Critical Care for
Step 1: Why Do Businesses Fail and What You Can Learn From These
Why you should read this information and how it will help you
1. 96% of all businesses that fail, do so because of this one reason, find
out what the reason is.
2. One of the most effective ways that I have found to avoid failure is to
study the reasons that businesses fail.
By becoming familiar with the primary causes of business failure, you
will begin to develop a hypothesis or hunch as to why your business is
You Have a Better Chance of Winning in a Las Vegas Casino then
Succeeding in Business...10-25%
Chance of Business Success
Hall in "Jump Start Your Business Brain" reported some fascinating
Estimates of new
product or service success rates vary widely depending on the industry
studied and the definition of success. A review of academic studies and
US census data found that on average about 75% of new businesses,
products or services fail and are discontinued within two to five years.
This means that
you basically have only a 25% probability of success with your new
advertising, product, service or business concept.
capitalist reported that 17% of the companies his firm invests in
succeed. This would actually be an improvement over the 10% rate
reported in the May-June, 97 "Research Technology Management" reviews of
the results of 10 major venture capital firms.
A 10-25% chance of
success is terrible odds. Most business owners would have a greater
probability of success if they went to a Las Vegas casino and gambled
their investments. The following chart details the various probabilities
of winning at gambling games:
machines-32% probability of winning
3. Blackjack (as
(perfect strategy and card counting)-50%
Brian Tracy, in an
article titled "How to Succeed in Business", cited even worse odds. He
stated that 99% of businesses started by people lacking business
experience fail within the first two to three years. However, and
equally surprising, 80% of businesses started by experienced
businesspeople succeed. He went on to explain the reason why there was
such a dramatic difference in the failure of the inexperienced compared
to the experienced business people:
According to Dunn and Bradstreet, the
Number One Reason Businesses in America Fail
Dunn and Bradstreet's
research shows that 96% of businesses in America fail due to
Managerial Incompetence. In order to understand what exactly is
meant by managerial incompetence, I have listed the top 12 reasons
business fail from research by Jessie Hagen of U.S. Bank:
12 Reasons Why Businesses Fail
82% Poor cash
flow management skills/poor understanding of cash flow.
79% Starting out
with too little money
78% Lack of a
well-developed business plan, including insufficient research on the
business before starting it.
77% Not pricing
properly - failure to include all necessary items when setting prices.
73% Being overly
optimistic about achievable sales, money required and about what needs
to be done to be successful.
recognizing, or ignoring, what they don't do well and not seeking help
from those who do.
the importance of promoting the business properly.
relevant and applicable business experience.
58% Inability to
delegate properly - micro-managing work given to others or over
delegating and abdicating important management responsibilities.
Hiring the wrong people - clones of themselves and not people with
complimentary skills, or hiring friends and relatives.
understanding who your competition is or ignoring competition.
47% Too much
focus and reliance on one customer/client.
Now that you have
some understanding of the reasons businesses fail, I have developed an
exercise to work through and which will assist you in shedding more
light on your specific business problems.
Click here to conduct a self audit of the reasons your business may be