Why Do Most Businesses Fail?


Having worked for various small businesses, companies and organizations over the past 11 years, you start to pick up on a few things. One of the main things you pick up on are the ‘warning signs for failure’. Now, that isn’t to say your business is going to fail straight away; sometimes it takes months; sometimes it takes years; sometimes you figure your way out through it; but, ultimately, it’s about the long game—not the short.

As such, here are a few ‘warning signs’ that you can look out for to help show you that you may be headed down the wrong track; alongside some very simple, practical solutions on how to avoid or divert them. Enjoy



Problem 1: You’re barely making ends meet
Liquidity* is huge. Especially in the business world. It’s not enough to say your company is worth x-amount of dollars, it’s more important that you are able to pay off your debts! Think of it this way… if your company, organization or small business is worth over $1 million in fixed assets, but your monthly operating cash flow is $1,000 and your monthly operating expenses are $1,500—well, you have a problem there, sonny!
Solution: Sell off, downsize, or look for additional sources of funding
Diversification is always key! It’s not pragmatic to put all of your eggs in one basket, because if that basket which you’ve put your entire stock into fails, game over. After all, it’s said, on average, a typical millionaire has at least 7 sources of income. Hence, the key takeaway here is: diversify, diversify, diversify.

Problem 2: Your core service or product offering isn’t satisfying the same need it once was
This is inevitable... all major organizations, companies and small businesses will face this at some point or another. You might have either: (1) not been able to establish a recurring customer base (ie. you’ve satisfied the needs of the 90’s kids, but forgot that there are 2000’s kids on their way; all with different needs, wants and outlooks), or (2) you’ve saturated your current market to the point that it’s drying up (ie. there are only so many widgets you can sell before everyone has one).
Solution: See if you can add new products/service offerings to the mix
There’s a reason why Apple expanded into the phone market and is now embarking on the credit card market, as well. Diversification is always key (see above). If one product or service offering is coming to an end; well, at least you’ll have a few others that you’re able to latch onto in order to slow the descent or completely shift courses altogether. It’s a lot like rock climbing; we all need footholds to help keep us on the mountainside as we continue to make our way upward!

Problem 3: You have an inability to adapt
This is really an upper-management issue. You, as the leader, lack the foresight or vision to navigate into the future waters of where your company, organization or small business might go. The current landscape is always changing, especially with the rise of new technologies, and if you can’t adapt quick enough, you’ve lost!
Solution: Always keep your finger on the pulse
Obviously, it’s important to keep an open-mind here, but what’s more important is to understand ‘what’ you should be keeping an open-mind on in the first place! Sure, you might be the most open-minded person in the world, but if you aren’t “hip” to the goings-on of the world around you, well—it’s sort of like the blind leading the hopeful at the point... so, always keep both eyes open.

Problem 4: No one on your team is willing to adapt
Again, this an upper-management issue. Morale is hard to foster; especially once it’s been lost. It’s not just about selling to the outside world, but selling your vision internally—first! After all, your internal team will be the one pushing your products or services to the rest of the market, so you’d at least hope that they’d be on board!
Solution: Take the yogic-approach
All change starts from within. Be the change you seek. Find passion in your own vision before pushing it outward. It’s pretty obvious, to the non-oblivious, whether you, yourself, feel passionate about your own product or service offering. If you barely understand or like what it is you’re selling, that only gets magnified as you add more bodies and minds into the mix. Start with yourself first—get STOKED by your own work!

Problem 5: You’re starting to think of a way out
It is what it is. You see the warning signs and you’re getting ready to jump ship.
Solution: Measure 3 times, cut once
In the ancient Japanese text, The Secret Traditions Of The Shinobi: Hattori Hanzo’s Shinobi Hiden And Other Ninja Scrolls*, it is said that it’s always more important to be mindful of a ‘way out’ than a way in. Personally, I’m always doing this. It’s what most adaptive people do. When you’re un-attached to the outcome, you are more objectively able to navigate your way through the obstacle set in front of you. At the end of the day, they say that 30% of all small businesses fail within the first 2 years of operating; 50% at year 5; and 66% by year 10. Failure may be inevitable, but having your wits about you and learning to adapt is not. Always keep both eyes open and use foresight to see where things are all headed.



Granted, after reading all of that, don’t let a sudden rush of fear stifle your dreams of opening your own small business, company or organization. After all, that’s the fun part about life—trying your best with the openness to either fail or succeed. If life were always easy, then what would be the point?

Fun fact for those of you living in Canada: you can actually file for bankruptcy 3 items before the government says ‘no mas’*.

So, give that new small business, company or organization a try! What else have you got to lose?

-you only live once.