5 top reasons entrepreneurs fail

Many workers leaving their jobs today turn to entrepreneurship. The National Bureau for Economic Research says that the application rate for new companies is at an all-time high. And Felena Hanson, founder and CEO of coworking space Hera Hub, saw a 50 percent increase in first-time entrepreneurs using her facilities.

While all of this sounds like good news, the failure rate of small businesses remains high: 20% fail after 2 years, 50% after 5 years, and 70% fail after 10 years.

But failure is not an entrepreneur’s enemy. It can be a wise teacher. Lak Ananth, CEO and managing partner of venture capital firm Next47, writes in his new book: Anticipate mistakesthat “instead of fearing failure, become aware of what could be causing failure in your company or industry and build a toolbox on how to deal with it.”

Here are five things that can ruin your business – and suggestions for avoiding or recovering from such failures:


this is that single biggest reason Companies fail: 42% go under because there is no market for their product.

When I sold my first company, I was so confident in my ability to be an entrepreneur – I had a 30-year track record – that I started a second company providing emotional intelligence training for fitness instructors. During my hours at the gym, I saw trainer after trainer ignore the client’s needs and show no emotional sensitivity. The problem was: I didn’t test the market. I felt coaches needed the services I market. but you didn’t see the need. Neither does their fitness center.

So talk to potential customers; Find out if what you want is what you want you want. And find out if those customers are willing to pay you a reasonable amount for it.


A second challenge for entrepreneurs is building a successful team. If this process breaks down, the business will suffer or collapse.

The best entrepreneurs surround themselves with amazing talent. For example, although some may consider Steve Jobs to be Apple himself, he did not develop these products himself. him once called, “You have to be a really good talent scout because no matter how smart you are, you need a team of great people. You have to figure out how to gauge people fairly quickly, make decisions without knowing people too well and hire them and see how you do and hone your intuition. . . because you need great people around you.”

So when you start a business, as Ananth writes, you need to “build a team that has a goal in mind,” and everyone needs to “help them achieve that goal.” You can start a business because you want to “be your own boss”. At long last, 55% of entrepreneurs say that’s why they go out alone. But if you don’t surround yourself with good people, you’ll become a sole proprietor at best.


A third challenge for entrepreneurs is to create a product that differentiates itself in the marketplace. Without that, the business will fail.

Richard Branson started a soda pop company that few of us know about because it, well, fizzled out. When Virgin Cola was launched, Branson had high hopes: “Cola is the most recognizable brand in the world,” he said called, “and if we could topple Coke, we thought it would be a lot of fun.” Unfortunately, his product didn’t sell because it was too similar to other sodas on the market. The company collapsed after a few years.

You must have a distinctive product. I built my first company, the Humphrey Group, because no other company offered what I knew I could offer: executive speech training that taught C-level clients how to make their own speeches, presentations, media commentary and other things can create and hold -cuffs comments.


A fourth problem arises from the technology not working properly. Again, this can thwart your chances of success.

Elon Musk has had his share of technology failures. The first three rockets launched by SpaceX have exploded. It took him years to iron out Tesla’s problems, and then more challenges came as he tried to ramp up production. And during an unveiling of the Cybertruck model, its designer hit the window with a sledgehammer, and to Musk’s surprise, the window shattered.

Musk did exceptionally well, but he was certainly prepared for failure. He once said, “Initially, I thought there was a better than 90% chance that both SpaceX and Tesla would be worth $0.” And he recently sent his SpaceX employees a memo warning that the company could go bankrupt.

Musk has shown tenacity in overcoming his technological flaws by demonstrating his willingness to analyze problems and determination to constantly improve.


A fifth serious problem entrepreneurs can face is the inability to support their business financially. To put it simply, it costs money to run a business and if you don’t have it, you will fail.

While good products and loyal customers ultimately make your business thrive, in the early stages you need proper funding and a keen eye on all expenses. I started my first business in a closet-sized office, and as a bank director jokingly said, my first capital was my two coffee mugs.

I’ve continued to keep costs as low as possible: I’ve hired trainers who work on a day rather than a salary basis, have only one corporate event a year, and my husband does the bookkeeping. I’ve seen too many companies that started with high salaries and lavish spending and soon close their golden doors.

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