5 Truths About Business Failure That Will Shock You

Here's a look at five common reasons businesses fail, reasons that no one seems to talk about.

  1. You’re not willing to overcome the costs of failure.

    If you ever meet a successful and experienced entrepreneur that tells you they have not failed walk away, abort mission – they are lying. To garner any level of success, you will have failed on some level whether you call it “a learning experience” or if it is visible or unseen. The marked difference between successful entrepreneurs and those who are not is categorically their perception of failure. One entrepreneur says, “my biggest failures led to my biggest learning experiences,” while another says “I hit rock bottom and decided it was too risky to begin again.”

    The act of failing itself is not enough to keep many would-be entrepreneurs from starting again, it is the financial, social, and psychological costs associated with failure. As such, you’ll need to mitigate these risks by a) avoiding common financial mistakes; b) engaging in social settings that support your life ambitions and c) focusing on personal development.

  2. You want to run before you walk.

    We’ve all touted mantras like “Go big or go home,” or “Move fast and break things,” and that’s okay, but what is often missed are the tactics behind this strategy: execute incrementally. Slow and steady wins every single time. Dependable, predictable growth is vastly superior to erratic surges. Fast growth sounds glamorous but the truth is ugly. For example, Startup Genome research from 3,200 startups concluded that of the majority of startups that failed, 70% fail because of premature scaling. (Source: Forbes)

    I liken premature scaling to a kid that should first ride a bike, but instead he hops in a car … on the German Autobahn. “While it’s no secret that the German autobahn is one of the last places where you can drive as fast as you want, the fabled public highways aren’t a free-for-all.” (Source: Car and Driver) Even unlimited-speed sections on the autobahn have recommended speed signs. The same can be said of startups.

    If you ramp up too soon you’ll eventually get hit in the face, repeatedly, with an onslaught of growing pains that you may not be ready or able to face. Floodgate investor Ann Ko points out, “In today’s business environment you never want to run out of chances to iterate. Second, premature scaling actually makes you less agile. Specifically, when you start hiring people and investing in your product, you become organizationally and mentally committed to your current approach—you’ve paid money and obligated yourself to a particular product or strategy and doing this makes it worlds harder to change. In economics this is known as the sunk cost trap and in psychology this is known as escalation of commitment—in both cases it can kill a startup quickly.” (Source: Forbes)

    So, do yourself a favor: crawl, walk and then run.


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