A while ago I read a book by Fernando Trías de Bes, published in 2007. This book details 14 causes or key factors of failure of companies and ventures in general, today I am going to share them with you.
The 14 causes are grouped into 5 areas:
1. Nature of the person who undertakes
2. The Partners
3. The Business Idea
4. The Family Situation
THE NATURE OF THE ENTREPRENEUR
Failure Factor 1. Undertaking with a motive but without motivation
– Interrogate and discover the real reason why you want to start an endeavor.
– Many times the motives that move us to undertake are “lamentable”, because they seek to escape from a situation that oppresses us, they are selfish motives.
– The business idea that we want to implement is never the reason, it is the object of the business only.
– Although, as long as there is motivation, the motive, even if it is selfish, is irrelevant. Motivation is understood as energy, the desire to learn, to start, to dedicate body and soul to make that idea a reality.
Failure factor 2. Not having an entrepreneurial character
– Entrepreneurship is not to create a company or inherit the family business or buy a franchise.
– Entrepreneurship is having illusion. Illusion for:
o Enjoying the insecurity of not knowing what will happen tomorrow.
o Loving the process of undertaking, of creating something from scratch.
Failure Factor 3. Not being a fighter
– Having the capacity to suffer is basic for an entrepreneur.
– Having the Ability to face obstacles or to have to make changes to the original plan.
– If you do not have it, surround yourself with people who do have that capacity. It is absolutely necessary to guide a venture towards success.
Failure Factor 4. Having partners when you can do it without them
– Many people look for partners in their venture because they are afraid to start that path alone.
– Being an entrepreneur implies loneliness. But that loneliness will allow you to make decisions with speed.
– Associate yourself only when you need something that the other person can contribute and that you definitely do not have.
– The best case of a partner is to have a capitalist partner, who only contributes money, not work or executive decision making.
– But if we can have a bank to lend us the money, it’s better than having a partner.
A bank will not comment on your company.
Failure Factor 5. Not having a relevant criterion to choose our partners
– What criteria are valid?
o That they be honest
o To have values like yours
o That their character is complementary to yours
o They must be aligned with the company’s objectives (which are yours)
Failure factor 6. Having 50% benefits when partners have not contributed the same
– What can a partner contribute to the company?
| In this case, the partner will be entitled to a percentage of the profits or shares, according to the amount of money contributed over the total.
o A construction, land, machinery … In these cases, the value of the property provided is calculated and it is calculated how much would your monthly rent or the market value cost, if it is part of the object of the sale. And that is what the one who has contributed will receive.
o Work. In this case, it calculates what an employee would charge for doing those tasks that the partners do now, and they will be paid those amounts (if it is at the beginning of the project and they are working “free”, as soon as there is liquidity, they will charge what they have worked for. according to that calculation and the number of months worked).
– It is necessary to define how the partners are going to be separated, before starting the company, to prevent the company from being seriously affected if some member leaves one day.
Failure Factor 7. Lack of trust and communication between partners.
In a society there will always be discrepancies, and if there is no trust or communication, these discrepancies can cause the company to fail. There are 4 main reasons for discussion:
– What each one contributes (money, work, effort).
– The efficiency (or lack of it) of the other partner.
– The professional style and ways of acting of the other.
-The distrust. The most worrying because it has a difficult solution.
THE BUSINESS IDEA
Failure Factor 8. Thinking success depends on the idea
– An idea is not worth anything unless you execute it.
– Even so, it may or may not be successful depending solely on how you execute it.
– An idea does not have to be revolutionary. Moreover, an existing idea is easier to start because someone has already tried and made a mistake executing it previously.
Failure Factor 9. You are entering a sector or niche that you do not know.
– Not knowing the niche in which you intend to undertake prevents you from knowing how to react in case of problems.
– It is preferable to work in sectors that you dominate.
– But if you insist on getting into an unknown sector:
o Talk to people who do dominate this sector, explain your idea and what you intend to do and that you validate the idea and inform you of the problems that you may have to face.
o Start working in that sector for others, to learn how it works, from within.
Failure Factor 10. Choosing unattractive sectors
– Look for attractive sectors that:
o Are growing
o Leaves a lot of profit margin
o Has little competition
o The investment requirements are low
o The economic moment is good
YOUR PERSONAL / FAMILY SITUATION
Failure Factor 11. Make your business depend on your family situation.
– Your situation has to adapt to your business (to the income generated by the business, not the other way around).
– Try to diversify your sources of income (keep your current salary and start your venture in parallel, try not to leave until your idea is underway and producing).
– Include your salary within your business plan
– If your company can not pay your salary at the beginning, perhaps you should look for external investment and thus be able to cover your salary.
Failure Factor 12. Undertaking without taking into account the impact on our personal lives.
– Whenever an enterprise starts, there will be an imbalance between family life and professional life (family time may suffer).
– If you want that balance between personal and professional life, you cannot be an entrepreneur.
THE MANAGEMENT OF GROWTH
Failure Factor 13. Create business models that do not generate profits quickly
– We must seek to have income that covers at least the expenses of the company as soon as possible.
– Once we have that sustainability, it is when we will seek growth towards a new objective that we mark ourselves.
Failure Factor 14. Not knowing how to retire on time. Not knowing how to be an entrepreneur.
– An entrepreneur is the person who starts and makes that idea come true.
– Once the company works, if your profile is that of an entrepreneur (creator) but not the entrepreneur (manager) you must hire one and give him the leadership.
– An entrepreneur is the one who will manage the stability of the company and will lead it to sustainable growth, which may not be your strength as an entrepreneur.
– By putting an “entrepreneur” in front of your company, you free yourself to be an entrepreneur again with some new idea that motivates you to keep active.
– Review this summary and ask yourself each of the points.
– If you detect that in some of these “failures”, think about the best way to cover that hole and reduce the probabilities of failure that would cause you not to pay attention.
– Once you have all your possible areas of improvement identified, work on making them strengths, or at least, making them of little impact for your business plan or for the idea of entrepreneurship that you have in your head.