Why Start up Businesses Fail? Top 3 reasons from 3 top business mentors

I asked 3 leading start-up business mentors to tell me the top 3 reasons why they think start-up businesses fail.  I will straight away give you the reasons provided by each mentor,  as I haven’t however requested permission to identify them as the providers of this information I will simply identify them as Mentors A, B and C, note that between them, these mentors have over 40 years of mentoring experience. Fasten your seat belts.

Mentor A –

  • Lack of Planning
  • Lack of Passion and Drive
  • Lack of Experience

Mentor B-

  • Lack of planning
  • Lack of resources (not just financial)
  • Lack of persistence

Mentor C-

  • Poorly thought through decision to leave employment and get into business
  • No written business plan or financial projections
  • Unprofitable pricing structure (You need to calculate your break-even price and NEVER charge below this)

I am amazed at the common trend of ‘planning’, otherwise known as business planning or in it’s most simplistic format, a simple business plan is on thread that cuts across

I am amazed at the common trend of ‘planning’, otherwise known as business planning or in it’s most simplistic format, a simple business plan is on thread that cuts across. And I know how many aspiring business people might not generally like what they consider paperwork; but hey, that is the reason why several of the folks who have tried before us failed.

I have a documented business plan, but following this feedback, I will surely be reviewing it a lot more regularly than I do. Your business plan need not be war and peace, it could just be a 3 page document- it is quality over quantity that matters in a business plan.

Some guy named Osterwalder, created some nine building blocks of what is required for your business  or planned business to function, I have copied it down below for your attention courtesy http://www.entrepreneurmag.co.za/

Create a one page document that answers these questions in as much detail and as thoroughly thought through as you can, you will have your first business plan in place, no matter how crude. All the best!20151102_120501

9 Building Blocks of a Business Plan

  1. Customer Segments: Who are your mass and niche markets?
  2. Value Proposition: What are you offering and why are you different?
  3. Channels: Look at the phases your product goes through. This is everything from awareness and distribution to after-sales service.
  4. Customer Relationships: How are you building relationships with customers and is it working?
  5. Revenue Streams: Look at what you are charging and if you could be charging more. How are you receiving your payments and does it contribute enough to overall revenue?
  6. Key Resources: What resources do you require to function? These can include physical, human, financial and intellectual.
  7. Key Activities: Ask yourself what activities need to take place in order to deliver on your value proposition?
  8. Key Partnerships: Write down who your key suppliers and partners are and how they contribute to your overall goals.
  9. Cost Structure: Look at fixed and variable costs so that you can see what can be improved upon.

The Question I asked 3 start-up business mentors

A few weeks ago, I asked 3, very experienced start up business mentors who between them have over 30 years of experience helping hundreds of UK aspiring entrepreneurs start and grow new businesses from scratch- They have several success stories and as you will guess, they have also seen several who failed.

I am in the process of building a small business, so I asked the all important question; can they each give me The Top 3 reasons why they feel many small businesses fail!

It was amazing , the similarity between their answers. One theme recurred with all 3 mentors and I did get one of them to give me a very detailed synopsis of her thinking on this.

Now if you are keen to know why small businesses fail and how to avoid the same fate. Stay tuned with me on Thursday night when I update the blog with the feedback from these front end operators.

Let keep a date for Thursday evening GMT.mentoring

5 things I did wrong early in my business journey.

  1.  Marketing an unproven product or service

Have you ever heard somebody say that “I am starting a business I am just waiting for the business card to arrive from the printers so that I can get started”.  Nowadays if I hear that from an aspiring business person I become sceptical about the chance of ultimate success. Starting running and growing a business has little or nothing to do with business cards!


It  has nothing to do with a good looking website,  if you do not believe me check out this website  http://www.berkshirehathaway.com/ , I believe it’s one of the worst business websites I’ve seen,  but you might be surprised to know  that that website is the primary business of the world’s most successful investor and one of the top ten richest men in the world today Warren Buffett.

warren buffet

Before any marketing the first task used to prove your product or service in the marketplace and obtain  feedback,  improve the product or service and  then obtain if you references in whatever format that maybe;  then maybe you now have something to market.

It has nothing to do with a good looking website

  1. Competing on Price

Whoever told you  that customers buy from the cheapest provider told you a big lie.  Yes we all like a deal but equally have attachments  to specific brands or providers for our specific products or services and those brands are not always the cheapest providers available.  People do everything they can to get the latest Apple product,  Apple is far from the cheapest product on the market.  Some people will never be caught dead shopping at Primark,  if we all shopped based on price then we will all shop at Primark.  You need to establish and create a reason why customers will buy from you other than price.  That reason may vary from quality of service,  flexibility of payment terms,  uniqueness of raw materials,  perception of premium value-  whatever it is you need to establish a very definable reason why people should buy from you and therefore pricing becomes is secondary consideration in the minds of your customers

  1. Partnering with the wrong people

“You can’t do a good deal with bad partners”,  I think it is the, now infamous, Donald Trump that made that statement,  and it is so true.  You need to establish what your values are as a business person  when you come across people news values are significantly at odds with yours,  it doesn’t matter how attractive the offer seems,  it is in long-term recipe for disaster.  However pragmatic judgement can mean you work with this people over a defined  time frame  or with clear documented an enforceable agreements or terms of service.

“You can’t do a good deal with bad partners”

  1.  Employing the wrong people

When you understand that there is nobody that is a BAD EMPLOYEE by definition but that many people even though they’re fantastic individuals they might not be the right employee for you and your business,  then you will be able to make decisions about whom to employ without feeling bad about your  employee decisions and actions.  the process of getting an employer in the right people is so complicated that there’s a field called HR  set aside for that process.  when you are starting off as a small business the best way to employ in my little experience  is by  strong competency based recommendations  from people you trust.  


The day you realize that everyone cannot be your client no matter how hard you try, that day you become free and more strategic


  1. Loosely defining your market

Your market needs to be clearly defined not just a product or service but the geography of your operation how far from your base will you work.  I remember travelling over 200 miles to discuss with a company to take on some of my services,  I did not get the project after all that effort,  now my market is better defined to about a maximum of 75 miles from me in any direction,  it will take a real monster offer for me to be tempted to go outside of those boundaries and I have established that there is enough potential client based within  that defined geography for us to achieve our business goals.  Now are marketing and business efforts are localised meaning we spend less on marketing in a concentrated geography and therefore are potential to create a strong brand is greatly increased. The day you realize that everyone cannot be your client no matter how hard you try, that day you become free and more strategic.

The three things you need to start a truly sustainable business

When most people want to start a business they usually think  first about having a product or is service they want to deliver.  Actually  this is not necessarily the first thing to consider when planning to start a small business.  From my experience I have put together the three things I think are critical to starting and maintaining a sustainable business,  whether or not it is a product or service you are planning on delivering.

1.  A  comprehensive list of prospects–  It is much more important  to determine who you want to sell to than what you want to sell.  I recognise however that in some instances  the latter comes before the former.  I learnt this because our company delivers consultancy services to small and medium sized businesses in a particular geography.

Business Meeting

Two business men shaking hands at international business meeting.

There are many other independent people and companies that deliver the same service that we do,  we struggled in the initial couple of years  to find clients  because we had difficulty of identifying who would need our services,  we spent lots of  time and effort meeting  various organisations who will gladly meet up with us but never truly purchased our services.  This became a significant frustration  for me.  I did not like wasting time and marketing resources on several meetings that resulted in non purchases.

Suddenly we were servicing a different market from our competitors and we had a list of over 1000 businesses that could potentially benefit from our added value service.

At one point I listened to a marketing expert who stated in clear terms that if you do not have a  list of prospects then you do not have a business. My first reaction was that’s a bit harsh especially as we had managed to coast along mainly through  a few referrals  as a business,  but I started thinking about where I could get a list of potential clients.  But the problem remained that there was significant difficulty in identifying who needed our support,  the only list I could lay hold of was a list of organisations who had already received a similar support as we also provided.  To cut a long story short we obtained that list and over a period of time re positioned our company to provide added value  to those organisations who had already received the support our previous competitors provided. Suddenly we were servicing a different market from our competitors and we had a list of over 1000 businesses that could potentially benefit from our added value service.

It was at this point that we truly started to build a business,  because our work in the last 1 year has been about working on the 1000 businesses to produce financial results.  so far we have engaged over 70 of these businesses  with them either attending a free event that we have put in place,  or having purchased Training Services from us or other consultancy interventions;  and we have very little organised competition in this new market.  Our  job now is to continue to create new services that this market you benefit from.

It is the market first that list of prospects first and then you can think of what to provide them.

2. A differentiating factor(s)- Most  of the people that provide a similar service to small and medium sized businesses in our region operate as independent self-employed consultants we are a registered small consultancy firm.  Our competitors typically charge clients based on the number of days involved in delivering the project, we charge a single fixed price for the whole project. Our competitors will spend 1 full day at the client site each time they pay a consultancy visit,  we recognise that this might not be convenient for the client all the time so we come in  as per client’s convenience meaning sometimes we do half day a visits.  our competitors insist on the client  paying as soon as the job is done,  we are happy to accept a payment plan from the client meaning they can spread payments across the year.

It is not necessarily simply because our approach is better than the competition that matters the most;  it is simply the fact that it is different (and that differentiation is sustainable and cost effective from our perspective) that is helping us to stand out in the marketplace.

it is simply the fact that it is different (and that differentiation is sustainable and cost effective from our perspective) that is helping us to stand out in the marketplace.

In the ideal world marketers will advise that you have a strong USP (unique selling point),  sometimes as in our case it might be difficult  to lay your hands on a strong USP.  You can have  several unique selling points rather than one USP,  remember the focus is on differentiation. And the ultimate goal of a USP is market differentiation. Go and be different.

3. Communicating,Refining and Patience- Now you have a prospect list in other words a potential marketplace.  Based on the uniqueness of your marketplace,   you have  a product or service that the marketplace needs and it is significantly different from the competitor in 1 or several ways  including content, delivery, servicing, payments, advertising, business structure  and even such details  appearance (eg uniforms) etc.  Now you need to start communicating with that list of prospects.


One single communication does not establish a relationship with a potential client

One single communication does not establish a relationship with a potential client,  it takes several repeated and varying individual communication contacts for you to make an impact on the psyche of a person.  So you have to stick by it.  Giving out your business card is not the equivalent of having a business,  you need to continue that communication until it gets you meetings sitting face to face with people whom you never met before but have been on your list of prospects for a while.  Whilst you are there,  you should be listening watching getting clues about what that prospect expect of your business and learning what is working and what is not working and building that back into your business process.  You will continue refining this process until it becomes closest to what most of your 

potential clients wants.

Giving out your business card is not the equivalent of having a business

That takes time and patience but it is the route to a sustainable business model where you have clients and prospects that are not just customers but fans of your business!


All the very best

How I gained the confidence to step out on my own

Starting out in business can be a scary thing, at least from where I was coming from and I believe there might be somebody there who could be sometime near taking such a decision. This is no advice, just a quick version of how I gained the confidence to start out. While I am a person of faith, I believe that threading new waters, especially when there is a lot at stake- like your family’s sustenance; it is imperative that we test out our ideas before launching all out and especially where you do not have a direct ‘push’ to do it, like I had. Let’s know if you find this useful.

I had always planned to set up in business in some form at some stage in life. In 2011, I reasoned I was some 5 years to when I will start up my own business and so I began a gentle push towards gaining more insight on what is involved. As I Have grown I have become a very selective reader of books and therefore did not go to books primarily for information about starting business. I was lucky a part of my job then, was auditing businesses and so I dealt with owners of small and medium businesses and senior managers of the larger businesses from time to time; I reasoned this was a God given opportunity so no matter what we talked about during the audits that would usually last for a minimum one day; I got them to tell me the stories of how they started; those many stories are material for another post.
Come the end of 2011; the head of the company I worked for took ill with a long term illness and could not continue; a new management structure was put in place and it was clear from the start that their approach was at odds with that of the previous head. She was focused on growing and gaining new markets; the new guys are about consolidating existing markets and stripping down to the core competence. I was brought into the organisation to grow a new competence- therefore I knew that I was an ‘at risk species’.

Along with my many ‘interviews’ with business leaders, I had also heard the oft repeated phrase, ‘think big, but start small’. I worked out a way of testing the waters as a business person. I realised, I needed a product. I had no money to put into some product, so I thought I would make a product that did not cost me much money- and so I decided I would make hand-made greeting cards. Now the gift of art and design in our family fell to three of my cousins; it didn’t come too much near my direction. But I visited hobby craft- a shop that provides various art and design material. I saw that in this shop you can simply buy various pieces, pictures and stuff that you can attach to a card to make up the full design, you do not even need fancy writing skills as you could buy key words like ‘happy birthday’ and ‘happy anniversary’ as sticky labels. I purchased materials, made a few samples and bought the plastic film pockets in which cards are enclosed in and put my cards in them- they didn’t look bad; because they were professional pictures on a professionally cut card in a professionally designed envelop in a professional plastic pocket- all I did was glue them together.

I went on the internet goggled all the card shops in Preston. I placed over 70 calls, got about 7 appointments and went to all seven and succeeded in selling my cards to 3 stores! I had created a previously non-existent product and successfully sold it- this was January 2012.

The important thing was not the amount I sold, but that I made a product and could sell it at all! The jinx was broken; the fear of the business world was removed. If I did the right things, I can make it in the brave world of business. Six months later as it was time to leave my job as I had foreseen, due to the new direction of management; I spoke to a competitor about doing some associate work with them as I set up on my own; on the day of the meeting; I was greeted with a much warmer smile by the team than I expected- as we began to speak; the manager said Yemi; “ just before we proceed with our discussion, I need you to know that a position is now available in our organisation due to someone leaving the role for you to do exactly the job you were doing with your previous company”. I thought it was interesting, we talked about 5 minutes and then I asked how much I might earn on the role- he told me the amount, it meant I could earn about a third more than I was earning with my soon to be previous employer- it sounded fantastic; I politely said “I’d discuss with my wife and get back to you”. I got to Shimona on the phone right at the car park- she said “that’s sounds fantastic, what do you think”? I said, perhaps to her disappointment, “I believe I can make it in business”! “That means the decision is made then, we’ll tighten our belt” she said.

I had tried it out on a small scale, now my income would have to depend on it; but I knew I could make it on my own in the big world of business. We’re six months in, no regrets yet! I’m working hard to ensure a brilliant sequel to this piece…how I became successful in business!


Photo credit: http://goo.gl/vy7dWI