7 reasons why businesses fail

Over the last 3 years I’ve interviewed over 2500 entrepreneurs about their business ambitions. As I listened, I sometimes had a sinking feeling that I already knew the business was off track and would probably fail. Here’s the top 7 things that come to mind that give me that feeling:


1. You sell a low cost product and you’re not funded

As soon as someone tells me that their main products sell for $20 – $1000 I already know the business will be in a “J-curve” and unless the entrepreneur is funded they are unlikely to make it out the other side. The business will often show promising signs in the beginning with people saying they like the product and a few even buying. Later the realisation sets in that the $40k a year PA you want to hire requires you to make 57 sales per month just to cover their wage.


2. You expect people to buy your product

Google relies on sales teams, so does BMW, so does, Rolex and so will your business. Occasionally someone might buy from you, most of the time you will need to go out and make a sale (especially in the beginning). Additionally, if you can’t or won’t go out and sell your product it’s unlikely you will be able to attract, train or retain a salesperson who will do it for you. For your business to work, you will need to go out and do face to face or telephone selling… And it will probably be that way for a while.


3. You’re delusional

If your business revolves around “Improving upon what Facebook is doing wrong” or “Taking Google to the next level” or “Being the next Richard Branson” … There’s a very good chance you won’t… More to the point, there’s a very good chance that you won’t be taken seriously. Before you give me the Colonel Sanders Story or the Disney Story, try starting small and getting one thing right, like Facebook, Google and Branson did.

4. You aren’t willing to front your brand

If you say “I don’t want to be known as the face of this business” for any reason, it’s probably not going to take off. Not unless you have a LOT of money behind the business. When a new business enters the market, people want to know who’s behind it. If you won’t front your business, you’ll be beaten by the person who will.


5. People aren’t clear about what you do and why it’s for them

“Every great business begins as a great pitch” was what Mike Harris told me. He’s built three multi-billion dollar brands, so he should know. If you can’t pitch your business, it’s like having a suitcase full of cash but you can’t open the case; no one know’s or cares what’s inside.


6. No one knows you exist

My belief is “you are who Google says you are” so at a very basic level people who are searching for you should get consistent, accurate and credible information about you. Beyond that, you must reach out to people and let them know you are there. Ads, cold calls, PR, events, etc are all part of a healthy business strategy for getting known; spend the money or go broke waiting for the phone to ring.


7. You’re trying to do too many things

Your business can probably get 1-3 things right over the course of the next 5 years. Google for all of it’s hundreds of experiments over 15 years gets very few to become successful money makers – Search advertising still represents 96% of their income. If you aren’t focused on one key thing, you’ll probably be average at quite a few things; which is dangerous. Look at the success of Twitter who focussed on a fairly minute and featureless broadcasting tool but dominated that little segment; they are now worth 4x the value of the Royal Mail (UK).


The purpose of this post is not to be negative, it’s to point out some clear issues that I’ve seen after interviewing thousands of entrepreneurs. I hope that you’re able to look at these 7 potential issues and avoid them before they cause real strife.

Key Person of Influence

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