The Truth About Why Small Businesses Fail
Part One of this article focused on debunking the idea that inadequate capital was a primary reason why small businesses fail. Here, in Part Two, we’ll look at the other popular reason used to explain business failure.
Is lack of knowledge a major reason for why small businesses fail?
The second most common reason given for why small businesses fail is lack of industry knowledge. That’s logical and probably true in many cases, but reasonable aptitudes and a desire to learn the business will overcome that negative. So, let’s go back to the sandwich making entrepreneur introduced in Part One. It’s safe to assume that sandwich making already plays a big a part in their life. In fact, you can bet that friends and family look forward to lunches ranging from old standards to the new creations always coming out of the kitchen. Reading, experimenting and testing new sandwiches on others is a favorite past time. It would come as no surprise that our sandwich maker purchased a food cart and plans to work a local festival. The subject of the business is sandwich making and our entrepreneur knows the subject well. But what might be missing? Because sandwich making has gone from a hobby to a business venture, there’s now more to the process than breads and fillings. Pricing, food costs, permits, and movable storage issues will arise. The entrepreneur will handle those concerns in stride as part of the passion and desire for opening the business.
Hard work and effort are necessary for running a business but one’s desire and attachment to the venture overshadow the effort. It would be akin to teaching a child how to hit a baseball. The thrill of seeing the child make progress displaces the effort expended in tosses, swings and misses. Interest, love, passion or any other word describing desire is the key. The real reason why most small businesses fail is lack of interest, aptitude, love and passion.
Just a word on business plans
Rarely do business plans reflect the long term reality of a venture. And very rarely does anything but the most rudimentary planning play much of a role in business success or failure. Elaborate, long range business plans have a way of evaporating when the act of DOING BUSINESS takes over.
Lack of understanding one’s entrepreneurial self is the real key to why small businesses fail
Ours is a different and perhaps even a novel take on why small businesses fail. But to take it one step further, look at the bigger picture and the real impact of small business failure. The incredibly high rate of small business failure fuels a negative chain reaction throughout our economic system. Our entrepreneurs are national treasures. But in spite of their importance, no viable solution has been presented to overcome the reasons why small businesses fail. Entrepreneurship is at the core of everything that’s economically successful in North America, and in all other capitalist societies. It’s the backbone of economies, yet the true nature of self-employment, as well as the true nature of the entrepreneur, is not generally understood.
Entrepreneurship is a ‘lifestyle’ all its own and understanding one’s entrepreneurial self is the first step in reducing small business failure. Instead, the world of self-employment is dealt with through ‘business plans,’ financing strategies and stories about people who have been successful. Entrepreneurship programs, government agencies, lawyers and accountants offer advice, but none of it holds a candle to the drive and passion brought into the mix by a person committed to fulfilling a dream. The Focus Program for Emerging Entrepreneurs takes an entirely different approach to self-employment because it deals with the entrepreneur first and the business second. It is the only philosophy or way of thinking that says PERSONAL PLANNING SHOULD ALWAYS PRECEDE BUSINESS PLANNING. Old-school approaches to self-employment have been proven woefully inadequate for decades. It’s time to face reality and see the real reason why small businesses fail.