Most new businesses fail

HENRY'S GROCERYUnfortunately, most new businesses fail. Inevitably, the product isn’t quite what the customer is looking for, or the price is too low to make a profit, or the price is too high, or supplies are limited, or an ex runs away with the cash box, or the rent becomes unaffordable, a competitor learns how to do whatever you do cheaper and faster, or the Feds take you down.  Chances are more likely than not that, when someone starts a business, someone or something is going to come along and end it all.  That’s life.

This is why some new businesses could be so extraordinarily profitable.  There is risk in starting a new business – great risk – and with that risk will come reward for the lucky few who succeed (ex. Mark Zuckerberg).  For every Mark Zuckerberg or Bill Gates, there are thousands, perhaps even hundreds of thousands of entrepreneurs who failed.

So how do you manage?

First, accept from the outset that statistics show that you will probably fail.  I’m sure you’re special but the statistics say that you will probably fail anyway.  Sorry.

Now take the challenge head on.  Think about what could go wrong, and then proactively address it.

  • Customers might not like your product.  Now address the risk:  Make sure that your product has a customer base.
  • Your ex might run away with your cash box.  Now address it:  Lock your cash away in a safe place.
  • You are concerned that your product is illegal.  Now address it: Get legal help.

Consider all of the risks and then address them as best you can.  The earlier that you identify and address problems, the more likely you will be able to successfully manage them.

Furthermore, don’t take unnecessary risks.  Don’t invest more time or money in your business than you have to.  Don’t buy five computers if you only need one and don’t buy expensive high speed computers if a basic model will do the trick.  The statistics show that for every minute and every penny that you spend working on your business, you will not reap any profits.  So don’t spent more time or money on your business than you have to.  Here’s the test: “If I fail, (and I probably will fail) will I regret investing in this?  Will I regret spending time on it?”  If the answer to either question is yes, then spend your time and money elsewhere.

So then, if you’re probably going to fail, and you shouldn’t take any unnecessary risks, then why bother starting a business?

Do it for it’s own sake.  Do it because it’s fun, it’s educational, and it’s exciting.  Do it because you enjoy it.  Invest money because you want to – you want to see if you can do it.  Take risks because you want to see what happens.  Invest yourself into the task so that, whatever the outcome, whether you turn out rich or poor, you can say that you enjoyed the ride.

It’s like going to Las Vegas.  The odds are stacked against you – you will probably lose – so why bother?  Because the games are darned fun to play, that’s why.

And if you fail (as you probably will)?  Then don’t quit.  Learn from your experience and try again.

[Image: HENRY’S GROCERY by striatic, on Flickr]

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

8 Responses to “Most new businesses fail”

  1. Three key points to emphasize: the knowledge gained, industry contacts made, and knowing that one tried.

  2. First work I did today was try to change the handle of a broken faucet. i failed. So what else will I be doing today that could fail?

    If i have to live my life thinking that I will fail on this or that, what is the purpose of living?

  3. Joseph, that’s just it. I sure hope that your whole day wasn’t ruined by a broken faucet. Look, sh!t happens, and a person can’t let it interrupt their life, the universe, everything. My point is that people have to be ready for it. And when it does happen, they shouldn’t get discouraged – keep working on it.

    • Point well taken. But for people like me who has been shitted more often than I can count. words of encouragement will be a welcome respite.

      Have a nice day. By the way, thanks for commenting back. At least I am talking to a real person, not a machine.


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