11 Ugly Truths About Business Failure

Becoming An Entrepreneur: 11 Ugly Truths About Business Failure

Lack of Skills:

To excel as an entrepreneur requires the ability to follow rules and procedures while implementing tried and true behaviour manipulation techniques. Entrepreneurs generally have no patience for management. Most entrepreneurs are running on the raw motivation of getting out from under dysfunctional management. The last thing an entrepreneur wants to do is become a manager, instead of becoming an entrepreneur, which is why many entrepreneurs fail at the point when their start-ups grow large enough to require professional management.

Whichever business you are in, you (as the owner) must have the motivation and the required core skills to manage the business. This does not necessarily mean all business skills, such as accountancy, but those that will be needed to run the business successfully, in your struggle of becoming an entrepreneur

There is no problem with moving into some entrepreneurial areas of business where you have a limited amount of skills to contribute. So long as you have the staff who can make up for your lack of skills and remain loyal to the business.

Stop asking how to become an entrepreneur with no money. Rather start asking how to be an entrepreneur without an idea. New venture startup business ideas are limitless and this article will help guide you toward choosing a niche for your business. The time you spend, in your process of becoming an entrepreneur, is the most valuable time you will use and will arguably affect the outcome of your success.

During this time, you as a successful entrepreneur should ensure that you have all the skills that you need to run the business and you should take the time to learn those skills that you do not have. The risk of business failure will be reduced if you take this preparation time to get things right even if this means delaying the start-up of your business for, say, another year.

Often, too, you will find yourself working with an employee who “doesn’t know the ropes” as well as you do, due to lack of experience.

Sales Problem

No sales = no business and so you must know where, how and who will bring in your sales once you start trading. This area should be covered in your market research, which is another area that most small businesses fail to cover properly in the process of becoming an entrepreneur, resulting in business failure.

Lack of Financial Control

When you start your own business, you must be willing to give up the security of a regular paycheque. The entrepreneur will often fall into the trap of increasing his/her lifestyle just as quickly as the company grows. S/he should rather direct his/her characteristic energy into creating a healthy savings account.

Not Understanding the Entrepreneurial Role

In the process of becoming an entrepreneur, successful entrepreneurs and people anyone who is into entrepreneurial ventures, in contrast to those who struggle, have learned to separate their roles in life from their self-worth or self-identity. They understand that role performance or failure with their own venture is not a judgment of them as an individual.

People who tend to equate their self-worth to their composite role identity are inherently risk-averse and look to maintain the status quo. Being able to differentiate these two identities allows them to be risk-prone vs. risk-averse, a key ingredient to success as an entrepreneur.

During the process of becoming an entrepreneur, Individuals who have risked failure, experienced failure and learned from failure, have not only learned how to differentiate their role identity from their self-identity, they have learned the lessons of risking and failing.

They understand that early failure in ventures is a natural part of successful start-ups. They can embrace those experiences, learn from them quickly and move on. This is critical to success as an entrepreneur. They must be willing to face and deal with early failures to prevail over time.

Lack of Goals

Even though much is said and written about goals and plans to be necessary for success as an entrepreneur, few people learn the mechanics of successful goal setting and planning. It’s not the plan but the planning that is important, and the goal-setting process allows them to develop the confidence to take risks and fail. Successful entrepreneurs are not only goal-driven and goal-oriented; they have learned to execute the process of strategic and tactical goal setting and planning.

Visualising goals, writing them down and putting together a detailed plan for achievement provides the confidence and motivation to prevail, while you are on your way to becoming an entrepreneur. More than just business or operational plans, they have goals and plans for all the important roles in their life. They have learned early that if they aren’t working on their own plan, they are probably part of someone else’s goals or plans. They chart their own destiny, embrace risk-taking leadership positions, make adjustments as required and prevail over a course of time.

There is a Price to Pay

Entrepreneurs don’t always understand that there is a toll to pay in the process of becoming an entrepreneur. To be a successful businessman in any role in life you must be prepared to pay the price. There are really no overnight successes as an entrepreneur. In fact, overnight success generally takes 15-20 years. One of the early tolls that entrepreneurs are often forced to face is the “re-making” of themselves and designing an entrepreneurial infographic in their mind, which can include growing beyond their current circle of contacts.

Since most people tend to stay within their own psychological comfort zone, they begin to lose identity with the risk-taker. They are comfortable with the type of person who is more like them. Quite often the entrepreneur moves on to a different circle of associates who understand the journey. Stepping out, being your own person and venturing into the risk-prone unknown is lonely by itself.

Consequently, there can be newfound stress in old relationships. It’s been said before that pioneers get shot in the front and the back, and only through a process of differentiating role performance from self-worth, being risk-prone, prevailing through adversity, sticking to your goals, and adjusting your plans, will you be prepared to pay the daily toll of becoming an entrepreneur.

Inability to Handle Failure

An entrepreneur has much to learn to be successful, including the day-to-day mechanics of running a business, producing products, delivering services, making money and dealing with people. Entrepreneurship is a journey. The biggest challenge of all is developing an understanding of him/ herself and coming to grips with what s/he wants and what motivates him/her.

This sustains one’s willingness to prevail over the long term against adversity. In their struggle of becoming an entrepreneur, Successful entrepreneurs have learned to transform their thinking, allowing them to prevail where others fail along the way.

Ideas To Become An Entrepreneur

To be a successful entrepreneur, you are going to have to learn to deal with failure. There is no way around it.

• Thomas Edison tried over ten thousand different experiments before he finally demonstrated the first incandescent light bulb on October 21, 1879.
• Bill Gates’ first company, Traf-O-Data, was a failure.
• Michael Jordan was once quoted as saying: “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times I’ve been trusted to take the game-winning shot, and missed. I’ve failed over and over again in my life. And that is why I succeed.”

Over-trading

Business failure is often achieved by over-trading: selling more than you are capable of dealing with (concerning your finance and resources). The prospect of a sudden increase in growth by most business owners will give them the enthusiasm to do whatever it takes to achieve this. The most common outcome of doing so is the business becoming insolvent, hence business failure. The morale is that fast growth is not always good growth: however, steady growth is good.

Insolvent Customers

Business failure can be caused by your business debtors failing to pay your invoices on time, or even at all. If debtors are poor payers (although they eventually do pay off the debt), it will leave you with cash flow problems. The biggest threat is when debtors cannot afford to pay you back at all and consequently become insolvent.

If this was your best customer, or if s/he accounted for the majority of the money owed to you, then this is a serious threat.

When a customer becomes insolvent, you may eventually receive the money (through the customer going bankrupt or being liquidated) owed to you. However, this money may be needed at present to pay off your short-term creditors and as a result, you may be threatened with bankruptcy.

When a customer’s assets are liquidated, to pay outstanding creditors, the creditors are paid in priority (with tax and employee wages being one of the priorities). Quite often, you may never even be paid back the money you are owed. This is because the assets of the business cannot stretch far enough down the priority list to pay you (if you are considered a low priority).

Banks and the larger lending sources take a debenture (security) as a condition of receiving funding: this gives them the first call on available assets such as fixed assets (sale of buildings/cars), stock, cash at the bank, and the insolvent company’s book debts (debtors who owe them money).

It is therefore important that when you have customers on credit, you obtain a credit report or a bank reference. It is further important that you recognise any early warning signs that customers are poor credit payers.

Red Tape

Each day, week, month and year, businesses have a required amount of government paperwork and procedures (VAT forms, Unemployment Insurance, etc) to complete and the time and money used to ensure their completion are a burden, particularly for small businesses

The time and money used to administrate the duties is very frustrating for business owners, as their attention is drawn away from the management of more worthwhile actions (such as making money), and consequently, businesses are pulled towards business failure

4 Great Advantages Of Becoming An Entrepreneur

The advantages for the entrepreneur who successfully creates value in the process of becoming an entrepreneur are numerous:

Independence

The independence emanating from ownership and management of one’s own business allows entrepreneurs to pursue what they personally regard as important. Entrepreneurs can integrate personal preferences more effectively in the development of their own business than in the corporate environment.

For example, the environmentally-conscious entrepreneur can apply environmentally sound management principles in his own business. Entrepreneurship gives entrepreneurs a feeling of being self-supportive.

The opportunity to realise your full potential.

Entrepreneurship is an instrument for self-actualisation. The personal skills, creative abilities and tenacity of the entrepreneur are used in full during the establishment and development process of becoming an entrepreneur.

The opportunity to realise a big profit.

Within the capitalistic system, the reward for successfully satisfying market needs is of a financial nature. Although the profit motive is not indicated as the most important motivation for entrepreneurship, the financial advantage enjoyed by the successful entrepreneur is still a crucial consideration when becoming an entrepreneur.

The opportunity to contribute to society.

By satisfying needs, the entrepreneur contributes to the development of the society in which he functions. Apart from financial success, successful entrepreneurs often enjoy a status in society and are acknowledged with hero-worship, power and authority.

5 Bitter Sweat Disadvantages Of Becoming An Entrepreneur.

Research indicates that, in the process of becoming an entrepreneur, 24 per cent of all new businesses fail within the first two years, 51 per cent during the first four years and 63 per cent within the first six years (Scarborough and Zimmerer, 1993:10-12).

While you are putting your resources together in the process of becoming an entrepreneur, Entrepreneurship subjects the entrepreneur to the following personal and financial risks:

Reputation and self-confidence.

A business failure implies personal failure. A business failure harms the entrepreneur’s standing in society. As much as society honours successful entrepreneurs, they also criticise unsuccessful ones. Loss of status and criticism may damage the entrepreneur’s self-confidence and discourages further- development of entrepreneurial abilities in his/her struggles to become an entrepreneur.

Uncertain income.

Entrepreneurship does not guarantee a comfortable monthly income for the entrepreneur. Cost may exceed income during the development phase of becoming an entrepreneur. Entrepreneurs come last in the compensation of production factors.

Risk of losing all capital.

Entrepreneurs are forced to invest personal capital in their new business. If the business fails, personal capital is lost. It influences the personal security of the entrepreneur and his family. If other investors also lose capital in the process, the entrepreneur’s guilt is increased.

Decreased quality of life.

The majority of entrepreneurs enter the market between the age of 25 and 39 years. The long hours and hard work required of the entrepreneur create tension in the family and socially. In the process of becoming an entrepreneur, Friendships and family are often sacrificed at the cost of business success. The situation might improve when the business is well-established and then the entrepreneur may have more time for his family and friends.

Total responsibility.

Entrepreneurs are forced to decide about matters with which they are not properly acquainted. This and the realisation that the success or failure of the business may depend on such a decision may be stressful for certain individuals.

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