“I’m the only person I know that’s lost a quarter of a billion dollars in one year…. It’s very character-building.” -- Steve Jobs
Here are the hard facts…
– A corporation fails every 3 minutes.
– A Company changes control every 15 minutes.
– 96% of ALL companies fail within 10 years with 80% of those failing within 2 years.
– 26,000 new products and brands are introduced every year.
– 16% to 30% of consumers changes brand loyalty in one evening of watching commercials.
– 74% of consumers buy outside of their favorite brands.
In 1992, the average consumer was presented with 3,000 commercial messages per day. In 2006, that number reached 30,000! The number is even higher for business owners.
If you have experienced failing in business or just starting a new one then this column is for you. You put up a business with the hope that it will be a very successful one. However there are some concerns you must address and correct if you are to attain your goal.
First, you need to go through a self correcting mode in areas where you don’t know anything is wrong. And second, like smoking, you know you have a habit but how badly do you want to change?
It’s been my experience over the years of watching small businesses come and go that the reasons for failure are not what you would normally think. Here are some of the major causes:
1) The Single Founder – running a business is no joke. You can’t be a master of everything because you’ll be exhausted and your own talents, skills and experience may be limited. You’ll have to hire people experienced in the area of your business or consult a business expert – one who is really hands-on and I mean someone who’s also into business so he knows what he’s talking about!
2) The Wrong Team – Don’t hire friends or ‘newbies with an attitude’ (just because they accept a low salary) to form part of your management team. If you can afford one, don’t skimp on hiring a consultant because their expertise counts a lot. That’s why franchising is one viable idea because these franchisors have already ‘tested the waters’ and proven the system. That takes out a lot of start-up problems for you.
3) Top Heavy – “Too many cook spoil the broth.” A long layer of managerial line-up at the top could really be too expensive for businesses. They may be too ‘high hat’ to form a team or to ‘wet their hands’ i.e. managers who sit in their air-conditioned offices all day long and are not in touch with the day-to-day realities of running a business.
4) Family Heavy – Don’t include your parents or siblings just because they are family. They may be protective of your interests but may sometimes go overboard. See to it that their interests and expertise are in tune with the nature of the business.
5) Wrong Legal Advise – Choose an attorney that’s well versed on business incorporation, labor issues and tax matters.
6) ‘Boiling the Ocean’ – This term cautions you not to go for projects that are considered high risk, hugely complex or be too concerned with a minutia of fine details.
7) Not talking to Customers – Communication is key. Reach out to your customers especially the segment that contributes 60% of your total sales.
8) Bureaucracy – Too many management layers for decision-making can be too tedious. Build a team that’s ‘lean but mean’. There is a saying that fat people die young so my advice is for business owners to cut excess fat in the organization.
9) Slow to Launch – After some market research and tests, launch your idea. Someone else may beat you to the game, so to speak. Be sure you have secured patents, copyrights especially if you’ve got products that are new and revolutionary.
10) ‘Stick-to-itiveness’ on original idea – The business world is very dynamic and time-sensitive. Don’t love your idea too much – test market it and check out the loopholes.
11) Wrong Location – Your business must be right where your market is located. It’s one of the principal reasons why businesses fail. If your business is out of reach, then your product will not be available. If it’s not available, it can’t be sold.
12) Founder-it is! – Don’t think that because you are the founder, you are the end-all and be-all of the business. You can still retain much of your identity or ‘touch’ by creatively harnessing experts’ ideas to your advantage. You have to adapt to a borderless market where ideas and product turnover are done in real time.
Part II will be released next week and will highlight lessons and best practices in managing small and medium size businesses.
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Prof. Soriano is the Turnaround Advisor of wongadvisory.com and the Chairman of the Marketing Cluster at the Ateneo Graduate School of Business. For comments please check his Facebook account or email writer at This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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