Conventional 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
Brainyquote.com 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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