Why Do so Many Businesses Fail?

Probably many of you have seen before. People full of energy, full of dreams, who decide to give up their job, start their own business, become their own boss and become rich in the process, they know they are good at what they do, they understand the market place they are pitching their product at - why shouldn't they succeed?

They are full of enthusiasm and the desire to create wealth. That's their dream. Usually to make a million or two, enough to live comfortably, with a beach house, a boat and a fast car.

It's not unusual. Many thousands of people set their own businesses every year. They start a company, offer a product or service and wait for success to roll their way. All too often, it doesn't. The dream evaporates in front of their eyes.

What goes wrong?

The new entrepreneur sees other succeed, so believes that he or she can too. It can't be that difficult, can it? Michael Gerber examined the reasons why businesses fail in his insightful book The E Myth, and concluded that many were due to a condition he called 'entrepreneur seizure'.

People who succumb to entrepreneurial seizure are often those who are very good at their job. They are excellent plumbers, architects, pastry cooks or computer's sales people. They are trained to do their jobs and acquire skills through years of experience. But being the world's best plumber doesn't mean you have the skills to run a business. In business you need to cope with employing others, to find a niche in a marketplace, to deal with the restaurant paperwork, and to keep your vision alive and the business growing. Running a business is a skill, one that must be learned, and all the budding entrepreneur's previous skills and experience may be worthless when it comes to this new challenge.

And those who are suffering an 'entrepreneurial seizure' take big risk. Business doesn't just need a telephone: they need premises, equipment or stock, furniture. All the little things add up - new entrepreneur need to consult a lawyers and accountants, get letterhead and business cards designed and printed. To get the business off the ground they either use their saving, or borrow the money. And the only security the bank will accept is their home.

It's an exciting time and they get carried away with the setting up of the business, but haven't thought through the most critical points:

• How they will attract customers in the first place?

• How they will keep them?

• If they do manage to succeed, is this business one they can sell profitably?

The result: very quickly the building tycoon realise that they haven't got a viable, expending business. They have a job with no prospects. And it's a job where they have to work harder. For less reward, than they would ever have dreamed of doing for an employer. They can't take holidays, not even proper weekends off. If they don't keep working at this increased pace, the result may be financial meltdown, bankruptcy and worst the loss of their house. Family life suffers from this stress.

And there's no way out.

It's usually far too late to start learning how to run a business when you have already made fundamental mistake. But if you don't learn how to do it properly - and quickly - the business will fail.