Year One: You and four other entrepreneurs start your own businesses.   Year Five: Only one of you is still in business. The other four have tried and failed. (They most probably are working in someone else’s business now.)   

Expressed as a percentage, less than 20% of businesses in North America survive past five years.

Why is this? Are we perpetuating a repeating cycle of five year ‘make work’ projects called “small business”?  

 How many times have you heard the expression from politicians and economists that ‘small to mid-sized businesses are the engine of the economy’?  

Well, if this is true, it seems to me our vital economic power-plant is long overdue for a tune-up?  Would you agree?  

I believe a strong, prosperous economy is built on having more business successes than failures.

In an effort to start making this a new reality, it is necessary for you and I to begin to understand why so many businesses go down the drain. Here’s a list of ‘Top Ten Reasons For Business Failure’ that I have discovered over my 25+ years as an entrepreneur:   

10.       Freedom Frenzy. This happens when someone who is technically skilled (or naturally talented) becomes temporarily possessed with the insatiable desire of having the freedom they perceive their current employer has. After quitting their job and rushing out to start their own business they soon find themselves working longer, harder and for less money an hour than earnings from their last job. My advice: seek continuous business training from experienced, qualified experts.

 9.         Ignoring the reality of the New Global Economy. How many of your competitors are franchises with head offices located in other provinces or states? In other countries? For example, did you know there are currently 40 Wal-Mart stores in Atlantic Canada?  

8.         Believing in the notion of “Build It and They Will Come”. Remember, “Field of Dreams” was just a movie. The old idea of building a better mousetrap and expecting the world to beat a path to your door is insane. Many entrepreneurs who believed this myth have found themselves broke with a ton of mousetraps nobody wants or is even willing to pay for.

 7.         Not Knowing What You Don’t Know. I think Yogi Berra really said it best when he said,” It’s not what you know that holds you back, it’s what you know for sure that just ain’t so.”  Understanding your personal weaknesses and seeking advice and assistance from experienced mentors (those who know the ropes) is a key to making the best business decisions possible.

 6.         Innovation Phobia. If you are not committed to continually improving your products and service you may find yourself suffering from this dangerous condition. Successful business owners allocate resources for long range needs rather than only short term profitability. Plan to become innovative, to stay in business and to provide long term employment. Start by asking the question, “How can we improve on what we’re doing for others?

5.         Operating a “Reactive” Business System. Do you find yourself constantly “puttin’ out fires” in your business? If so you are practicing what I call ‘Chaos Management’. It is a highly stressful form of business management that rapidly leads to burn-out, frustration and failure – the exact opposite of what you really want. Establishing and formally documenting policies, procedures and processes is your only salvation. Start thinking  “Operations Manual”.       

4.        Lack of Adequate Financial Resources. The old axiom “it takes money to make money” still holds true. Successful entrepreneurs ensure adequate financing/investment is in place long before it is needed. How many franchises do you know that start and operate successfully on shoe-string budgets?  

3.         Expenses Exceeding Revenues. This one is a killer. Daily cashflow management and tight financial controls/reporting are critical to your business profitability and survival. Remember cashflow is the fuel of your business engine. Many a new business has simply run out of gas and been left abandoned on the side of the road.

 2.         No Marketing System. Without a system for creating new customer relationships, maintaining them effectively and enhancing them consistently a business will eventually wither and die. Your marketing system should address three types of customers: the Nows, Sooners and Laters. In my opinion 95% of businesses focus the majority of their attention on attracting the “Nows”. This is the most inefficient and expensive way to market your business. Ideally, your marketing system should seek to consistently communicate with the “Laters” who will eventually become “Sooners” and then finally become “Nows”.