No business is a failure until you give up. Business literature is full of people, who despite having faced setbacks, have risen beyond the challenges and moved forward in life. There are ups and downs in any business and it is important to learn from one’s mistakes and make improvements on existing plans. In particle physics, it is said that sub-atomic particles are so small that they cannot be observed until they collide with one another. The same principle applies in the business arena. If your business is doing well, it is difficult or even impossible to tell the difference between success and failure. However, once problems arise, your tenacity and determination to succeed are tested. This is when success and failure becomes evident.
Walt Disney, co-founder of Walt Disney Productions, dream of becoming a newspaper cartoonist when he was young. However, no one was willing to hire him. So, he established a commercial art studio and took up a part-time job to support himself. Later, he started an animation company, which was a huge success in Kansas City, US. Unfortunately, the company went bankrupt. But this did not stop Walt Disney from pursuing his dreams and interests. Despite his initial failure, he rose to the challenge, learnt from his mistakes and started all over again in Los Angeles, US. Today, Walt Disney is considered one of the greatest entrepreneurs of all time. And Walt Disney Productions, now popularly known as The Walt Disney Company, is a multi-billion dollar company, with more than 150,000 employees worldwide. This is a true example of ‘business success in failure’. In every setback, Walt Disney learnt important and valuable lessons, which acted as seeds that eventually grew into a tree of success.
According to experts, acceptance of failure is essential for business growth. Making mistakes is not taboo; not understanding your mistakes is taboo and detrimental to progress. Kingfisher Airlines was one of the top performing companies in India till December 2011. In fact, its customer base was growing by leaps and bounds and it had the second largest share in India’s domestic air travel market. Unfortunately, due to a major financial crisis faced by the company in early 2012, its market share fell sharply and it was forced to shut down its operations. There are many airline companies in the world that have faced financial problems. However, they have managed to enhance their services and products to gain more market share. One such company is Southwest Airlines.
Every year, Southwest Airlines manages to turn a profit, even during difficult times. After many trials and errors, Southwest Airlines managed to come up with a policy that works for them – keep operations simple. This way, the airline company saves cost and manages to attract more passengers. Southwest Airlines does not assign seat numbers. This way, when there are last minute changes to an airplane, the crew need not make changes to seating arrangement and issue new boarding passes. Such innovations and novel ideas are essential for the survival of businesses. It is true that failure is the forgotten ingredient of business success. People associate failure with shame, embarrassment and weakness. Failure is disappointing, no doubt, but it makes a business stronger. Once you know what can hurt your business, you will try your best to avoid them and prevent mistakes from occurring again. Plus, failures make you more confident of your abilities. Business leaders who have faced challenges are more determined and confident than those who have been enjoying success all along. So, business is not considered a failure when its market share drops or it loses revenue; it is a failure when you give up.
Businesses fail for many reasons. The following list includes some of the most common reasons :
1 – Lack of planning – Businesses fail because of the lack of short-term and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and results. The right plan will include specific to-do lists with dates and deadlines. Failure to plan will damage your business.
2 – Leadership failure – Businesses fail because of poor leadership. The leadership must be able to make the right decisions most of the time. From financial management to employee management, leadership failures will trickle down to every aspect of your business. The most successful entrepreneurs learn, study, and reach out to mentors to improve their leadership skills.
3 – No differentiation – It is not enough to have a great product. You also have to develop a unique value proposition, without you will get lost among the competition. What sets your business apart from the competition? What makes your business unique? It is important that you understand what your competitors do better than you. If fail to differentiate, you will fail to build a brand.
4 – Ignoring customer needs – Every business will tell you that the customer is #1, but only a small percentage acts that way. Businesses that fail lose touch with their customers. Keep an eye on the trending values of your customers. Find out if they still love your products. Do they want new features? What are they saying? Are you listening? I once talked to the CEO of a training company who told me that they don’t respond to negative reviews because they are unimportant. What? Are you kidding me?
5 – Inability to learn from failure – We all know that failure is usually bad, yet it is rare that businesses learn from failure. Realistically, businesses that fail, fail for multiple reasons. Often entrepreneurs are oblivious about their mistakes. Learning from failures is difficult.
6 – Poor management – Examples of poor management are an inability to listen, micro-managing – AKA lack of trust, working without standard or systems, poor communication, and lack of feedback.
7 – Lack of capital – It can lead to the inability to attract investors. Lack of capital is an alarming sign. It shows that a business might not be able to pay its bills, loan, and other financial commitments. Lack of capital makes it difficult to grow the business and it may jeopardize day-to-day operations.
8 – Premature scaling – Scaling is a good thing if it is done at the right time. To put it simply, if you scale your business prematurely, you will destroy it. For example, you could be hiring too many people too quickly, or spend too much on marketing. Don’t scale your business unless you are ready. Pets.com failed because it tried to grow too fast. They opened nationwide warehouses too soon, and it broke them. Even the great brand equity that they have built couldn’t save them. Within a few months, their stock went from $11 to $0.19.