When Entrepreneurs Fail

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Thirty-four percent of the 177 self-made millionaires in my Rich Habit Study acknowledged that they had failed at least once in business.

Failure is painful. It emotionally and financially threatens your family life. No one likes to fail. But failure forces you to change and grow. The lessons you learn from failure stick. Failure leaves scar tissue on the brain. You never forget your failures and the hard lessons failure teaches. Failure forces you to learn what to do and what not to do. For those who are somehow able to pick themselves up and try again, failure is almost always temporary.

In my books, Change Your Habits, Change Your Life and Rich Habits Poor Habits, I share many of the reasons entrepreneurs fail. Here are the top 8 reasons:

  1. Ready, Fire Aim – When you take action before diligently studying all aspects of a new business venture you will be blindsided when something goes wrong. This is why it is foolhardy to start any business that is new to you. The most successful entrepreneurs have years of experience working in a specific industry. When they start a business, they know the business, they know the competition, they have strong industry contacts and they have proven processes they carry with them in their tool belt. Never start any business without knowing everything about that business.
  2. Bad Business Partners – Picking a bad partner will almost always sink any business. The most successful entrepreneurs have years of experience working with individuals who become their partners. Never partner with anyone if you do not know them very well.
  3. Inadequate Working Capital – Even if you are an expert in your industry and pick the best possible partners, not having enough working capital can sink any business. Ideally, you want to have enough working capital to carry you for two to three years. Working capital can be money you invest or it can be lines of credit.
  4. Lack of Feedback – When you go all in in any new venture, without gathering feedback first, you must figure out how to build your plane while you are falling. Adequate working capital can buy you time, but it is an expensive way to learn. The most successful entrepreneurs almost always pilot any new venture. Why? Because piloting allows you to gather critical feedback that can help you improve your product or service or the way you do business.
  5. Reckless Spending – Those who fail in any venture are often reckless in their spending. They spend too much on new equipment when refurbished equipment will do. They hire too many employees right out of the gate. They spend too much on rent. Successful entrepreneurs watch every dollar and are reluctant to spend their money.
  6. Ignore Red Flags – There are always red flags when you are doing something wrong in business. Those who ignore those red flags end up paying for their negligence down the road. Successful entrepreneurs are always on the lookout for red flags. They are constantly vigilant in identifying potential pitfalls.
  7. Lack of Focus – Entrepreneurs who suffer from Bright Shiny Object Syndrome are perpetually distracted by new things that catch their attention and distract them from their core business. Successful entrepreneurs have laser focus on their core business and ignore distractions that would interfere with that focus.
  8. Too Many Mistakes – Any new venture is going to have their share of avoidable mistakes.  Making too many mistakes will sink even the best business model. Those who succeed almost always avoid making too many mistakes. They go into any venture with proven processes that work or they are fast to develop sound processes that prevent mistakes from happening.

Failure is almost always preventable if you know what not to do. Unfortunately, most only figure out what not to do when it’s too late. If you want to succeed as an entrepreneur you must do your diligence before diving into any venture, surround yourself with proven success partners, adequately fund your venture, pilot any new venture first, be frugal with your money, recognize red flags, focus on your core business and avoid making too many mistakes.

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Thomas C. Corley About Thomas C. Corley

Tom Corley is a bestselling author, speaker, and media contributor for Business Insider, CNBC and a few other national media outlets.

His Rich Habits research has been read, viewed or heard by over 50 million people in 25 countries around the world.

Besides being an author, Tom is also a CPA, holds a master’s degree in taxation and is President of Cerefice and Company, a CPA firm in New Jersey.
 
Phone Number: 732-382-3800 Ext. 103.
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