I was reminded of this recently working on a new project. Most of us make the mistake of assuming that we’re smart enough that nothing will go wrong. Big mistake. I’ve learned the hard way that more often than not Murphy was right – whatever can go wrong, will. To make matters worse, things tend to take longer and end up costing much more than we think they will.
I’ve been involved in numerous businesses, and without fail, those that failed to invest in their planning failed. I’ve seen statistics regarding small businesses as high as 90% failure rate within five years. Even such reputable sources such as Forbes state “8 out of 10 entrepreneurs who start businesses fail within the first 18 months.” But are these true?
I did a little digging and the facts are not quite as bad as we have led to believe. According to data from the Bureau of Labor Statistics, 20% of small businesses fail within their first year, 30% in their second year, 50% after five years and 70% fail in their 10th year in business.
Last year, I started a new business with two partners. The difference this time was the time spent in preparation. It took us four months alone to organize all the paperwork. 10 months in and we have just starting testing the process. This differs greatly from other businesses I was involved in, most of which ended in failure. Those lessons in my early years taught me a lot.
What separates those that succeed and those that go the way of the dodo?
- Successful businesses spend more time planning than implementing
- Brian Tracy states “One minute of planning saves you 10 minutes in execution.” My research has shown that to be true.
- Successful businesses listen to the marketplace
- Too many entrepreneurs make the mistake of falling in love with their products. They are the brainchild of their products and believe it’s the best thing since sliced cheese. But in business the only thing that matters is what the market wants. According to Fortune, a survey of failed startups found that 42% of them identified the “lack of a market need for their product” as the single biggest reason for their failure. It’s not about having a superior product, it’s about having what people will buy.
- Successful businesses price accordingly
- This doesn’t mean cheap. It means you find the right price point for your market. Having lived in Japan for over 20 years now, I’ve learned that in general, most people won’t spend over $10 for lunch on a regular basis. Walking around Osaka, you’ll see it everywhere. It’s a perfect example of understanding their market and catering to it.
- Successful businesses are well-capitalized
- Probably the fastest way for a business to fail is simply a lack of money. Most companies don’t end up in the black until their third year in business. You’ve got to make sure you have enough money in the coffers to weather the storm.
- Successful businesses invest in people
- A business is only as good as its people. Every business that has continues to succeed believes in investing back into their greatest asset – their employees. Workshops, training, and lectures are offered at all the big names (Google, Apple, Facebook, Microsoft) and it shows.
- Successful businesses have superior customer service
- Sales are the lifeblood of any business, but that’s a one-time transaction. Customer service is what keeps people happy with their purchase. In the automotive industry, aftercare is what often keeps people coming back.
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