Three mortal wounds killing businesses
Everyday , we see businesses going out in the cold on the road of closure. In America 9 out 10 start ups will close down within a year while in South Africa 80% of new businesses close down within five years.
What makes so many promising entrepreneurs go out of fuel within a few months? There are no set or predetermined response to that question but a few indicative behaviors within the entrepreneurs and the staff culture may explain the failure behind so many businesses.
One of the indicative behavior predicting the failure of a business is rooted in a lack of practical strategy.
We prefer to emphasize the terms ‘practical strategy’ rather than using the word ‘strategy’ because so many organisations create plans totally out of touch with reality and which fail to turn their products into concrete sales.
A practical strategy is easy to understand, customer centered and intends on creating sales or a specific return.
Based on the observation made on some of our clients, we have selected three strategy related mistakes committed by most businesses and/or entrepreneurs. Those mistakes represent mortal wounds which eventually will lead to business closure:
1. Developing an unrealistic strategy:
All too often, entrepreneurs venture themselves into business with an extremely unrealistic mindset caused by their level of excitment. Though we strongly advise people to dream big and great, we do not advise our clients to overlook realities.
Realities can be overcome, however, ignoring them can prove a deadly mistake for your business operations. Many entrepreneurs and businesses draft decisive strategies ignoring realities such as the political environment, the size of their bank accounts, the interests on their business loans, the labor laws, etc…
As they step into the business world, several companies fail to deal with realities or to find a way to overcome them.
As a good example, we once discussed with a consultancy firm senior manager about the company she ran. She boasted about her long term strategy for the firm and how she hired extra staff to complement the vision. However, her strategy completely ignored the realities of her company instead of dealing with them. She hired three additional staff members in the hope that they would help with a tender the company had applied for, and yet the bidding process did not reach finalization yet.It turned out that her company failed to get the award( first mistake). Secondly, the company’s finances were negative with no money in the account (second mistake). Lastly, her focus was more driven towards hiring, admin work and procurement which all form severe costs (third mistake). Eventually the company closed down a few months later due to her inclination to favor procurement above selling services.
2. The misrepresented freedom
There is a lie pertaining within the entrepreneurial and business community which goes like this:
‘ when you are an entrepreneur, life gets easier and you are free to do whatever you want with your time. No more 45 hours a week! You can spend as little as 4 hours a week (to mention Tim Ferriss) and still make a lot of money!
Unfortunately many entrepreneurs enter the business ring with that mentality and they fail to adapt a work ethic producing results. Our experience has observed countless ‘so-called’ entrepreneurs who spent their entire day of freedom browsing facebook.
A real entrepreneur is constantly active at doing something towards building services for the market. Entrepreneurs who misrepresent their freedoms by working 3 hours a week on their business, will eventually close down within a few months.
3. Going with the flow with no strategy at all:
Being an entrepreneur also means working with no supervision. South Africa is filled with ‘so-called’ entrepreneurs bragging about the fact that no-on tells them what to do…
The best way to keep active and productive is to:
a) set a goal aiming at rendering a needed service in the market
b) Create steps building the goal set in step number one.
Before starting the day, business leaders and entrepreneurs should have a personal agenda outlining a series of tasks or steps to do during the day or the week or within a specific period of time. Those tasks must contribute towards building services to sell in the market.
How do you know a ‘fakepreneur’ from an ‘entrepreneur’?
Simply ask them to provide information on their daily routine. An entrepreneur with a list of tasks set before starting the day, is more likely to thrive than the one who never has an agenda and who decides to take the day as it goes.
South Africa did well in providing platforms, finances and political support (e.g:BEE) for entrepreneurs but the government failed to train the recipients of those opportunities towards building initiatives and productivity habits. As a result we ended up with a bunch of people with opportunities but no drive.
Things got to change.
What makes so many promising entrepreneurs go out of fuel within a few months? There are no set or predetermined response to that question but a few indicative behaviors within the entrepreneurs and the staff culture may explain the failure behind so many businesses.
One of the indicative behavior predicting the failure of a business is rooted in a lack of practical strategy.
We prefer to emphasize the terms ‘practical strategy’ rather than using the word ‘strategy’ because so many organisations create plans totally out of touch with reality and which fail to turn their products into concrete sales.
A practical strategy is easy to understand, customer centered and intends on creating sales or a specific return.
Based on the observation made on some of our clients, we have selected three strategy related mistakes committed by most businesses and/or entrepreneurs. Those mistakes represent mortal wounds which eventually will lead to business closure:
1. Developing an unrealistic strategy:
All too often, entrepreneurs venture themselves into business with an extremely unrealistic mindset caused by their level of excitment. Though we strongly advise people to dream big and great, we do not advise our clients to overlook realities.
Realities can be overcome, however, ignoring them can prove a deadly mistake for your business operations. Many entrepreneurs and businesses draft decisive strategies ignoring realities such as the political environment, the size of their bank accounts, the interests on their business loans, the labor laws, etc…
As they step into the business world, several companies fail to deal with realities or to find a way to overcome them.
As a good example, we once discussed with a consultancy firm senior manager about the company she ran. She boasted about her long term strategy for the firm and how she hired extra staff to complement the vision. However, her strategy completely ignored the realities of her company instead of dealing with them. She hired three additional staff members in the hope that they would help with a tender the company had applied for, and yet the bidding process did not reach finalization yet.It turned out that her company failed to get the award( first mistake). Secondly, the company’s finances were negative with no money in the account (second mistake). Lastly, her focus was more driven towards hiring, admin work and procurement which all form severe costs (third mistake). Eventually the company closed down a few months later due to her inclination to favor procurement above selling services.
2. The misrepresented freedom
There is a lie pertaining within the entrepreneurial and business community which goes like this:
‘ when you are an entrepreneur, life gets easier and you are free to do whatever you want with your time. No more 45 hours a week! You can spend as little as 4 hours a week (to mention Tim Ferriss) and still make a lot of money!
Unfortunately many entrepreneurs enter the business ring with that mentality and they fail to adapt a work ethic producing results. Our experience has observed countless ‘so-called’ entrepreneurs who spent their entire day of freedom browsing facebook.
A real entrepreneur is constantly active at doing something towards building services for the market. Entrepreneurs who misrepresent their freedoms by working 3 hours a week on their business, will eventually close down within a few months.
3. Going with the flow with no strategy at all:
Being an entrepreneur also means working with no supervision. South Africa is filled with ‘so-called’ entrepreneurs bragging about the fact that no-on tells them what to do…
The best way to keep active and productive is to:
a) set a goal aiming at rendering a needed service in the market
b) Create steps building the goal set in step number one.
Before starting the day, business leaders and entrepreneurs should have a personal agenda outlining a series of tasks or steps to do during the day or the week or within a specific period of time. Those tasks must contribute towards building services to sell in the market.
How do you know a ‘fakepreneur’ from an ‘entrepreneur’?
Simply ask them to provide information on their daily routine. An entrepreneur with a list of tasks set before starting the day, is more likely to thrive than the one who never has an agenda and who decides to take the day as it goes.
South Africa did well in providing platforms, finances and political support (e.g:BEE) for entrepreneurs but the government failed to train the recipients of those opportunities towards building initiatives and productivity habits. As a result we ended up with a bunch of people with opportunities but no drive.
Things got to change.
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