Don’t let it happen to you
Congratulations on starting your business. It takes massive courage and commitment to make the first step into the unknown. You've made a great choice to find out why businesses fail and how to avoid the most common mistake.
You like most business owners likely started your business because you’re really good at something or better than anyone else. Your friends or family may have been encouraging you to go start that business for months or even years. Maybe you just always had a burning desire to do something more with your life. Maybe it was to help someone solve a problem, or make the world a better place.
However you got started, you made the hard choice; you took the leap of faith and here you are.
What to expect
In this article I’ll address the most common reason why businesses fail and the most costly mistake business owners make. This is especially true when they start out on a shoe string budget or their life savings. Most businesses fail because of lack of knowledge and end up becoming a statistic. You can be on the other side of the statistic! One the millions of businesses that make it past the 10-year mark. Or better yet, the million-dollar per year statistic. Heck, this 1 thing that you’ll learn about will make the difference between a struggling business and a thriving one. Just read this article through to the end and you’ll see exactly what it is. You'll be able to fix it before it’s too late.
Where it all began
Firstly, I’d like to introduce myself. I started my career young, straight out of high school. My parents moved to a rural area with less than zero opportunities. So at the tender age of 16 I decided to move out and start life on my own. My parents were middle-class at best and didn’t help me with a financial start. So I had to make it on my own. What my mother did do was make a phone call to an extended family member. She asked them if they could offer me a job in the small city where they lived. They had a small computer services business and they offered me a job. It paid slightly over the minimum wage at the time, but it was workable.
They taught me everything I needed to know about computers and doing my job. I stayed with them for a while until I earned enough to get a place of my own. I quickly became an expert in my field and became the most sought-after IT expert in the city. In a few short years I had the largest companies fighting price-wars over hiring me. By 21 was among the top paid employees in the city. I rivaled top executives from the largest companies, but not successful entrepreneurs.
At one point I worked 3 full-time jobs (I didn’t need to, I was just “really passionate”). But it took a toll on me. They had some hourly requirements and it drained me. I was totally exhausted, burnt out, and unhappy. But there was still more demand for my services than I could handle.
Rude awakening
My sister and her husband had started their business about 7 years earlier and were doing quite well. They built a million-dollar home and I clearly remember sitting with my calculator. I worked out how many years of my “huge” salary I would have to save to build or buy a house of that value. The math was very clear. I would have to save every dollar I made for the next 30 years. I factored in a 10% increase every year; until I was 50. Only then would I be able to afford a house like that. That was a tipping point for me. It was when I decided to start selling my services and not my time. If I wanted to achieve anything significant in life, I was going to have to leave the safety of my jobs and salaries and start my very own business.
Where it all began
I sat with my fiancé at the time, now my wife and had a conversation. I asked her “do I have your support to quit my job and start my business?” She said yes and I resigned from all my jobs and converted them into consulting contracts until they could find replacements.
3 months into being self-employed, things were going great. Then the government decided to add a tariff to computers, which killed my sales business for a solid 6 months. Luckily for me, my consulting contracts kept me going.
Making it to the top
Over the next few months and years, I grew into the biggest provider of IT services in my city. I was constantly in extremely high demand from all the largest projects, hotels and businesses for consulting, equipment, and services. I was the guy that vetted and hired all the IT guys for these large companies.
Now as you can see, I had no previous experience in business. Just a passion and a skill and I was able to grow it into something massive. Never was I taught anything about business. I was just good at something, had a passion and did what came naturally without understanding. I didn't even knowing what I was doing or that if I stopped growing I would start dying.
Inevitably it happened
Things were going great, and I was making a lot of money. I could basically afford anything I wanted easily. But then 2008 happened and that was the beginning of the end of that business.
We struggled along until about 2010. But then a much larger player from a different industry decided to enter the marketplace. They started the most massive price war you could imagine. To top it off, I also had a major accident which landed me in the hospital. I was unable to walk for 6 months. It drained my bank account and all my key staff left. All my business contracts were cancelled because I was sick in bed recovering and not available to work at all.
My business was just too small
The price war closed every other computer store or business within a year or two. Thankfully I had added high ticket security solutions to our product offerings in 2007. It became the bread and butter of the business. We distributed for, retailed, and installed the largest global brands. We introduced them to our regional market and did the marketing and promotions. All the major players in the industry bought from us. We made their brand and products desirable until our distribution contract came up for renewal. You see, all my customers were larger companies than I was.
I later found out that they were secretly having discussions with the manufacturers. They all wanted to cut me out from the equation. They wanted the distributorship for themselves. And when it became time for me to renew my distribution rights they offered me at a scale I just couldn’t afford. So, one of my customers ended up becoming the regional distributors and I was out.
Looking back...
This is an embarrassing story for me to share and I hate to talk about it, but I tell it to show why businesses fail and to help you avoid the same mistakes I made. I didn’t know what I didn’t know, and it cost me dearly. Lack of knowledge took away my business and the destroyed the safety that I thought I had.
I took it for granted and thought that it would always be there supporting me and me enjoying it, but that quickly changed into “how am I going to pay my bills?”, “how am I going to cover payroll?”, “How am I going to pay my rent?”, “What about groceries and my mortgage?” These may be very familiar questions to you, or you may not yet have experienced anything like this. I hope you haven’t but if you have or have not yet, then you’re in the right spot. I’m going to tell you what you should have done the moment you started your business or even before.
Bigger is better
One thing that you should realize by reading my back story is the reason my business failed is because I didn’t grow fast enough, big enough or strong enough. I remember when our CCTV equipment manufacturer asked me to renew the distribution contract, the minimum order quantity was US$50,000 per month and at the time we were probably doing about US$10,000 per month in purchases. I just couldn’t wrap my head around affording it. Maybe we could have afforded the first few months of purchases, but I’d be buying more than I was selling and that didn’t make sense.
Why did I lose the distribution contract to my customer? It’s because I was asking the wrong question. The question I should have been asking myself was “How do I sell enough to purchase $50,000 per month” and if I had asked that question, my eyes would have been opened to new possibilities. I could have asked for a bigger geographic region, a balloon contract ramping up to the required US$50,000 per month.
I knew my customers wanted the products so I could have forced them into purchase contracts, since a number of them operated in multiple countries, they were big enough to make it possible. But the problem I faced was I was thinking too small and only inside my own little box. Nobody told me to just get bigger. Just be bigger. Make it happen, I only sold in my local market, go start selling in 5 other markets. That's why businesses fail in the first year or 5 years or even 10 years.
What I should have done
See bigger IS better. My customer that ended up with the distributorship operated in 9 countries at the time and bought the required quantities. Needless to say, I was pissed. I was mad. I felt so unnecessarily hurt then I heard the “good news” the next year. They lost the distributorship to a bigger regional distributor that operates in 21 countries and the minimum required purchases rose from US$50,000 per month to US$2M per month. See the best opportunities come to the larger players.
The Common Misconception
I have in the past offered to help some small business owners to grow their business and their response was “I’m too full, I don’t need any more customers, I don’t have enough time”. I will admit, that’s a great feeling to have but it’s a false sense of security because I’ve been there, and you can see it everywhere. Just look at how many businesses Amazon or Walmart has closed. How many businesses closed in the 2008 crisis. The big companies keep growing while those that grow slower end up at risk and eventually closing.
OK, so now that we’ve address the problem, we can talk about the solution.
Today is the day
I’ve mentioned get big, get bigger and become the biggest in your industry. That sounds like a tall order, it sounds scary and almost unrealistic especially when you think about the giants in your industry. But guess what? They started somewhere too, one day in the past with the first single step.
What made them into what they are today was the unwavering urge to grow, dominate and the constant questioning of “How can I?”. If you observe these large companies, if they want to do something that is illegal or immoral and they know it; but they want to do it anyway, what do they do? They do it and pay the fines because it’s how they know they can get the result that they need. They ask, “how do I achieve this goal?” And if the answer is “break the law”, they do it. I would like to think that they don’t want to or that they didn’t know better before, but they most times just keep breaking the law and paying the fines because that’s the only way to get it done.
Please, I urge you, don’t break any laws, because that's another reason why businesses fail. The laws tend to be different for large corporations who have expensive legal teams at their disposal and besides that, they can afford the million-dollar fines. They just raise their prices to accommodate it.
The power of size
That’s a true demonstration of the power of size. Some of those fines would close our doors. Sometimes one wrong move can land you bankrupt or worse in jail. These are the risks that we take as small business owners. We thread carefully and play safe, but we must do everything in our power to ask the question “how can I grow today?” What Can I do today to make me bigger or better tomorrow and that’s where we should focus our attention.
It may seem difficult
I know it’s hard, especially if you’re a solopreneur, but being small allows you to act quickly and make the most impactful moves on a daily basis. This is especially true if you’re light on obligations like payroll and rent. You can take bigger risks, make bigger moves and double at a faster rate. For example:
Let’s say you just started your business, the first dollar you make is one million percent growth, just by doing one thing. Let’s say on the first day you made 1 sale and you made only 1 sale per day every day. The next week you made 2 sales per day, that’s 200% growth even though it’s only 2 sales per day.
You can use this trend to keep track of your growth and plot it on a piece of paper on your desk every day to monitor your growth. Keep the chart in front of you every single day and update it with yesterdays sales figures so you can graphically see every single day that you’re growing or when you slow down.
If you see your curve flat-lining, ask yourself the question, “how can I move the curve up again? What is one thing I can do today to make that curve go up today?”. Don’t put it off till tomorrow, because tomorrow, there will be another tomorrow until its forever tomorrow and you get comfortable - another reason why businesses fail.
Don't fall into the trap
Comfort is another reason why businesses fail. It is the false sense of security that business owners have when they are able to pay their bills. It feels deceivingly safe but is in fact the scariest place to be. It’s like walking through a war zone with a blindfold and military grade noise-cancelling headphones. Once you start flat-lining, that’s it, you’re done. It’s only a matter of time.
I have a colleague that started his business and was a solopreneur. He was making about $20,000 per month at the time, he thought he was a super star and then he met in a car accident. He lost both his legs and was unable to walk again.
During his recovery time, about 6 months, his business took a nosedive from $20,000 per month to $0 per month. It was not his fault, but it still happened to him.
He was MIA for about 4 of those months just psychologically out of it before trying to catch up and regain his customers. Had he been bigger, let’s say he had 1 staff and making about 50K per month, he could have easily hired a second staff and not miss a beat, except for the additional payroll. But at 50K per month, paying 2 staff members aren’t a big deal. See the power of size yet?
What happened in the end - This is why businesses fail
Now you might ask yourself after hearing this story, why did my business end up closing and why did my key staff leave? Well, my number 1 was hired by one of my larger customers that was looking for an IT manager, stolen from me because they were a bigger company with better benefits and higher pay and my number 2 person died of cancer. My entire business relied on the 3 of us and with the 3 of us gone, my clients were more than happy to give us the axe. In hindsight, I should not have gotten comfortable with only 2 senior technicians. I should have had a bigger business to offer better benefits, match the pay offer and have a larger team of senior technicians. Bigger is better.
Had I known why businesses fail from the beginning, that my business or any business was going to be so hard, so vulnerable and could take so long to fail I guess I would have had my guard up and just went as big as I could, as fast as I could, without the limits of cities, countries or even regions. I had no idea that any one of these events could destroy everything I had worked a decade to build. All it took was one competitor that came out of nowhere and destroyed every other business in the industry, one major health concern, one staff quitting, one staff dying, one vendor outgrowing me or one client squeezing me out.
Your business is the biggest asset you'll ever own
They say hindsight is 20/20. Most people look at the negative experiences from the past and avoid the pain of ever encountering them again.
I’ve taken a long, good look at my history and that’s what led me to attend all these self-improvement, business, motivational, sales, marketing and, advertising courses. I had to figure out what I did wrong, why businesses fail and find a way to avoid making the same mistakes again and in that process, I found my true passion: Helping businesses grow - Educating business owners like you, with the tactics and skills to help you make the most of your most valuable asset, your business. To help you fill the gap between where you are and where you need to be. To help you avoid common mistakes that aren’t obvious and nobody talks about.
Running a business is a hard and lonely choice, and there was no manual, until now. Continue doing the things you’re great at, while we help you methodically grow and make the most of your business - the biggest asset you own.
Conclusion
I hope this article about why businesses fail has helped you realize that you have the potential within you to massively dominate your space and grow exponentially. Keep your eye on the prize or on your sales chart rather, and keep asking yourself “how can I move the curve upward today? What is the one thing that I can do today to make it happen?”
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