at these internal factors before we get into the outside causes. If you are one of those who believe that the formula for business success is simple and it is about cash+know-how+market need, (which are essential) then stop and reconsider the start-up of: GoCrossCampus. This company had 5 founders, who raised $1.6 million, had 100,000 users, and had more than 100 institutions participating. Even the New York Times liked their concept and described it as “may be the next Internet phenomenon to emerge from the computers of college students.” But they failed. One of the founders Brad Hargreaves attributed their failure only to themselves. It was a classical case of  available cash with a brilliant idea that can meet a market need, yet that was not enough. Entrepreneurial success is based first on you. How you think and what your assumptions are about?

The internal causes are:

1-Lack of passion for the business: According to Jay Abraham, who has given consultations to more than 10,000 clients worldwide, the top priority for business success is first to determine what kind of business you like. Every kind of business has the potential to make money, but you want to choose the one that suits your preference, the one that you really like to do every day. Warren Buffett, the legendary investor, still works 9-5 every day, not because he needs money, but because he loves what he does. Bill Gates used to love his work at Microsoft to the extent that he would work on weekends. It is helpful to start asking yourself about what kind of business that you feel you like to do in the long run. Business success is based on continuity which needs your heart before your brain. This is the same for athletes, musicians, writers…etc. It is the same law or principle for everyone. To engage in business simply because it is promising while you don’t actually like it, will lead to failure in the long run.

2-Wrong personality: Most importantly is that you have the right personality for business in general. According to Dr. Clare Graves people have different values systems, meaning different personalities. If you have level 5 or 7 of this values system, you are very likely to succeed in business. If you have level 6 which is more towards Green Peace, you would be away from business mentality. Execution is crucial in business, and it is based on your personality.

3- Wrong assumptions about yourself: Once you have decided about what you like and what you want to start, you need to check your assumptions about your abilities. You may like it, but does it suit you?  Is it within your abilities? Is it something you understand, and not just love? Of course, you don’t understand or know all aspects of any new project, and you can familiarize yourself with any necessary details or know-how later, but you need to have the “natural” tendency to do this kind of concept. You want to be able to do what it needs to be done, most likely, on your own in the beginning. You need to do a chick list of your abilities and if they are suitable for this business.

4-Wrong assumptions about the kind of business: Choosing a business that you like and is within your abilities is not enough. Does this business meet a market need? Some failed entrepreneurs with brilliant ideas take it for granted that this concept will work. A classic example is Webvan. They assumed “if you build it, they will come”. Webvan spent more than $54 million and recruited more than 400 employees before they shipped a single product, all in the hope that orders will come later. They managed to deliver 2000 orders a day, which was not enough to break even with their substantial investments. They had a wrong assumption about their business from the start, and they failed.

5-Fatigue and lack of energy: Many entrepreneurs get enthusiastic with a lot of energy in the beginning, but they tend to lose it after a while, especially when confronting challenges and  market obstacles. They become exhausted and tired, sooner than they should be. Stephen Covey in his best-selling book “The Seven Habits of Highly Effective People”, which sold more than 15 million copies worldwide, talks about maintaining high energy as a habit essential for success. According to Tony Schwartz, many business leaders are suffering from fatigue and exhaustion. In his article of the Harvard Business Review, he described fatigue as “Your Enemy”. Business fatigue is caused mainly by negative emotions associated with business. As Dale Carnegie said” Our fatigue is often caused not by work, but by worry, frustration and resentment”. Statistics show that business burnout is common among entrepreneurs and that they are uniquely prone to exhaustion. Fatigue may lead not only to business failure but also to self-destruction.

6-Lack of ability to deal with stress and frustrations: Business is very demanding for time and efforts. According to Tony Robbins, in his best seller book “Unlimited Power”, not being able to deal with daily disappointments and frustrations  is a major cause for failure. You need to have the emotional strength and mental conditioning that enables you to overcome day-to-day nuisances. You want to be flexible in front of those challenges, emotionally and mentally. One common mistake among entrepreneurs in this regard is that they focus too much on the little things which can be daunting and frustrating. They tend not to focus on the big things, things that matter most. Failure can be a result of repeated disappointments.

Conclusion: There are many causes for entrepreneurial failure, and here I focus on the main internal causes, causes that are related to the personality and that are within the thinking and behavior of the entrepreneur. These factors have higher priority over outside factors because they are inherent in the person.

Please join me for the next series about entrepreneurial failure. 

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