Why Businesses Fail (And What You Can Do About it)

Why Businesses Fail (And What You Can Do About it)

We've both heard the crazy statistics about how most small businesses fail. Whether they fail in the first eighteen months or over the next four years, whether it's because of poor leadership or bad products, the odds of success are stacked against us.

Every day, people like you are heading out into the unknown. Their goal is to change the world with what they know. Their mission is to control their future instead of turning it over to someone else.

Going out of business - Why Businesses Fail

But, just as some entrepreneurs charge ahead and give it their best, others throw in the towel and call it a day.

Over the past several years, I've noticed several rather troubling trends. I've watched as writers, marketers, podcasters, creators, attorneys and accountants made decisions for their businesses I knew would lead to their downfall.

Many of those mistakes I've made myself.

I don't want to see you make mistakes that could be avoided. I want you to succeed – succeed in taking control of your future and making the world a better place with what you know.

Before we go into too much detail about why businesses fail, let me share a quick story with you.

For my birthday a few years ago, Ashley, my wife, planned an all-day trip for us to visit Fredericksburg, Texas which is a couple of hours away. We toured the Grape Creek Winery and loved their wines so much we joined their wine club. As members, we'd receive their wine in the mail a few times a year.

About a year ago, Grape Creek opened a storefront about ten minutes north of us. This was perfect because we could now pick up our wine and save on the shipping charges. It didn't hurt that we could stop in for a free glass of Bellissimo at our convenience.

When designing their store, instead of doing simply what was expected, which never works, Grape Creek went above and beyond.

Let me explain.

Instead of opening a storefront just to sell their products, they created an experience. Instead of making their shop a destination, Grape Creek's owners turned it into an event.

They created a member's lounge. They offer cheeses and meats for sale because they know their customers want to buy them. They also sell wine-oriented trinkets, glasses, corkscrews, serving tables and other things that go along with wine.

Instead of swinging by for two minutes to pick up their wine, Grape Creek's customers stay two hours for an experience.

Why Most Businesses Fail

Destination vs. Event Thinking

It doesn't take a genius to figure out that it's better for people to want to be around you than it is for them to want to come and go quickly.

One large company doing this on a global scale is Apple. Like Grape Creek has done, Apple has designed their store around an event. Whether a new product launch or a visit to the genius bar, people like going to their stores.

You and I can learn from this and apply it to our businesses as well. We need to ask ourselves,

Is my business  based on relationships or transactions?

The answer will likely determine how successful we'll be. Building relationships with your customers and turning them into lifelong clients is what you should be striving for.

You can accomplish this by having cold water bottles in your waiting room, a host with a smile at the front of your restaurant, or a personal touch to your blog. Whether you've got a storefront or a website, if you can make people feel at home, odds are, you're on the right track.

Offering What You Want to Sell and Not What Your Customer Wants to Buy

Let me ask you a question.

Is Best Buy an electronics store?

The short answer is “no.” Best Buy is not an electronics store; they're a home entertainment store. While there may only be a subtle difference, it's an important, and billion-dollar, distinction.

Here's what I mean.

Best Buy is successful where other companies, like Circuit City, failed. Instead of filling their shelves only with things I love to look at, they also sell things a non-nerd would like to look at. And I'm not just talking about dishwashers and Keurigs either. I'm talking about furniture, music, and even a cold drink in the checkout line.

I can't tell you how many times I've bought a Coke from Best Buy because I was thirsty after walking around for an hour.

Even though a product isn't in perfect alignment with what you want to accomplish as a business owner doesn't mean you shouldn't offer it to your customers.

In the IT world, we used to call this “product” versus “solution selling.” A product meets a need but a solution builds a relationship.

If you're not offering peripheral products to your customers, someone else is. If you don't have the accessory to compliment your product, you're not only missing out on a sale, but you're missing out on a chance to partner with someone who does (see below) and you're loosing mind share – something only the most successful people know about.

Grape Creek would have been within their right in saying,

We sell wine here, not cheese or trinkets.

But as a customer of theirs, when I drink wine, I like a little cheese with it. They offer what their customers want to buy by offering cheeses and meats for sale too.

Your customers want solutions; don't settle for selling products.

Competition vs. Collaboration Thinking

I have to admit, it took me a long time to realize my way of thinking was holding me back. I viewed other bloggers and online business owners as competition instead of people I could collaborate with.

If you, like me, see competitors everywhere, you're shooting yourself in the foot.

For me, I think it was partly how I was raised and partly how I was trained by Corporate America. I grew up playing sports and everything was a competition. When I moved into the IT world, it was “Our Company” versus “Their Company” and if you were buying their products you weren't buying ours.

When you're a small business, you cannot afford to think that way. If you and I don't band together, support one another (and each other's products), we'll get crushed by the bigger guys.

I further chronicled my missteps here, but it took me a while before I realized I needed to collaborate instead of compete.

Let me give you an example.

Early in 2014, Michael Hyatt launched a product called “Best Year Ever.” I saw no less than 10 other big players in the online business industry supporting him and his product.

Was it a perfect fit for their message?

Probably not.

Did they support Michael anyway?


A perfect example of collaboration is Pat Flynn doing a podcast episode with Michael. Even though Pat's message is about generating passive income (the message Pat wants to sell) he shared Michael's message of goal setting, prioritizing and success with his audience (the message Pat's audience wants to buy).

The rising tide raises all boats. There is more than enough to go around. We can all reach our destinations if we stop pushing each other down along the way.

Focusing on Market Share Instead of Mind Share

Only the very best and brightest sales people talk about mind share in addition to market share. Understanding market share is easy, but mind share is business at a whole other level.

Market share is easy to measure. If your market has $100 and they spend $25 with you and $75 with somebody else, it's a pretty good assumption you have 25% market share.

Mind share is difficult to measure. It's elusiveness is why most companies and sales people don't even talk about it. Mind share is how likely people are to think of you as a resource when they have a question or a need.

For search engines, Google has both an extremely high market share and almost 100% mind share. “Just Google it” is something we say without thinking.

With a focus on market share, companies want a piece of a buyer's wallet.

With a focus on mind share, companies want to be a part of how buyer's think.

Having mind share means your customers, readers, clients and audience members are coming to you because they see you as a knowledgeable and competent resource.

When I was in IT sales, my mind share measurement was how often people asked me for advice regarding products and services they didn't know we typically offered. I figured, if a customer was coming to me first, even if it was exploratory, that was a good thing. I was extremely successful selling computers and servers because I had so much mind share that people were coming to me for advice.

Here on my blog, my mind share measurement is how often people come to me searching for information regarding the nuts and bolts of starting an online business. I want to be a resource for people to find quality blog posts, videos and podcasts showing great tools, featuring empowering guests and offering helpful videos.

Whether you're an accountant, attorney, a dentist or a real estate agent, you should be focused on growing your mind share.

You want your customers thinking of you as a resource. You want your clients coming to you with questions instead of going to someone else. You don't have to have all the answers, but you do want your clients coming to you with questions so you can guide them to the right place (people you know, like and trust).

No Rolodex

I'm amazed when small business owners tell me they've never thought about doing business with, or referring their clients to, their friends.

Just the other day I played golf with a real estate agent and a personal financial consultant. They'd met years ago and become friends. Thinking their businesses were perfect for partnership, I asked,

So, after you help a client buy or sell their house, do you introduce them to [the other guy]? That seems like a good fit.

The response?

Huh, no. I'd never thought of that!

“I'd never thought of that!?” I figured it out after 3 holes of golf and they've known each other for a decade.

If you and I are going to succeed as business owners and entrepreneurs, we have to do better at connecting people. We have to partner with our friends, send referrals, and be valuable resources to our clients.

For us to have niche businesses and compete against the 800 lb gorillas in our industry, you and I have to excel at connecting our clients to the people and resources that will help them.

As a real estate agent, build relationships with local businesses owners like dentists, personal finance experts, attorneys, car dealers – anyone who a home buyer would need to know.

I do this by guest posting on other blogs, interviewing guests on my podcast and holding local, in person, meetups every week.

Partnerships aren't just for Fortune 500 companies. Building a Rolodex will allow you to think collaboratively, increase your mind share, make more money and connect your customers with people and businesses who you know will provide a good experience for your customer.

Forgetting About the Customer-Experience

Can you think of a time when you walked into a store and the staff was rude? Or, been seated at a restaurant only to be greeted by a rude waiter?

How about the time you tried to buy something online and it was one headache after another, all along the way?

Regardless of whether your business is on or off-line, or if your products are physical or digital, the companies who forget about the customer experiences are going to fail.

A great example of a company doing this fairly well is Amazon. When you visit Amazon.com you're often greeted by a letter from Jeff Bezos himself, which makes me feel welcomed.

Amazon also does a good job where most companies drop the ball. Their patented “Buy Now with 1-Click” button is the simplest way to buy on the internet. It has even been said that implementing this simplified purchasing process has alone increased Amazon's revenues by billions of dollars.

Far too often we go shopping online and it takes forever to find what we're looking for and making a purchase is a chore. By ignoring customer experience, you're costing yourself money and making it harder for people to benefit from what you have to offer.

An offline company that has created a great customer buying experience is In-N-Out Burger. They offer burgers with or without cheese. That's it. No chicken sandwiches, no fish tacos, nothing else. For their sides, no onion rings or jalapeno poppers, just fries.

While In-N-Out's menu is a little light for me options-wise, they've minimized choice for their customers and created a streamlined customer experience. By focusing on a smaller menu they're positioned to excel at what they're really good at. As a result, they've created an extremely popular brand.

From a crabby receptionist to a smiling janitor, everyone in your business impacts customer experience.

The entrepreneurs and business owners who make it simple to buy their products will always out perform those who don't. The businesses who greet their customer with a smile and make buyers feel comfortable on their websites will always get better results than those who don't focus on those things.

Sometimes creating a good customer experience is admitting you aren't the best fit for the customer. Other times it's up-selling them to the solution they need instead of the one they want.

What You Can Do About it

Even though I've shared some ideas from my experiences throughout this post, I want to offer specific things you can do today to help your business tomorrow.

  1. Connect with your customers, readers and audience by sharing a personal story. Here's one of mine.
  2. Get feedback from the people you connect with. SurveyMonkey makes getting feedback easy. Tell me about yourself!
  3. Put yourself in your customer's shoes and go through the buying process. Check out mine.
  4. Introduce one of your clients to someone in your Rolodex and share how they are a good fit for one another.
  5. Promote the products of your partners and move forward believing a rising tide raises all boats. Collaboration is good for business!

Together, you and I can achieve our dreams. We don't have to compete, we can collaborate. To be successful, we have to work together and think win/win.

Question: What are you doing in your business today to make you (and your partners) successful tomorrow?


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  • Ellory – tons of great ideas in this post. For me, making the connections is something I will be engaging in more frequently. It’s easy to get busy and forget about helping others in ways that take so little time, but can help others solve so many problems they face.

  • Ellory – tons of great ideas in this post. For me, making the connections is something I will be engaging in more frequently. It’s easy to get busy and forget about helping others in ways that take so little time, but can help others solve so many problems they face.

  • Johnny Lee Phillips says:

    Thanks for the post. I love the reminder that we need to band together and help each other. At this stage of business, I am focusing on generosity.

  • Johnny Lee Phillips says:

    Thanks for the post. I love the reminder that we need to band together and help each other. At this stage of business, I am focusing on generosity.

  • Mike Kim says:

    Terrific insight, Ellory. I loved this post! The online business space is revolutionary for the entrepreneur because it encourages collaboration. Brick and mortar businesses still find it hard to collaborate if they’re in competing circles, but I hope they take some of what you said here to heart!

  • Mike Kim says:

    Terrific insight, Ellory. I loved this post! The online business space is revolutionary for the entrepreneur because it encourages collaboration. Brick and mortar businesses still find it hard to collaborate if they’re in competing circles, but I hope they take some of what you said here to heart!

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