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Why Businesses Fail

I recently wrote a book called Why People Fail.

It examines the 16 biggest obstacles to success and how we can overcome them. Many readers asked me whether I had similar theories about why businesses fail. Of course, there are a myriad of reasons that cause corporate failure, but here are six of the biggest:


People usually don’t just discover great products. Contrary to the famous saying, if you build a better mouse trap the world will not beat a path to your door.
You need to develop a way to efficiently attract leads, then convert some of them. This seems so basic, but hundreds of thousands of busineses start with no clear marketing funnel and then have to rely on luck or referrals to get customers in through the door.
What’s your marketing funnel? Will you start with print ads? Google ads? A free offer? Direct mail? Unless you develop a system for marketing, your chances of making money consistently are minuscule.


Once you’ve got an enquiry from a potential customer, you have to stay in contact with them.
For how long? Well as the great marketer Dan Kennedy likes to say, “Until they buy or die.”
So many business owners are unaware of the importance of this. They get hundreds of phone enquiries or street walk ins, then let them leave without leaving any follow up details. Crazy.
Give them a reason to leave you their email address (a free report, a discount, a newsletter) then keep reminding them that you exist and that you sell some good stuff. You’d be amazed how well this works. This doesn’t just work for potential customers it works just as nicely for people who’ve already bought from you. Just stay in touch and many will buy from you again.


There are two types of businesses you can run. A talent based business and a systems based business.
A talent based business relies on the talents of a few key people. It can make money, but it’s precarious, because that talent may decide to leave. Or ask for too much money. Or get sick for a few months. Far better is a systems based biz.
It doesn’t just rely on talented people, it’s also got clear, organised systems and rules that staff have to follow. Creating a systems based business can be a bit of a hassle initially. But when you do the place will run much more smoothly and definitely more profitably.


Some people just give up too easily. They encounter a year of obstacles and just lose hope that things can change. Believe me, the corporate world is full of examples of companies doing it tough, then emerging triumphant.
In the early days Boeing was so strapped for cash they started producing furniture! True story.
The Marriott hotel chain started as a root beer stand.
Good companies take time. Sometimes lots of time. But so many entrepreneurs get depressed that they haven’t made a hundred million in their first three years. And give up soon after.
Don’t make this mistake. Extend your timelines, commit yourself to your company for the long term. It makes a world of difference to your results.


Closely allied to persistence, self belief is vitally important to the success of a business. When you have strong self belief you think better, sell better and lead better.
Potential clients sense it and are attracted to people who possess it. Almost every area of a Chief Executive’s performance lifts when they believe in themselves. Yet so few corporate leaders work on their beliefs. It seems a bit too touchy feely, too intangible, compared to say working on next quarter’s figures.
Yet focusing daily on your self talk, choosing empowering beliefs, refusing to give negativity substantial time in your head, will help you make more progress than working on almost any traditional business skill.
You tend to become what you think, so for goodness sake be careful what you think. As Henry Ford put it, “Whether you think you can or can’t, you’re right.”


The final reason businesses fail is simply that they sail too close to the wind. All they need is a little bit of bad luck- a tough six months, a key client who pulls their account, a senior staff member who leaves for a rival firm, and they find that they simply don’t have enough cash to survive.
This year alone I’ve mentored two CEO’s of online businesses who had fabulous sales, but just didn’t have enough cash in reserve. The result? They went under.

Warren Buffett likes to call this ‘Margin Of Safety’. When he invests in a business he makes sure the deal makes sense even if the company performs well below expectations. He doesn’t just depend on things going right, he builds in the chance that things will go very wrong. We all need to do the same.

A guy I know said that the most common phrase Richard Branson used when they were talking was ‘protect the downside’.

So take a look at these six causes of business failure. Ask yourself whether any of them apply to you. If you’re weak in even one of these areas your entire business could be in peril.

Make a plan today to fix that weakness and set a deadline by which you’ll do it. None are hard to fix, but all could become a nightmare if they are allowed to grow.

– Siimon Reynolds

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