Imho – What is the #1 reason for business failure among small business owners?

I ran across this question by www.linkedin.com/in/davetteharvey in LinkedIn Answers

English: Findlay, Ohio, September 20, 2007 -- ...
English: Findlay, Ohio, September 20, 2007 — Gilbert Yingling, a representative with Small Business Administration (SBA) makes calls to local business owners from a local chamber of commerce business directory as part of an SBA outreach program. He then follows up with person to person meetings with the business owners. John Ficara/FEMA (Photo credit: Wikipedia)

“Although there has been an increase in support services for entrepreneurs and small business owners, the percentage of business failures in America is still pretty high. Across industries it is averaged that 56% of businesses will fail within the first four years. In some industries, it is estimated to be as high as 86%. All of these businesses may not have had outdated products or underperforming services. Again, what do you think is the number reason for entrepreneur and small business failure?”

As I work exclusively with small businesses, I chipped in with my own answer because I see how many of these failures could have been stories of success. 9 to 5 has done a lot of harm to those of us with entrepreneurial potential. Being an employee for someone else can push you to forgo your own ideas for someone else’s in many cases. You may get used to letting go of responsibility in many ways, as in some companies, you are actually penalized for thinking outside the box, and are asked to settle into the status quo of the management mentality.

What does that mean in regard to these failure rates? In my opinion (I have a lot of those!), many a creative, entrepreneurial minds have been dumbed down by the “Peter Principle” experience of corporate work. So even when those same minds finally break loose and go on their own, they have ingrained habits that keep them in an employee mentality. That is why I wrote this answer to Davette Harvey’s question in LinkedIn Answers and hope that by sharing it with you, it will help one less SMB from failing.

Here is my response to Davette’s question. I’d love to hear what you think as well.

“If you own a small business, and don’t think beyond today, then you are nothing but an employee of your own business.

I used to train new retail franchisees as part of my corporate job with a franchisor and so many of them stunned me in regard to the lack of due diligence they executed before purchasing the franchise. In addition, very few of them had retail experience. Coming from a desk job, no matter how high the level, is not immediate qualification for running your own business.

Now I consult for them – and often they call me in far too late.

Yes, passion can take you far, but if you are like many small business owners, the inability to delegate the details is where you begin to lose the passion that drove you there to begin with.

Start out of the gate with lining up the right people for the various jobs and it will be the best ROI you can imaging. If a business owner tries to do it all, they lose the momentum of the opening due to being sucked into the daily operations that should be handled by those best suited. You need to have continued vision, oversee those who work for you, and market your business through networking and planning. If you are working in your store full time, you cannot do any of that.

The perceived lack of funding to delegate to employees is a result of waiting until business slows to recognize the errors. Customer service suffers, control over inventory suffers, marketing suffers… it all suffers including the owner who, by that time, is burned out.

Think of your well chosen staff as an investment in your business just the same as the brick and mortar building and the inventory or tools you placed in it. Then you will be free to oversee and grow it, you will prosper.

All too often I see the staff is the first to go when things slow down. They should be the last tier of the business to be let go. Check your operations, customer service, inventory, scheduling, etc.

And most of all, ask the staff, they know more than you oftentimes. Most common observation I hear from staff? “if the boss would just get out of the way and let us do our jobs…”

Please feel free to share your opinions….