It Ain’t About the Money – T.I. (2014)
You will see many studies that explain most business fail because they are underfunded.
This is certainly a logical conclusion.
Maybe their business idea was too big to begin with.
Maybe the founders were trying to keep too much control.
Maybe, maybe, maybe times ten.
Yes, there are financial reasons for failure. But you’ll be surprised to find out those are not the number one reason for failures. Mindset tends be the winner and major variable for success or failure.
The first financial mistake most business owners do make is simple. They don’t know their real buyout number post taxes.
When someone comes to write them a check to buy their business, what is the price? What allows them to walk away and live another life? This is a fact for most private companies. Why?
Well, there’s no single reason. A public company has this mechanism already built in because the people running the company don’t necessarily own it – the shareholders do. So, if someone comes in and buys up a controlling interest of the stock, there’s a new boss. A new vision. A new destination. A new focus.
When business owners don’t know their exit strategy, they invite financial failure.
Bad Attitudes Drive Most Business Failures
I’ve worked with thousands of businesses (public, private, startup, mature, etc.) over decades and found the real reason businesses fail or projects doesn’t succeed isn’t financial. The reasons usually are mental issues. Here are a few that destroy decision-making and businesses.
- Cognitive Dissonance
- Rumination (living in the past)
- Projection (living in the future)
- Conflict Avoidance
- Inability to ask for help
- Trying to make it a family style business
- Keeping secrets
These core issues become so emotionally strong that leaders become rigid, protective, and isolated with their decision-making processes. They experience this rigidity as focus, direction, purpose, passion, mission statements, etc. This is what makes it difficult for them to see the real issues until it is too late.
That rigidity prevents the business owner from experiencing potential solutions coming to them either internally or externally.
At the Core a Business Is Not That Complicated
- We need a market
- We need goods/services
- We need customers
- We need a form of currency to exchange between buyers and sellers
- The consumer needs/wants/desires a benefit to them
- The business owners need a profit
15 Keys to Building a Successful Business
- Make it fun. If it isn’t fun you’ll walk away in hard times and over-celebrate in good ones.
- Delegation. No business is successful alone. Delegate whenever possible because that frees up your time.
- Understand that time is always more important than money. We never get time back. We can always make more money.
- Know where you are in the business cycle.
- Understand the macroeconomic elements that impact your industry.
- Be clear on what the competition does better, faster, cheaper, smarter, and more effectively than you.
- Listen to the customer.
- Listen to employees.
- Listen to vendors/suppliers.
- Have financial discipline.
- Pay attention to margins. Giant topline revenues mean nothing if they end up with no profits.
- Profits are important.
- Don’t get your self-esteem from your business.
- Have a life outside of your business.
- Have dreams outside of your business.
Not Knowing the Sales Process – Another Reason for Failure
Not knowing the sales process is also another error many companies make. I just did a Google search for “sales process” and in less than a minute got 31,500,000 results. Truth is most sales executives make adjustments to a sales process. It’s human nature to want to make it theirs.
Yet really the sales process isn’t that complicated.
- Pre-qualification – This includes anything – and I mean anything – that potentially identifies or weeds out a potential customer. The bottom line for this part of the process is of course, Can they pay for your product/service? Do they need it within a reasonable timeframe?
- Order – This includes anything involved in getting from someone who has passed through the pre-qualification phase to an actual order. This phase includes proposals, negotiations, and so on. They all end up ending this phase with an order. Without an order, there’s no sale. Even if they can buy.
- Support – This is everything and anything that has to do with supporting the sale. It ranges from customer service to financing.
- Referrals/Repeat Business – This is when you know that you’ve done the first three phases at a high enough level of success.
Understanding the Difference Between Sales and Orders
Even more important than knowing the sales process is comprehending what is a sale versus an order?
If someone has been a customer then it is an order. In this scenario, the company should have a customer service oriented sales system. One that matches the emotional needs, wants, and desires of the customer.
When someone is new and the sales executive guides them through the process then it is a sale. A sales process is more proper for this event. Why? Well, we have to make sure (1) They can and will buy, (2) We get the order, (3) We provide support, and (4) We earn their repeat business and referrals.
Lack of Diversity and Awareness of Personal Biases
This is another issue that can drive business failure. The customer is not and never will be us! The customer is something completely different. To fully understand that, it is extremely vital, critical, and important to have a diverse set of views within the business leadership team. Even more important, we need mental awareness of these various personal biases – especially, as owners and/or key decision-makers.
This is the only way we will ask the most important question of all – what if I’m wrong?
We will all look at things from our perspective and that will usually make our first choices – statistically wrong. Wrong choices stacked on top of each other creates a rickety bridge to failure and crosses waters filled with piranhas.
If I’m a man it is impossible for me to ever fully understand a female perspective. If I’m white, how could I ever comprehend what the world would be like with a different color of skin? If English is my dominant language, how can I understand the struggle of someone for whom it is their second, third, fourth, or fifth language? Only 1 in 7 people actually speak English. Even more important, all of them are not native speakers.
It’s critical that we are aware of our personal and cultural biases. Business leaders must make sure they’re getting all points of view – otherwise they lose the real opportunities for growth.
Search for similarity is one of the biggest traps business owners or key decision-makers fall into while building a company. We’re naturally drawn towards people who remind us of ourselves. That gives us a false sense of safety. This is a dangerous trap. Again, we are not the customer. We’ll never be a true customer of our product or service – because we know too much.