THE BLOG

Why Small Business Dreams Die

09/11/2008 05:12 am ET | Updated May 25, 2011

For passion to survive it needs structure. But for structure to grow, it needs passion.

90% of all new businesses fail. And most of the companies that don't fail won't become billion dollar businesses or change the world. Why is that?

Ask those who didn't make it and the most common answers you'll get are: under capitalized, didn't have the right people, bad market conditions or a combination of all those things.

But there is a deeper reason.Failure

Every single new business has something in common: they all started with an idea. An idea fueled by passion. This passion drove the excitement, the feelings of invincibility. This passion and the feelings of world domination motivated "irrational" behavior like quitting a perfectly stable job with steady pay and benefits to set up a business in your basement. The passion of the founder/s is intoxicating to some. It encourages others to also quit their good jobs or pass up better paying ones to join up. In itself, this is not a bad thing. The problem is that though companies may be born of passion, "a company" in practice is a structure. A collection of systems and processes, good companies run like well oiled machines. Though they may have all the passion in the world, if someone doesn't know how to build those structures and manage those processes (the stuff that will ensure income, the ability to navigate all market conditions and hire the best people (see excuses above)), then the company will likely struggle to stay afloat, survive only with continued infusions of money or just fail (remember the dot-com boom: lots of passion, not so much structure and processes).

For those passionate few who also have the ability to build the structure and implement the processes, for those that defy "the statistic," they face another challenge: success.

Success can be the biggest challenge for a small business. With success, focus can shift to managing the structure at the expense of managing the passion. There are many owners of successful small and medium sized businesses that will say that the energy in their businesses is "not like it used to be." They reminisce about the times of old. It's a paradox - so many successful business owners may be financially successful, but they don't feel successful. Whereas when the business was young, they felt successful even though they were broke.

Perhaps this explains why so many small businesses cap out at (if we're really generous) between $50-$150 million. Yes a company is nothing but a structure, a machine, and money may fuel the machine itself, but the company is also filled with people. It is the people who drive the business. And though financial incentives may help for the short term, it is passion and inspiration that fuels people. If that runs out - growth is much harder to attain. Structure is essential for a company to survive, but sustainable passion is essential for the company to enjoy sustainable growth.

No matter the size of the organization, fixation on the structure alone and failure to manage the passion, the inspiration within, will mean that that perfect machine won't have any fuel to go.

For more from Simon Sinek, visit simonsinek.com