There are some businesses that don't do well. Why is it that over 90% of businesses fail? What's the rationale behind it?

The first major reason why most businesses fail is because most businesses are not started by entrepreneurs but by technicians thinking they are entrepreneurs. And this is quoted by this person called Michael Gerber who wrote this book called The E Myth.

And what he says is really true. He says that the fatal assumption people have is if you know how to make the technical product of a business, then you know how to run a business that makes the technical product. That's a fatal assumption. What does that mean?

A lot of people assume that if I can cook, I can run a restaurant. If I can train, I can run a training company. If I can style hair, I can run a hair salon. I am sorry, you can't. It's totally different.

The hair stylist who goes to start a hair salon, she was good at what she was doing, she was cutting hair. But when she starts a hair salon, she sucks. She's a hair stylist. She can't market, she can't sell, she doesn't know accounting, she doesn't know how to set up business system, she can't lead a team and that's why the business collapse.

So that's the first reason why they fail. So if you are a technician right now, or if you are a hairstylist, what do you do?

What these groups of people should do is to learn how to run a business, learn marketing, and learn finance. Or find a partner or partners that can add on to the skill sets you need.

Second reason why people fail is because of, product sameness, a lack of a Unique Selling Point or USP. Most people, when they start a company, you ask them. So what makes you different? And they can't answer that question.

And even if they do answer that question, there's a lot of fluff, oh we are different because we can do it better but how, they can't tell you. And sameness kills.

For example, let's say you are in the food business and you start a chicken rice stall, there are hundreds of them around. You know what happens at the end of the day? You have to compete on price. And when you compete on price, your margins get slashed and you end up making no money.

You start a hair salon. There's another hair salon down the street, what makes you different? You start a tuition center? There are hundreds around, what makes you different?

So never start a business unless you got a USP, you are sure that it's different from the rest of the people.

These are the two reasons why businesses fail. Now that you are aware of these two reasons, you will be able to plan, steer and manage your business in a manner that would increase your chances of your business being more successful and profitable.

Adam Khoo is an entrepreneur, a best-selling author and a peak performance trainer. A self-made millionaire by the age of 26, he owns and runs several businesses in education, training, event management and advertising, all with a combined annual turnover of $20 million. His best-selling "Patterns of Excellence" is a complete step-by-step system that will literally program you for success in life.

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Excellent points - I think apathy must come in at a close third, though. Not getting round to things often makes it a nonstarter before the business has even had a chance to get going - especially where the principal player of this new venture already has a dayjob.

 Posted by: Tony Smith at July 23, 2008 11:11 AM

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