There are many reasons entrepreneurs fail. On today’s Black Entrepreneur Blueprint podcast episode #421, Jay discusses and dissects a recent article in Fast Company magazine titled “5 All-too-common Reasons Why entrepreneurs fail.” Jay will also break down how to avoid these pitfalls and become a successful entrepreneur.
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BLACK ENTREPRENEUR BLUEPRINT SHOW NOTES – EPISODE # 421
1. FAILURE TO ASSESS THE MARKET
According to Fast Company, this is the single biggest reason businesses fail: 42% go under because there is no market for their product or service. Many times, we think we know what the market wants but we don’t.
Test, test, test, and test some more. The true barometer to find out your product/service is viable is when people go into hip pocket national and spend money for the product – that’s the real test.
Three ways to test this
- Create a Minimum Viable Product (MVP) – is a is a product with enough features to attract early-adopter customers and validate a product idea early in the product development cycle. Example:
- Create A Dummy Test – this is when you create a sales mechanism to sell a proposed product or service even though you have not created the product or service yet. If you have enough people pay for the product or service, then create it or refund the money if it doesn’t convert to your satisfaction. Example: Nootropic supplement and Magazine
- Pre-sell The Product or Service – If you have a definitive idea for a product or service, you can take pre-orders to validate and give you proof of concept like doing a Kickstarter campaign. Example: if you sell online courses, you can pre-sell the course before you create it and if enough people convert, then create the course.
2. FAILURE TO BUILD A SUCCESSFUL TEAM
According to the article, when that process breaks down, the business will suffer or collapse. The best entrepreneurs surround themselves with amazing talent. Unfortunately, many times when we start a business we are the team so we only rely on ourselves.
Even though you may not have money to hire and build a team, you can utilize an advisory team of skilled professionals, mentors, and find contract workers to help you with things that you can’t do, or don’t need to be doing as the owner of the business. Example: Contract out a lawyer, and an accountant on a per needed basis to handle legal and financial issues. Anything else in terms of marketing and creative you can outsource that also.
In terms of running your company, that’s where your advisory board and mentors come into play. You want to create an advisory board comprised of people with strategic skills to help your business. These skills may include a marketing advisor, a person that creates systems for businesses, etc. Example: Condom business advisory board
3. FAILURE TO CREATE A DISTINCT PRODUCT
According to the article, creating a product that is differentiated in the market. Without that, the business will fail. Richard Branson founded a soda company that few of us know about because it, well, fizzled when he launched Virgin Cola. Unfortunately, his product did not sell because it was too similar to other sodas in the market and the company folded after a few years.
To solve that problem, you don’t have to necessarily create a totally distinct or unique product or service, but you do have to be able to market your product or service in a way that people will buy it. Remember it’s all about how you position your product or service and using the correct messaging for each of your customer avatars.
- How does your product/service differ from the others in that space? Studies have shown that there is a very large segment of the hot sauce market that wants premium options and not the low-cost watered-down sauces you see in most supermarkets, big box stores, and restaurants. Separate yourself from your competition.
- What is your brand story and is it appealing to your market? Tell your audience about your brand, why it was created and who you are. This creates a connection between you and your audience that most larger companies can’t match. Example: we are a small, family owned, hot sauce company that sources all our ingredients and produce from local vendors, and we support small businesses.
- Have you filled a whole in the market? Identify why you are unique. Example: Hell Yeah hot sauce If you want to fill the gap in the hot sauce market for a premium, gourmet sauce at an affordable price point, Hell Yeah is perfect for your establishment.
- What are your natural alliances or synergies that you can play off of? Hell Yeah hot sauce is a Black-owned manufacturer of hot sauce. We want to connect with our natural alliances and seek support from them.
4. FAILURE TO GET THE TECH RIGHT
According to Fast Company magazine, they cited Elon Musk as an example of an entrepreneur that struggled with tech for Space X and Tesla before he got it right. Musk has shown persistence in overcoming his technology failures by demonstrating a willingness to analyze problems, and a determination to constantly improve.
Now most small businesses aren’t going to need that type of technology to start off, but you must have the right technology to do business and do business efficiently.
- Have your basic technology handled up front – You must have a website, a CRM/database, email account with autoresponder, bookkeeping software like QuickBooks to start off correctly.
- Look at industry specific software that you may need – your industry may use a specific type of software that is an industry standard. Example: Loan origination software like Encompass
5. FAILURE TO FINANCE YOUR BUSINESS
According to Fast Company another serious problem entrepreneurs can face is failure to financially sustain their business. To put it simply: It costs money to run a business, and if you don’t have it, you’ll fail.
To solve this problem there are several things you need to do.
Estimate the cost to start and run your business and then double that – That’s right, most of us have no idea how to estimate what we need until we’re in the mix.
Plan Your Exit from Corporate America – Before you go out on your own, acquire the tools and resources you need to do business. If you need an office and furniture, start buying your furniture well in advance of when you will need it. The same goes for anything else you need like computers, phones, etc. Remember, you can’t do business if you don’t have the tools.
- Look for alternative financing if you can’t get a bank loan – Look at family and friends for a loan or to invest in the business (always have everything in writing), withdraw money from your 401K or investment accounts
- Start part-time and let your job finance your business – Many people start their business part-time and use their salary to finance the business.
- Look for a business opportunity that does not cost a lot of money – There are so many opportunities now that can be done with just a laptop and a concept like selling digital products, becoming a freelancer, and drop shipping just to name a few. If you don’t have the 2 million dollars to start a McD’s franchise then look at other options.