Failure is a natural part of the creative process. The only people who never fail are those who never do anything or never attempt anything new. Successful entrepreneurs know that hitting an entrepreneurial home run requires a few strikeouts along the way, and they are willing to accept them. Failure is an inevitable part of being an entrepreneur, and true entrepreneurs don’t quit when they fail.
Because of their limited resources, inexperienced management, and lack of financial stability, small businesses suffer relatively high mortality rates. Because they are building businesses in an environment filled with uncertainty and shaped with rapid change, entrepreneurs recognize that failure is likely to be part of their lives, but they are not paralyzed by that fear. The excitement of building a new business from the scratch is greater than the fear of failure. Entrepreneurs use their failures as a rallying point and a means of refocusing their business ventures for success. They see failure for what it really is; an opportunity to learn what does not work! Successful entrepreneurs have the attitude that failures are simply stepping stones along the path of success.
Entrepreneurial success requires both persistence and resilience, the ability to bounce back from failure.
How to avoid the pitfalls
1. Know your business in depth
Get the best education in your business area you possibly can before you set out on your own. Become a serious student in your industry. Read everything you can – trade journals, business periodicals, books, online classes, trainings, seminars and conferences, research reports – relating to your industry and learn what it takes to succeed in it. Personal contact with suppliers, customers, trade associations, mentors and others in the same industry is another excellent way to get that knowledge. Smart entrepreneurs join trade associations and attend shows to pick up valuable information and to network before and after they open their door for business.
2. Develop a solid business plan
For any entrepreneur, a well-written business plan is a crucial ingredient in preparing for business success. Without a sound business plan, a firm merely drifts along without any real direction. Yet, entrepreneurs who tend to be a people of action, too often jump right into a business venture without taking time to prepare a written plan outlining the essence of the business. Not only does a plan provide a pathway to success, but it also creates a benchmark against which an entrepreneur can measure actual company performance. Building a successful business begins with implementing a sound business plan with laser-like focus.
A business plan allows entrepreneurs to replace sometimes faulty assumptions with facts before making the decision to go into business. The planning process forces entrepreneurs to ask and then answer some difficult, challenging and crucial questions.
3. Managing financial resources
The best defense against financial problems is to develop a practical information system and then use the information to make business decisions. No entrepreneur can maintain control over a business unless he or she is able to judge its financial health.
The first step in managing financial resources effectively is to have adequate start-up capital. Too many entrepreneurs begin their businesses with too little capital. Entrepreneurs should estimate how much capital they’ll be needing to get the business going and then double the figure because, it almost costs more to launch a business than what entrepreneurs expect.
Cash is the most valuable financial resource to any small business. Although earning a profit is essential to its long term survival, a business must have an adequate cash flow to pay its bills and obligations. Some entrepreneurs count on growing sales to supply their company’s cash needs, but this almost never happens. Growing companies usually consume more cash than they generate, and the faster they grow, the more cash they gobble up.
4. Understand financial statements
Every business owner must depend on records and financial statements to know the condition of his or her business. All too often, entrepreneurs use these only for tax purposes and not as ital management control devices. To truly understand what is going on in their business, an owner must have at least a basic understanding of finance, budgeting, auditing and forecasting.
When analyzed and interpreted properly, these financial statements are reliable indicators of the health of a small firm and these can be helpful in signaling potential problems.
5. Learn to manage people effectively
No matter what kind of business you launch, you must learn to manage people. Every business depends on a foundation of well-trained, motivated employees. No business owner can do everything alone. The people an entrepreneur hires ultimately determine the heights to which the company can climb – or the depths to which it can plunge. Attracting and retaining a corps of quality employees is no easy task. However, it remains q challenge for every small business owner. In the end, your most dominant sustainable resource is the quality of the people you have.
6. Set your business apart from the competition
The formula for almost every business failure involves becoming a “me-too business” – merely copying whatever the competitors are doing. Most successful entrepreneurs find a way to convince their customers that their companies are superior to their competitors even if they sell similar in product and services. Hence, it is important for small companies going up against larger, more powerful rivals with greater financial resources and a unique selling point that will set them apart. Ideally, the basis for differentiating a company from its competitors is founded in what they do best; doing what no one is doing or improving on what everyone is doing. Other times, it is in the extra things like good customer service, convenience, speed, quality, or whatever else that is important to attract and keep customers.
7. Maintain a positive attitude
Achieving business success requires an entrepreneur to maintain a positive mental attitude towards business and the discipline to stick with it. Successful entrepreneurs recognize that their most valuable resource is their time, and they learn to manage it effectively in order to make themselves and their companies more productive. None of this, of course, is possible without passion – passion for their businesses, their products, their services, their customers and their community/business environment. Passion is what enables a failed business owner to get back up, try again, and make it to the top!
One hallmark of successful entrepreneurs is the ability to fail intelligently, learning why they failed so that they can avoid making the same mistakes again. Entrepreneurs know that business success does not depend on their ability to avoid mistakes but to be open to the lessons each mistake teaches (has to teach).
Entrepreneurs learn from their failures and use them as a fuel to push themselves closer to their ultimate target. Entrepreneurs are less worried about how they might lose if they try something and fail than about what they might lose if they fail to try. Although failure can be a valuable part of the entrepreneurial process, no one sets out to fail in business.