Most entrepreneurs fail. It’s a fact of the market, and really, it isn’t that surprising considering that around 543,000 businesses open their doors each month. There simply isn’t enough room for all of these businesses to succeed in the first place. So where do entrepreneurs go wrong? Nobody starts with bad intentions or the goal of shutting down their business after just a few years, but inevitably it happens to the majority of these aspiring pioneers of industry.
As it turns out, we can pinpoint a few specific catalysts that account for most of the failures among entrepreneurs.
1. They Favor Concept Over Execution
If you look at what the best CEOs have to say about their success, it rarely has anything to do with “their great idea” that changed the market. Instead, it was a combination of skill set, decision making, and business savvy that led to the success of their business.
Too many entrepreneurs waste their time and money creating the perfect product or service instead of focusing on what is really important: getting that product in front of consumers to get feedback and improve as well as learn who the competition in the market is and how it reacts to the new business.
2. They Lack A Willingness To Learn
Many entrepreneurs start a new business in order to be their own boss, pursue a sense of fulfillment, or perhaps work in a very specific capacity within their own company, but in the beginning, there is no team, just a single entrepreneur. This means that they have to do everything: sales, marketing, development, building the product, and customer service. It’s a lot of hats to wear, and success means learning. A lot.
Entrepreneurs have to learn all the time in order to grow their business and understand where problems are when they arise (as well as how to fix them). Expanding the team to add specialists in each department is a financial burden startups cannot afford in the beginning, so it falls to the entrepreneur to learn how to succeed across all facets of a business, and if an entrepreneur can’t or won’t do that, the company is destined to fail.
3. They Prioritize Money Over Value
Of course, raising money is crucial to the success of any entrepreneurial venture, but there are constraints you should consider. Raising money for the sake of headlines or the money itself is not a good reason to acquire more capital.
Many entrepreneurs fall to greed and raise more money than they need. As a result, that money often goes to waste, the company is forced to expand too quickly, or the VCs that supplied the funding are suddenly putting a lot more pressure upon the entrepreneur to see returns for the money they invested. To avoid these scenarios, entrepreneurs need to focus on the business, not the money.
How can the startup provide more value to its current customers or clients? What is the natural point of growth for the business, and how much money is needed for that? The goal for each round of funding should be to only raise as much as needed, not to see how high the ceiling is.
4. They Are Unable To Handle Failure
No business is built overnight, let alone in a bubble of repeated successes. Many entrepreneurs are unable to handle the inevitable failures that will come with starting from the bottom. Mistakes will be made, whether it’s a faulty product, losing their best client, or hiring the wrong employee (more on that later).
Successful entrepreneurs take these failures as lessons (i.e. what can I learn from this mistake to improve my business in the future) whereas entrepreneurs that fail take those small failures personally or get disheartened by how hard being your own boss actually is. In short, one of the biggest reasons entrepreneurs fail is that they give up when the going gets tough.
5. They Hire The Wrong People
Eventually, it will be time to expand the team, and here’s where execution becomes critical. Do you hire someone technical to handle software development and design? Do you bring in an experienced co-founder that can act as a mentor, but may be less invested in the company due to external interests? Do you hire someone with a background in business and economics? The early choices that entrepreneurs bring into their early-stage business will define the company’s culture, its goals, and ultimately whether it can succeed. There is no right answer here.
What most entrepreneurs hire during the early stages of their business is dependent on what skills the entrepreneur already brings to the table and also which talented individuals whose goals align with the business they happen to meet with first. Many entrepreneurs fail to execute their great ideas simply because they fail to build the team that can make their vision a reality.