For Many Entrepreneurs, A Sure Way To Fail Is To

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10 Reasons Why Entrepreneurs Fail

This article is more than 5 years old.

Entrepreneurs fail for lots of reasons. Most entrepreneurs fail, by the way, so lists that describe why they fail should be helpful if only as mirrors entrepreneurs can hold up to their faces.

It's hard to be an entrepreneur for at least 10 reasons.

Not Smart Enough

Not talking about IQ here. Entrepreneurial IQ (EIQ) is about holistic understanding of situations. Many entrepreneurs understand their idea, but not the market that will accept or reject the idea. Nor do they understand how accidental, uncontrollable, unscheduled innovation actually works. Or who the real competitors are. Often entrepreneurs have too little domain depth: they literally do not know what they're talking about (though they often talk a good game). Many entrepreneurs fail because they're not actually entrepreneurs but some variation on the theme. Even worse are entrepreneurs who believe they're terrific at activities at which everyone else believes they're horrible. If an entrepreneur is incapable of seeing what everyone else sees, he or she is blind to success.

Not Knowing Who's Who

Entrepreneurs often fail because they cannot separate friends from enemies. They cannot identify EIQ from fluff or bluff. They cannot find a good part-time accountant and they have no idea how to assess the skills and experience of legal counsel. They also fail because they cannot recognize smart loyal co-founders and employees or how to optimize their contributions. They fail because they cannot separate dumb Angel investors from disciplined ones. There's a lot to know, and many entrepreneurs just don't know enough about the players.

Not Finding Enough (of the Right Kind of) Funding

Entrepreneurs often fail because they cannot raise the right kind of funding at the right time at the right valuation. They use too much of their own money and way too much money from friends and family – which becomes a distraction every time a friend or family member asks about how the company – and their investment – is doing. Entrepreneurs fail because they do not know how to value their company or phase investments along timelines designed to optimize valuations. They fail to appreciate how much money it takes to meet milestones. Or how to respect their investors who deserve professional communications on a regular basis – especially if they plan to keep asking them for money.

Grandiose Expectations

While it's sometimes good to believe in miracles, it's no way to run a start-up. Entrepreneurs who fail often do so because they believe they will change the world and if the world doesn't welcome their authority, it's the world's fault, not theirs. Entrepreneurs fail because they're often self-delusional and greedy believing that they're just a sale away from revolutionizing an industry and becoming filthy rich.

Horrible Soft Skills

Entrepreneurs often fail because they're not housebroken, because they speak their minds no matter how inappropriate or inopportune the situation may be. Some entrepreneurs are famously outspoken and controversial – we know who they are – but they generally became that way after their first hit start-up. If an entrepreneur cannot listen, is insecure, short-tempered and intolerant of opposing opinions, he or she will fail. The worst entrepreneurs are the ones who cannot accept responsibility for anyone and spend their days and nights looking for someone – anyone – to blame for their mistakes.

Bad Partners

Entrepreneurs often fail because they hang out with the wrong people. "Wrong" here is a broad term. It includes colleagues who agree with everything the entrepreneur says, "good guys" that others endorse but are unfamiliar to the entrepreneur, channel partners who use the entrepreneur to channel their own sales, legal counsel that rack up unnecessary fees and gurus that know just about everything about anything. Good entrepreneurs have a purpose-filter through which they pass their time: is this partner really worth my time? Entrepreneurs who fail do not have this filter.

Ineffective Sales

Entrepreneurs often fail because they cannot sell to the right clients at the right time for the right price. Start-up sales are obviously fundamentally different from the sales that established companies enjoy on an almost automatic pace. Good entrepreneurs understand all forms and flavors of lighthouse sales processes, logo hunting, how to buy the right early customers. Entrepreneurs who fail shortchange sales in favor of competing activities, especially R&D.

Market Invisibility

Entrepreneurs often fail because their companies are invisible to the world because they cannot bear to spend money on marketing and PR. This is a huge mistake that some entrepreneurs make when the money gets tight. Polishing products and services until they shine brightly in the sunshine is a waste of money. Smart entrepreneurs get the word out early and often via all available media, especially digital media: if they cannot find you, they cannot buy you.

Pivot Paralysis

Entrepreneurs often fail because they cannot adapt to unpredictable events and conditions (as if any entrepreneurial events or conditions are predictable). All start-ups require pivots. Unsuccessful entrepreneurs cannot pivot. Instead, they stay their own courses – even when the entire world believes they're severely off course and about to crash into the side of a large mountain.

No Sense of the Inevitable Exit

Entrepreneurs often fail because they cannot gauge their ultimate exit relatively early in their journey. Call it instinct or judgment, the range of exit outcomes begins to reveal itself once the products and services hit the market and once the source and pace of competition clarifies. Is the exit an IPO or an acquisition? Is it an acqui-hire or a recapitalization? Good entrepreneurs have a sense of how an exit will occur (if one occurs at all) within a year of their launch. Bad ones believe in miracles.