Most of us have heard that 50 percent of new businesses fail within the first 5 years. But, failure is not easy to define. If a business closes -- without leaving debt in its wake -- is it a failure? If the founder grows bored or finds something better to do, is that a failure? If a closed business has already provided invaluable lessons, knowledge, stepping stones or skills that could not have been acquired otherwise, can we call the venture a failure?
From where I sit, business closure does not automatically equal failure. And, business failure (whatever that is) doesn't equate to personal failure. Yes, clearly, some businesses are a bust. However, you don't have to ever join their ranks. There are some things you can do now to put and keep your business on the right track.
1. Find the right partner. Business partnership can bring you triumphant glory or catastrophic disaster. Ideally, partners contribute diverse skills and talents to their business, providing a sense of wholeness that neither partner could have achieved alone. However, the intensity of sharing a professional identity, coupled with the knowledge that each partner is impacting the other's ability to survive, brings a huge potential for conflict. Many of today's iconic companies were founded by pairs. And investors prefer to invest in teams. However, co-founder conflict can destroy the dream. To avoid disaster find someone who (1) you genuinely enjoy, like and trust, (2) shares your values, (3) has a different (complementary) set of skills and traits, (4) gives as well as takes, (5) wants to grow and will support your growth, (6) engages in proactive conflict management, (7) shares your vision and (8) is prepared for the end. For more on these eight points see my Forbes article.
2. Avoid any business that you do not fully understand. Every industry has hidden pitfalls. Investing your money before you have invested your time and energy into learning the business' insider secrets is a recipe for disaster. I believe that even those who want to buy franchises should first work (even at minimum wage, volunteering or interning) within a similar business. There is no better way to learn how to protect yourself from common business pitfalls such as employee theft.
3. Create a dialogue with your customers. My business partner Susan Dubow calls this "playing in their sandbox." Your customers hold the key to your success in their pain, behaviors, dreams and values. In order to really understand them you have to keep walking in their shoes. Talk to your customers now, later may be too late. Sticking your head in the sand is not a viable response to a customer complaint. Taking a defensive stance will keep your blind spots hidden. On the other hand, remaining curious and receptive to negative feedback gives you decision making data from a bigger picture view.
4. Celebrate your uniqueness. We are living in an age of specialization, information overload and global competition. This means that your business' survival depends on your understanding of your market niche, your competition and your customers. Following along won't cut it, innovation is what makes a business stand out. Take a look at Peter J Thomson's Value Proposition Canvas Template to help you figure out how you can achieve recognition for yourself as well as value for your customers.
5. Live below your means. I recently heard Joe Veccia speak at Kellie Kuecha's Emerge Event . He wisely advised members of the audience to steer away when our egos want to drive us into debt. According to Joe, making your home and auto purchase decisions based on what the bank will lend you is lunacy. The bottom line is that living below your means will help you prepare for the opportunities that will eventually cross your path. Living at, or above, your means leaves you preoccupied and scrambling to pay debt service.
6. Shut down when it's not working. This is good advice for every aspect of our lives. If you have given your business (or anything else) your best shot and it still isn't working, figure out how you contributed to the mess and take that lesson to the next station on your journey. Timing is everything. There is no easy way to know when you are giving up too soon or holding on too long. Learn to trust your instincts. At some point in time, most of us realize that we made a mistake when we failed to listen to that little voice but no one ever says, I trusted my gut and it was wrong.