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Thirty-four percent of the 177 self-made millionaires in my Rich Habits Study acknowledged that they had failed at least once in business.
Failure is painful. It creates enormous emotional and financially stress for you and your family life.
No one likes to fail. But failure forces you to change and grow. The lessons you learn from failure stick. Failure creates 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:
- 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.
- 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.
- 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 money you borrow from banks or others.
- Failure to Pilot a Business Model – When you go all in in any new venture, without piloting it first, you must figure out how to build your plane while it’s 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.
- 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.
- 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.
- 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.
- Too Many Mistakes – Any new venture is going to have its 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 a tool bag of proven processes that work or they are fast to develop sound processes that prevent them from making or repeating mistakes.
Failure is almost always preventable. Unfortunately, most only figure out what to do and 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 before diving in, be frugal with your money, recognize red flags, focus on your core business and avoid making too many mistakes.
Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, “Effort-Less Wealth”, “Change Your Habits Change Your Life”, “Rich Habits Poor Habits” and “Rich Habits: The Daily Success Habits of Wealthy Individuals.”