Five Reasons 8 Out of 10 Businesses Fail.

business-failureBreaks my heart. According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn. But why? What can we learn from the colossal amount of failure with small business that we can apply to our own business aspirations?

In my 30 plus years as a serial (yes – hate that word too) entrepreneur, and through my exposure to thousands of entrepreneurs via my company Mighty Wise Media, I have seen plenty.

And yes, at surface level the primary reason businesses fail is they simply run out of cash. But trust me — the cracks in the foundation start well before the brutal day of financial collapse.

Thus I give your 5 reasons for failure and more importantly, what you can do to avoid it happening to you:

Reason#1:  Not really in touch with customers through deep dialogue.  An amazing thring hapens when an entrepreneur sees a potential opportunity in the market, or dreams up a new idea for a product/service: they retreat to a cave.  In my experience, this is the worst move an entrepreneur can make because complete understanding of your customer is imperative to your success.  Listen -in my mind entrepreneurs must walk 1,000 miles in the shoes of their customers.  Your customer holds the key to your success deep in their pain, behavior, dreams, values and the jobs they are trying to accomplish.

Your Solution:  In 1999 four smart guys wrote a book called The Cluetrain Manifesto.  Although the book is a tough read there is one silver bullet piece of wisdom shouting from the pages…MARKETS ARE CONVERSATIONS.  Dialogue is key.  And 140 character tweets don’t count.  Real dialogue with real customers (via whatever channel is best for them).

Nathan Furr and Paul Ahlstrom, co-authors of the book Nail It, Then Scale It, said it best:  Which would you rather do -talk to customers now and find out your were wrong or talk to customer a year and thousands of dollars down the road and still find out your were wrong?

Reasons 2-5 = No real differentiation in the market (read: lack of unique value propositions), failure to communicate value propositions in clear, concise, and compelling fashion, leadership breakdown at the top (yes -founder dysfunction), and inability to nail a profitable business model with proven revenue streams.  For explanations of their solutions please click:

By Eric T. Wagner, Forbes Magazine.