I’ve been an entrepreneur for 30 years. I’m the founder of Patriot Software Company, which presently has six companies under its umbrella, all of which I’ve started. With each one of these business ventures, I learned something new about what it takes to get a business up and running. I’ve also learned a thing or two about what doesn’t work in business and will lead to a failed startup. That’s because, despite my six successful businesses, I can count two businesses that have outright failed, and numerous business ideas that never made it off the ground at all.
Failure offers valuable lessons. I’ve used these lessons to help me craft the flagship products at my current companies, like payroll for startups, accounting software, and even recruiting software. I’ve learned what works and what doesn’t when it comes to business. From my experience, there are five reasons why your startup will fail.
You Can’t Turn an Idea Into a Business
You’d be amazed at how many business ideas break down when you ask a few simple, logical questions about a plan to launch a startup. For example, if you want to offer a service, who would buy it? Or, if you want to sell a product, how will it be made? Instead of talking about how cool your idea is, you need to be able to turn it into something you can market, sell, and scale. Conducting a market analysis can work simple wonders, and help you avoid a failed startup.
You Don’t Understand Business Velocity
I’ve had many business ideas. Sometimes, my vision induces spending on development before I ask questions or do research. Why do I, an entrepreneurial veteran, make mistakes like this? It’s because business is about speed-to-market. Sometimes you have to trust your gut and move fast on an idea, even before you can fully vet an idea.
Time is money, and managing the clock in business is just as, if not more important than, managing your budget for business. You can spend time like a currency. However, unlike money, what you don’t spend, you lose. So, knowing that you only get so much time, and that time is perishable, will you spend it gaining information and making plans at the cost of a head start? How much will it cost you if you don’t take the lead, or if a competitor beats you to market? Knowing the relationship between your clock and your wallet is crucial to running a successful business.
You Form a Not-so-great Team
I’ve tried to adopt a servant-leadership style with my employees over the years. My aim is to hire people smarter than me, put them on a team, and then let them do what they do best. I know that their capacity for innovation is my company’s greatest resource. But, I can tell you that the skills listed on a resume don’t always create productive teams. In fact, I’d rather have teams that work well together than have a software development team full of superstars that can’t work with anyone.
I was the superstar employee once, and I got disgusted with my teammates. They couldn’t keep up with me, so I left them behind. I charged ahead, took on more work, and tried to make myself look amazing to my employer. What happened was the opposite. I looked like an information bottleneck who wouldn’t share knowledge and was unable to lead because I, myself, wouldn’t listen.
Highly collaborative teams are much more effective than individual stars. Now, I look for talented people who can work with others instead of searching for only best-of-the-best talent.
You Are Unable to Prioritize
I once heard an incredible entrepreneur say that the key to success in any field is becoming a gold medalist in one category. The thought was, if you can show that you are amazing at one thing, other things will take care of themselves.
This is easier said than done for many startups. You probably believe that all your ideas are great. And, they just might be! But, trying to bring all your ideas to life at once is how you turn a bunch of great ideas into one failed business. Instead, pick one idea and focus on it.
Your Ego Gets in the Way
The ancient Greek philosopher, Pythagoras, once said, “No man is free who cannot command himself.” Simply put, if you can’t control yourself, then you aren’t operating under free will. Instead, you are subject to your emotions, or ego.
All entrepreneurs need confidence. Some have too much confidence, and it leads them into traps. Those entrepreneurs push forward with ideas that research says aren’t viable. They chase bad money with good money. And, they treat people as a means to an end instead of real folks with real ideas, values, and emotions. In the end, they will join the failed startup club, and their ego will suffer a painful blow.
Ego is something entrepreneurs must manage throughout their careers. Your ego will expand and contract with your business, and it can get beat up or become impervious to reason. If you want your company to be balanced, you have to be balanced. Your job is not who you are; it’s just an extension of how you want to live. Making the distinction between your job and your life makes every part of business easier.
Failure is a Part of Business
This might shock you, but you should fail during the course of your business. I’m not saying your business should collapse, and you should be out of a job. But, failure isn’t a bad thing. In fact, lean and agile business principles are all about testing, failing, learning, interacting, and trying again. Failing fast, in small batches, can help you make the most of your business.
When I first started in business, I was afraid of failure. Now, I structure my business ventures in such a way that, if I’m going to fail, I’m going to make the most of it.