Business rises and falls on leadership. According to business
guru, Brian Tracy, "Leadership is the most important single
factor in determining business success or failure in our
competitive, turbulent, fast-moving economy." Still not
convinced? Based on a study by Jessie Hagen of the US Bank,
here are the main reasons why businesses fail:
* Poor Business Planning
* Poor Financial Planning
* Poor Marketing
* Poor Management
Proper application of these key factors is a function of good
leadership. Let’s look at some of the conclusions of the US Bank
report. According to Hagen’s study, in the Business Planning
category, 78% of businesses fail due to lack of a well-developed
business plan. It boggles my mind that so many people go into
business without a plan, as if it were the ice cream flavor-of-
the-month! Is it any wonder that when I came across the DEA
Police & Government auction site of confiscated property, there
is a gleeful statement that declares, "Most businesses fail
within their first two years, so chances are, you will come
across some relatively new merchandise. At (our) auction, get
what you need without paying full price."
If you just rolled out of bed with ‘a great business idea’ and
don’t want to be a part of this grim statistic, run to your
nearest bank, get a free business plan template, and write your
plan now! Honor the time-proven cliché, "If you fail to plan, you
plan to fail." Leadership is about planning for success before it
happens. Sun Tzu, the 6th century Chinese philosopher, in his
epic work The Art of War, gave some sound business advice that
still applies today: "When your strategy is deep and far-
reaching, then what you gain by your calculations is much, so you
can win before you even fight. When your strategic thinking is
shallow and near-sighted, then what you gain by your calculations
is little, so you lose before you do battle."
In the Financial Planning category, a whopping 82% of businesses
failed due to poor cash flow management skills followed closely
by starting out with too little money. Business leadership is
about taking financial responsibility, conducting sound financial
planning and research, and understanding the unique financial
dynamics of one’s business. Before even starting a business,
show your plan to your accountant and get their counsel. What a
concept! Asking for the advice of someone who sees the bottom-
line realities of business day in and day out; someone who sees
the birth certificates, successions, and autopsy reports of
thousands of business entities. It just makes good business
sense. But many people will ignore this advice and eventually
meet with business disaster. [Word of caution: don’t rely on just
one opinion. Get at least two or three opinions from different
accountants to get a more informed view].
The third business failure factor profiled in the report, and a
critical one, was Marketing. Over 64% of the businesses surveyed
in the Marketing category failed because of owners minimizing the
importance of properly promoting their business followed by
ignoring their competition. Again, as a business leader, you must
be able to effectively communicate your idea to the right people
and understand their unique needs and wants. Leadership is all
about taking initiative, taking action, getting things done, and
making decisions. If you’re not doing anything of significance to
market and promote your business, you are most likely headed for
business failure. I recommend every time you get up in the
morning, jot down 5 new things you can do to promote your
business and go DO them! If you can’t think of anything to jot
down, I highly recommend reading Jay Conrad Levinson’s book,
Guerrilla Marketing, which has oodles of useful information
and tips on promoting for small business.
Know your competition. Leadership is also about providing value
to people. If your main competitors are all providing a better
quality and lower priced product than yours, how can you possibly
create any value? Either you harness your strengths to provide
different benefits such as speed, convenience, better service;
lower your price and improve quality; create a different product
for an unmet demand; or get out of the game.
Finally, one of the most important reasons why businesses fail
is due to poor management. In the Management category, 70% of
businesses failed due to owners not recognizing what they don’t
do well and not seeking help, followed by insufficient relevant
business experience. Not delegating properly and hiring the wrong
people were major contributing factors to business failure in the
Management category.
Leadership is about knowing yourself – understanding your
strengths and weaknesses. Leaders are aware of their potential.
Losers ignore their potential. Leadership is ultimately about
influence and delegation. As a leader, you must have the humility
to be able to surround yourself with people who are brighter than
you and who can make up for your weaknesses and limitations so
you can do what you do best: seize the day and lead!
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