The 9 Ingredients for a Recipe to Fail

Many entrepreneurial ventures fail – and for a variety of reasons. This blog focuses on nine (9) of these reasons, of which any one or combination of these reasons can lead to the demise of an enterprise. Interestingly, all our related to each other and it hard to discern when one failure behavior ends, and another begins. There are remedies.

1. No One is as Smart as all of us

Many entrepreneurs understand their idea, but not the market that will accept or reject the idea. Nor do they understand how accidental, uncontrollable, unscheduled innovation actually works. Or who the real competitors are. Many entrepreneurs believe “capital” is the only thing standing between themselves and success. Often, they are the single point of failure in their own company. They become control freaks and must make every decision. They do not recruit (or retain) managers who will challenge them, grow their managers, and empower them. Their good managers leave. Many of these CEO’s believe they are doing everything to be successful – when it is ‘everything they know.’ And it is never enough.

2. Paralysis through Analysis

Entrepreneurs often fail because they cannot adapt to unpredictable events and conditions (as if any entrepreneurial events or conditions are predictable). All start-ups require pivots. Unsuccessful entrepreneurs cannot pivot. Instead, they stay their own courses – even when the entire world believes they’re severely off course and about to crash. Perfect is the enemy of progress. Often, it is their money on the line, and they become paralyzed with fear of losing it all. The result? … they lose it all.

3. A Single Point of Failure – and It is You

Entrepreneurs often fail because they’re not housebroken, because they speak their minds no matter how inappropriate or inopportune the situation may be. Some entrepreneurs chase every shiny new penny – idee de jour. If an entrepreneur cannot listen, is insecure, short-tempered, and intolerant of opposing opinions, he or she will fail. The worst entrepreneurs are the ones who cannot accept responsibility for anyone and spend their days and nights looking for someone – anyone – to blame for their mistakes.

4. Self-Delusion

While it’s sometimes good to believe in miracles, it’s no way to run a start-up. They drink their own Kool-Aid. Entrepreneurs who fail often do so because they believe they are the ultimate authority and if the world doesn’t welcome their authority, it’s the world’s fault, not theirs. Entrepreneurs fail because they’re often self-delusional and greedy believing that they’re just a sale away from success. They end up cutting corners and never develop the processes necessary to have a sustainable and accountable success in every facet of their businesses.

5. What is the End Game? … No Exit Plan Means No Plan

To find your way to success, one needs a map … with a starting point and an endpoint. Entrepreneurs often fail because they cannot gauge their ultimate exit relatively early in their journey. Call it instinct or judgment, the range of exit outcomes begins to reveal itself once the products and services hit the market and once the source and pace of competition clarifies. Is the exit an IPO or an acquisition? Is it an acquisition, merger, or a recapitalization? Good entrepreneurs have a sense of how an exit will occur (if one occurs at all) within a year of their launch. In order to follow your map of success you must have a beginning and a destination. What is your destination?

6. Cannot Separate Friend from Foe

Entrepreneurs often fail because they cannot separate friends from enemies. They often think their friends are the people who always agree with them and their enemies are those who do not. Sometimes, your competitors can become a staunch ally. They cannot find a good part-time accountant and they have no idea how to assess the skills and experience of legal counsel. They also fail because they cannot recognize smart loyal co-founders and employees or how to optimize their contributions. Even more troubling, many entrepreneurs do not value counsel from the outside nor are they held accountable to someone. Becoming part of a Peer Advisory Group is an excellent way to grow as an executive.

7. If You Do Not Believe in Marketing – Adios!

Entrepreneurs often fail because their companies are invisible to the world because they cannot bear to spend money on marketing and PR. Marketing is the accelerator. Some entrepreneurs believe in the field of dreams, “you will build it; they will come.” This is a certain road to failure. Build out your content and your messaging. Develop multiple vehicles to deliver your value to the marketplace. Marketing is both branding and lead generation. Do not undervalue your investment in marketing.

8. Poor Sales Execution

If you cannot measure it; you cannot manage it. Entrepreneurs often do not have sales management experience or recruit the right person who does have that experience. Their organization does not set up activity matrices that are critical to understand from where sales (and the money) will come. Entrepreneurs often fail because they cannot sell to the right clients at the right time for the right price. Start-up sales are obviously fundamentally different from the sales that established companies enjoy on an almost automatic pace. Good entrepreneurs understand all forms and flavors of lighthouse sales processes, logo hunting, how to buy the right early customers. Entrepreneurs who fail shortchange sales in favor of competing activities, especially R&D. The keys are building the right sales process including pipeline development and management; training; accountability; and bringing insight to your customers.

9. Insufficient Funding

Entrepreneurs often fail because they cannot raise the right kind of funding at the right time at the right valuation. Entrepreneurs often over value their companies. (No one cares how hard you work.) They often undervalue the benefit of having a strong management team. They fail because they do not know how to value their company or phase investments along timelines designed to optimize valuations. They fail to appreciate how much money it takes to meet milestones. Or how to respect their investors who deserve professional communications on a regular basis – especially if they plan to keep asking them for money.

About DSB & Associates. Our mission is to enable company owners to maximize valuations today through business planning, strategic marketing, sales, and financial planning, process improvement, leadership training, and better technology and security; so, they can execute their exit strategy on their terms tomorrow. Our uniqueness is that we combine revenue generation, financial acumen, building a culture of collaboration, and a history of successful engagements.