Why Small Businesses Fail: How to Lower the Rate of Small Business Failure
Business Ownership: Highly Desired, But Not Highly Pursued
Business ownership is the most dreamed-about career option in the United States. More than one-half of the adult population considers self-employment as a career choice. (57% of U.S. adults would opt for business ownership according to one Gallup Survey.) But of those 70 million-plus people, less than one percent (about 600,000) will ever take the leap. Why? Because most lack the focus, planning skills, guidance and personal insights needed to overcome fear and other obstacles.
For too long, prospective entrepreneurs have been without a critical ingredient; a logical system that can take them from wanting to be in business to successfully being in business. That void, I believe, is why small businesses fail. Even more disturbing is that more than one-half of new ventures will not survive for even five years. It’s a tragedy that once aspiring entrepreneurs finally get into business, less than half will succeed. And, it’s tragic on two levels.
The High Cost of Small Business Failure
The high failure rate of small businesses represents devastation to millions of bank accounts and the families draining them. Failed businesses lessen job opportunities for others, reduce our tax base, fund fewer government works, and offer up a smaller number of budding major companies. Low success rates for small businesses fuel a negative chain reaction throughout our economic system. Emerging entrepreneurs are national treasures, but no viable solution has been offered to reverse their high mortality rate. Lowering the rate of small business failure should be a priority for government, academics and all associated with its impact. But it’s not.
Entrepreneurship is a Lifestyle. View it as Such.
Entrepreneurship is at the core of everything that’s economically successful in North America, as it is in all capitalist societies. It’s the backbone of economies, yet the true nature of self-employment and the entrepreneur is not generally understood. As a result, entrepreneurship as a ‘lifestyle’ is not taught in our schools or promoted by small business authorities. Instead of focusing on the entrepreneur, the world of self-employment is centered on business plans, financing paths and marketing. It’s true that many succeed through hard work, grit, and sometimes plain luck, but for most, what was a beautiful dream becomes a living nightmare. Such is the lot for so many brave souls who start alone and end alone. It doesn’t have to be this way.
Business Schools and Business Plans are much needed, but not the solution to Small Business Failure.
Government, schools, and prestigious advisers insist that business begins with business planning. But the most successful business owners, consciously or otherwise, first understand themselves as entrepreneurs. They also know what type of venture suits them, and how they fit inside of that venture. Entrepreneurship must first be about the entrepreneur. Personal planning should always precede business planning. If one is to take this high-risk journey, one must first consider self before all other factors. To study and interact with failed and successful entrepreneurs is to understand why small businesses fail and why they succeed.
The first step in business ownership should be gathering up quality weapons to do battle. But traditional weapons such as capital (sometimes too much) and business plans should not be deployed first. Capital and business plans alone are not formidable enough to overcome the high rate of small business failure.
The Key to Successful Entrepreneurship is the Entrepreneur
Increasing the rate of small business success means increasing insight as to if and/or how self-employment is to be undertaken. The difficulty lies not in acknowledging the problem, but in not having a means of discovering one’s entrepreneurial self before start-up. The most successful entrepreneurs are gifted with the ability to know how they might fit into business ownership. For others, the connection is not self-evident.
The missing weapon is a personal plan based on greater knowledge of ourselves and the truth about where we belong, if at all, in the world of self-employment. If there’s one single factor for why small businesses fail, it’s a lack of self-understanding that leads to poor choices. It’s not a business that makes a success of the entrepreneur. It’s the entrepreneur, who, if well prepared, makes a success of the business. Simply put, if chances for success in self-employment are to be increased, the self-employed must know their entrepreneurial self and build a venture around those findings.
A Process for Entrepreneurial Insight
The Focus Program for Emerging Entrepreneurs is the first and only insight system for developing a clear image of who a person might be as an entrepreneur and where they might ‘fit’ into self-employment. Until now, there has not been a process for examining the single most important component of entrepreneurship, namely THE ENTREPRENEUR. The Focus Program for Emerging Entrepreneurs guides users through the creation of a Personal Entrepreneurial Portrait, providing a powerful word picture that aids in defining critical success factors. Major outcomes associated with developing an entrepreneurial portrait are the ability to:
- Determine one’s entrepreneurial type
- Relate business due diligence to personal insight
- Assess one’s aptitudes relative to entrepreneurship
- Decide if self-employment is a wise personal choice
- Choose the kind of business that will best fit one’s style
- Understand what role to assume in one’s chosen venture
The Focus Program for Emerging Entrepreneurs – A Virtual Exploration into Self-Employment
No other program, process, or system has ever zeroed in on and helped create a detailed word picture of the entrepreneur prior to launching. Upon completion of the process, individuals will know themselves and in particular their entrepreneurial selves far better than before. The process calls for patience, care, honesty, and reflection. It’s not accomplished in a day or a week. This is a journey into self-discovery that, if taken seriously, will serve users well for the rest of their lives whether or not they choose self-employment. After all, if the process results in knowing that business ownership is a poor choice, that is one more heartbreak and one more bank account saved. Entrepreneur, Know Thyself is not a witty statement. It’s the truth about successful self-employment.
The Focus Program for Emerging Entrepreneurs can yield a logical vision of a person’s ‘entrepreneurial type’ on a unique continuum. It will also help clarify the user’s goals, God-given gifts, talents and aptitudes regarding a new venture. The net result is taking authority over multiple options by seeing more clearly the path that is right for the individual, including the path that reads ‘Entrepreneurship is not for ME’. The intended goal is quite simple: Replace Entrepreneurial Chance With Choice.
A New Perspective on the Entrepreneur/Business Relationship
To summarize, successful entrepreneurship requires the ability to simultaneously make quality judgments about both personal and business issues. Above all else, business ownership is a human endeavor that embodies the personality, goals and abilities of the owner. Yet, conventional wisdom disregards the more human side of self-employment. It focuses almost exclusively on the business processes required such as writing a business plan, raising capital and marketing. Each of these is important, but they pale in comparison to the importance of the person taking the risk. The reason why small businesses fail is that people do not first understand how, if and why business might be a wise choice.
Entrepreneurship is about building and maintaining a strong, healthy, personal relationship with the business. Tradition ignores this fact because it’s not popular, not understood, and may even be too personal to have a place in business. Wrong thinking has cost too many people too much and is exactly the problem with the conventional approach to entrepreneurship. Successful entrepreneurship flows from understanding one’s self as well as one’s business ideas.
Successful Entrepreneurs Understand Why They Have Chosen Their Business – Follow Their Lead
Those who have achieved success in business have understood, either consciously or unconsciously, how they, as a person, fit into their venture. Starting a business without evaluating oneself or the reasons for starting it is no different than beginning a journey without directions. The result is holding the reins tight and hoping for the best. That practice leans toward failure, both in business and in life.
Often, entrepreneurs begin assessing themselves after launching the venture when prior poor choices are either very difficult or impossible to change. Important decisions left to chance usually result in disappointment, upset and/or failure. On the other hand, entrepreneurs who clearly state personal and business goals that are congruent with who they are, tend to find different outcomes. As with life choices in general, great entrepreneurial experiences begin with a clear and accurate knowledge of what will complement our God-given skills and logical needs.
Do What You Love and the Money will Follow
The old adage “Do what you love and the money will follow” is powerful and accurate advice. Successful entrepreneurship truly begins on the inside, and ultimately manifests itself as an appropriate personal expression on the outside. This may sound logical enough, but in practice, few emerging entrepreneurs give themselves permission to be led by their heart. Grave mistakes can occur when we’re unduly influenced by other people’s opinions or supposed hot business opportunities. Decisions based on greater personal insight invariably lead to better and more fulfilling results because they are choices based on self knowledge; knowledge of what works best for us.
The Focus Program for Emerging Entrepreneurs is the only insight process that helps prospective business owners build a virtual model of themselves in business before taking a plunge that is costly in so many ways.