What is the fundamental error that causes most new small businesses to fail?

The error that I see over and over is failing to spend enough time articulating the vision and then prematurely moving forward without a written business plan.  One of my favorite sayings is, “If you fail to plan, then plan to fail!”  No where is this more true than in a one man show or other small-scale operation.

Inevitably, the prospective entrepreneur is enthusiastic.  However, eventually the dream comes up against the demands of the world.  If the original vision wasn’t written down, it could seem surreal at this point.  Also, this is the trigger for the individuals fears coming up.  This confluence is disorienting and discouraging.  The dynamic also tends to spiral downward from here.

By having a written business plan, you must clearly articulate your dream.  I would even take this step further and say you must put it into the exact right words that have the power to evoke your emotions and original enthusiasm.  If you do a lot of work on this, returning to it will renew your sense of mission and passion.  If this step was done carelessly, you will read your words, but they won’t land emotionally.  In other words, your original idea might seem hollow from the perspective of this new point in time.

Further, without a written business plan, you don’t have a battle plan for WHEN your fears strike.  If you believe this won’t happen to you, you are wrong.  If your dream is important to you, something will come up that threatens it’s realization.  The stronger a sense of calling you have, the bigger the fears.  Therefore, anticipating the challenges and having a plan you believe in along with a vision that creates passion has the potential to carry you beyond your own fear.  You must believe in your business plan!

Lastly, most small businesses do fail.   The more time you put into your business plan when you are enthusiastic, the less time you will have to spend battling internal demons or recovering from being surprised by the harsh realities of the market place.

About Pat

I'm an organizational development specialist, career counselor and personal development coach. My other interests are diverse, but I'm primarily concerned with helping people to lead a productive and meaningful life. I currently maintain two blogs on WordPress. One is directed more toward a business audience and the other will most appeal to the general public. My Masters is in Integral Psychology and I also attended Coaches Training Institute. I like an work in Silicon Valley and work with people from all over the world.
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5 Responses to What is the fundamental error that causes most new small businesses to fail?

  1. dongrgic says:

    Patrick, great post. In this instance I have to partly agree and somewhat disagree.
    The bit I agree with is you must plan. And I also use the saying “failing to plan is planning to fail”. It’s important to have a direction (which the plan will give you) but the destination should not be fixed. Whilst some new businesses plan, the majority are unable to put a detailed plan together as they do not have enough experience or knowledge of the business and or industry they are getting into.
    The bit I disagree with is in what causes the failures. I believe that in most cases failure is caused by inexperience and lack of knowledge and speicifcally, in the earlier stages with management of growth, cashflow and finances in general. In addition I think one of the biggest barriers to smalll business success is the ramp up in knowledge required at startup. Whilst the new entrepreneur should be focusing on developing clients, products, services and delivery he is required to overly focus on regulatory and administrative issues relating to the business. This is only exasperated once staff are employed.
    Lastly, from experience, no matter how many times I have started ventures and with great planning, inevitably the playing field changes or some aspects were unforseen in the planning. In those cases an entrepreneur needs to have flexibility in the plan and is required to (I hate the concept of pivot) shift, adjust and modify direction including product and service mix, to achieve desired business goals.

    • patca63 says:

      I agree with all of your points. There are many areas where a new business can fall down. This specific article is more directed at those who do not even make it out of the starting gate because they are crushed under the weight of their own fears. However, I can see where a lack of knowledge or experience is also a problem and I guess I assumed that someone starting a business in a particular area would have that. Within my customer base, that is what I have seen. The ones who think they know everything, don’t necessarily hire a coach. The question of hiring and scaling are things that need to be dealt with once one leaves the gate. Unfortunately, many start up businesses don’t make it far enough to have to worry about that.

  2. dongrgic says:

    Patrick, I think we are both looking at the same issue from differing perspectives. By knowledge and experience, I was specifically thinking of business skills. Most people that do start businesses certainly know their industry or trade, but don’t necesseraly have that business acumen or operations knowledge to sustain their offering… whether service, trade or product.

    Cheers
    Don

    • patca63 says:

      Agreed. You can get a lot of business acumen by hiring. However, you need to be aware that you need it! Those who most need it, don’t tend to seek it out. That is to say, self-awareness and some humility is critical. At the same time, the founder has to be confident in their vision. It’s a tricky balance and the optimum balance changes. Therefore, flexibility also enters the equation. What are your thoughts? Are we missing anything else that could be useful or important?

  3. dongrgic says:

    Absolutely. Where do I start? It’s one thing to have an idea and want to and plan to start a business. It’s a whole new ball game when you actually do start a business. No matter how much planning and strategising you do, nothing will prepare you for the actual experience of having total accountability and responsibility for the products, services, staff, payroll, revenue, billing, administration, cashflow, and may I add profitability just to name a few. For the uninitiated, the juggling act can be a daunting experience. In many businesses that fail, one or more of the items I have listed have fallen through the cracks for some reason or other.
    The key is to have established systems and processes in place. It takes time to develop them but they are essential for success. By breaking down any task into a series of easy to follow steps, you improve your probability of success. In addition, many of the tasks you need to undertake to manage your business can become routine.
    This is not the place for detailed instruction on how to set this up, but what I’m trying to say is to run a successful business it takes more than and idea, a plan and some cash. It takes courage, persistance, determination and hard work to pull it all together and make it happen.

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