According to the U.S. Bureau of Labour Statistics (BLS), approximately 20 per cent of new businesses fail during the first two years of being open, 45 per cent during the first five years and 65 per cent during the first 10 years.
Only 25 per cent make it through to 15 years or more.
There is a common and consistent thread on why entrepreneurs or businesses fail. It's more common than you can imagine. Many make similar mistakes, fall into similar traps no matter their background and which industry they compete in, said Karthik Siva, founder of Global Entrepreneur Xchange (GEX).
"I personally advised, worked with and mentored more than 1,000 entrepreneurs, CEO and several billionaires," he added.
There is always an excitement about a business idea or an opportunity and also over-optimistic about future success. That is the main reason why more of them are going all out or nothing. This irrationality or giddiness is also one of the main reasons why so many fail.
Here are seven of the Deadly Sins of Entrepreneurs.
Deadly Sin #1: Entrepreneurs that create a business based on an untested idea(s)
Ideas should be tested and refined before anyone involved can confidently produce market evidence that shows potential customer interest. Doing market research and testing validates your assumptions that your business ideas are actually fulfilling a need of the market gap.
Deadly Sin #2: Entrepreneurs fail to develop a product without a customer
As mentioned earlier, without proper product validation, entrepreneurs may find themselves in the position of no potential buyer. Entrepreneurs must produce a product compelling enough reason to cause the potential buyers actually to commit to purchasing.
Deadly Sin #3: Entrepreneurs that build their businesses without a proper business model
Entrepreneurs are often too optimistic about how easy it is to build a business. They assume that they build a fantastic website, products or services that customers will come knocking on their doors. Yes, you may get a few customers initially when you pumped in some advertisement. Still, in many cases, the cost of acquiring the customer is actually higher than the lifetime value of that customer. A proper business model is a simple way to focus on what matters in your business and develop a plan to make a profit.
Deadly Sin #4: Entrepreneurs that do not have a strong team
Another common reason entrepreneurs fail is the lack of business acumen in managing their teams. Without a dedicated team, the entrepreneurs might have the greater potential to mismanage certain parts of the business. Well, you only have 24-hours in a day, anyways. With a dedicated and trustworthy team, you can easily continue operations well into the future and place your time in other matters that you need to put your time on.
Deadly Sin #5: Entrepreneurs that do not learn and adapt quickly
This brings us back to the earlier deadly sin #1 about testing and validation. Sometimes, entrepreneurs get ahead of themselves without realising that market validation and re-validation is a cycle. This is important to enabling businesses to adapt to the current market needs. We all know of the examples of past big businesses that crumbled without adaptation.
Deadly Sin #6: Expansion without getting better
A business that scales too fast has a higher likelihood of falling hard and fast. Any expansion should be treated as if you are starting all over your business. As a successful entrepreneur, you should always understand your new products or services, creating a solid team, etc. When businesses expand too rapidly without the same care, strategy and planning, it can potentially tank the entire business.
Deadly Sin #7: Businesses that don't differentiate themselves
Market differentiation allows your business to provide superior value to customers at an affordable price and create a win-win scenario that can boost your business's overall profitability and viability. Therefore, entrepreneurs must have a differentiation strategy to stand out from the competition effectively.
The bottom line that is the staggering failure rate is the inevitable consequence of the fact that most entrepreneurs begin their journey without the right skill sets, without proper guidance, perspective or mentorship.
An entrepreneur has to learn, adapt, strategise and innovate continuously.
Karthik Siva is the Chairman of Global Entrepreneur Xchange and Founding Chairman of Global Brand Forum, Asia’s most influential Forum for brands, business and leadership, described by the BBC as the “Davos of Branding” and Straits Times Singapore as the “World Cup of Branding”.
Karthik Siva is hosting a FREE R.A.I.S.E. Bootcamp, where he will be talking about different aspects of the entrepreneur (startup) journey.
Registration links as below:
- RA.I.S.E Bootcamp: 6 Predictors of Startup Success 25 September 2021
- R.A.I.S.E Bootcamp: How Can Your Business Design & Deliver Innovation 23 October 2021
- R.A.I.S.E Bootcamp: Master Business Strategy, Transform Your Business 27 November 2021