DefinIT Insights

Why One Business Failure Doesn't Mean to You've Failed Totally?

roadbumps-don't-mean-failureConventional wisdom dictates that they are two things that hold true when someone has failed to successfully launch a small business: the person is a failed businessperson, and he or she should probably not try again. But a new study disputes this point. So why do businesses fail, and when is this not a complete failure?Admittedly, having a business go bust is not a positive experience. Nor is it an uncommon one. A new study, reported on by Allison Schrager in the Bloomberg BusinessWeek website, found that in a 21-year-span, 2.2 million business failed – out of 2.4 million that opened. Yet, there is a positive spin on all this failure: the power to learn from mistakes.

Of the all the failed launches, only 29% first-time entrepreneurs tried again. Yet, those that did try again had better odds of success.When is a failed business not a complete failure? When you learn from it and try again.

But this raises another question:

Why Do Businesses Fail?

According to the Small Business Administration website, there are several reason why small businesses tend to fail. They can be broken down into four basic areas:

  • Management and Experience Problems (managing inventory and cash flow, etc.)
  • Poor planning (bad location, lack of research, etc.)
  • Financial Problems (using business funds for personal items, insufficient funds)
  • Unexpected business growth

It doesn’t take a logician to figure out that many of these problems are due to inexperience. The exception – and the surprise on the list – is unexpected business growth. When is business growth a problem? Find out here.

Learning from a Failed Attempt attributes the following to Bill Gates: “It’s fine to celebrate success but it is more important to heed the lessons of failure.” What can entrepreneurs learn from a failed business attempt? Quite a lot, actually. More than we have the space here to discuss. We’ll start with a short list; feel free to add your own in the comments section below.

  • The importance of marketing
  • Strategic planning, starting with startup costs and budget management
  • How to research an idea and choose a location
  • Dealing with expansion and growth

Failure is by no means a certainty when you start a small business, but neither is success. The important thing to remember is that there’s a learning curve for all entrepreneurs, regardless of whether they’re embarking on their first endeavor or moving into a new field. With that in mind, let’s close this article with a quote from Benjamin Franklin, himself a man of many endeavors: “Do not fear mistakes. You will know failure. Continue to reach out.”

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