My first failure in business was many years ago.
The story goes like this:
A friend and I attended a presentation on wireless alarm systems (which was new technology at the time). It was easy to start - you buy a unit, find a client, install the unit, take your profit and order a new unit for inventory. Some other issues surfaced like first in the area will have preference (franchise area) but I mainly made my decision on not wanting to miss the opportunity as my friend decided to go for it immediately. I had to decide and did so based on nothing but the lure of the idea. So "Alert Alarms" came into existence during a 3 hour drive back home.
We started without a single financial projection on paper, no market research, no competitor analysis, no business plan, yes nothing at all was done. The hype of the idea pulled us into our first business.
Long story short - We sold one product and ordered the second which I sold to a neighbour and ordered the next. Things seemed to improve but then somehow things between the "partners" did not work out. We had no formal agreement, no formal business structure, no labour division, no profit share structure, no cost allocation structure - again there was no thinking going into planning especially the operations.
Thereafter we sold nothing and the "inventory unit" I installed in my own house. The business just did not exist anymore - nobody spoke about it thereafter again. It just died.
What did I learn from it and took to the second attempt?
It was only many years later that I started to understand some important issues namely:
* If you have no knowledge of the industry you want to enter, you are looking for trouble. Get some or at least do some serious market research. This has been referred to as "school fees" that you should rather pay beforehand and during the start-up.
* Develop a business plan - its more for your own sake as it forces you through the thinking required to put everything in place - use it a "peer review" of your plan. Ensure that you cover at least the following: Positioning, business model, cash flow, sales and demand projection and resource fit. Great ideas have the ability to lure you into trouble - make sure it is a real opportunity.
* If you want to lose a friend for sure - start a business with them without having a proper agreement in place. The same goes for family - especially family as I have seen many of these in my later research.
* I had a full time job at the time (so did my partner) so I think there was no pressure to perform, a total lack of urgency to seek sales and do the business. If I had more money invested, maybe I would have put in more effort.
What caused the failure?
If I am honest today I think these contributed:
* Lack of knowledge and skill at the time (industry and basic business)
* Lack of thinking (maybe I should say no thinking at all)
* Pursuing an idea that was not an opportunity yet
Invite to tell us your story
The aim of this blog is to gather data on business failures and the associated experiences of the owners / managers involved. I am intersted in anything and everything about your specific experience. This includes the causes of declines, any signs of it coming, your feelings and thinking during the decline, your decision processes and whatever you think may be important. Please share with me and others who can benefit.
6 comments:
Good idea. I have not yet failed, however, all the signs are there. Hopefully I will be able to turn it around and then I do not have to write to you about my failure. I am operating in the training and education sector.
What are the signs of failure that I see now?
1. I have no BEE partner and that is hurting me. Can't find one, belive it or not. 40 million to choose from, have not found one yet.
2. I am a one man show in an industry with major players, organisations with 10,000 plus employees. What can I offer? I have one of the best products in the world, but I am to small!!!
I am interested in this field and will contact you for a discussion.
Hi JFB. I found your posting very interesting as I am in a similar position as you. I am a 46 yr old white professional with a Master's degree (currently busy with a PhD in Entrepreneurship). I also find it very difficult to get contracts - full or part time in training.
I have gone the BEE route and burnt my fingers. We were awarded a tender for 5 years (R5m per year) to train and market a certain NGO. Long story short - he left with the contract that was in his company's name.
So bad, so sad. It will however not help anybody to cry over spilled milk. Is this an example of a failed business - I think so - I put in a tremendous effort, helped to secure a contract and was left with nothing but wasted time and disappointment.
What have I learned? "If it is to be, it is up to me" I am done with BEE, unless I have a way to guarantee payment for work done. I will not "carry" unproductive dead wood just interested in collecting money every month.
Is there a future in SA for us. Definitely! We just have to be smarter and more creative. We have the skills and there is a dire need for them in this country.
My name is Gerhard Ferreira and I am busy with a PhD in Entrepreneurship at the University of Pretoria.
My study leader is Prof Marius Pretorius. The topic of my research is "The complexity of the entrepreneurial challenge after the age of 50 - Entrepreneurship as a second career."
I would like to hear from the "grey" entrepreneur. I am interested in stories about success and failure in business.
You can communicate with me through this blog or email me on facultyferreirag@gmail.com or phone me on 083 422 4163.
Story of two failed startups – Developing in a vacuum never works.
July 23, 2008
By sinha
Here is the insightful story of 2 failed startups:
Monitor110: Raised $20mn in 3 rounds, but finally shut shop.
7 deadly sins?
* The lack of a single, “the buck stops here” leader until too late in the game
* No separation between the technology organization and the product organization
* Too much PR, too early
* Too much money
* Not close enough to the customer
* Slow to adapt to market reality
* Disagreement on strategy both within the Company and with the Board [More]
Another startup, that bootstrapped for 1.5 years shut down has very practical
advice:
* If your idea starts with “We’re building a platform to.” and you don’t have a billion dollars in capital, find a new idea. Now!
* It’s a marathon, but it’s a marathon made of sprints
* Initial conditions matter. A lot.
* Developing in a vacuum never works.
* Beware of the chicken and the egg – have a product that is useful on its own.
* Prototype any 3rd-party libraries that you’ll be depending upon, before you base your product on them.
* If you’re doing anything other than building your project and getting users, it’s premature.
* The product will take longer than you expect. Design for the long-term.
* People have an incentive not to crush your dreams. Take everything they say with a grain of salt.
* Know your limitations. [More] – via
Following sentence summarizes the nuts and bolts of a possible success:
A lot of this comes down to picking a problem that’s a.) worth addressing and b.) doesn’t require a lot of support code to address it.
Too much money is like too much time; work expands to fill the time allotted, and ways to spend money multiply when abundant financial resources are available. By being simply too good at raising money, it enabled us to perpetuate poor organizational structure and suboptimal strategic decisions.
Lessons Learned: Why My First Business Failed
by Alyssa Gregory
A number of years ago, I was working full-time as a designer and received a lot of requests to design sites on the side. At the time, I knew very little about business ownership, but always felt an entrepreneurial pull and it seemed like a good idea to start a web design company. Needless to say, I learned quite a few things from my initial venture, and thought I’d share a few of them with you.
Lesson #1: All marketing isn’t created equal.
I can’t even tell you how much money I wasted on ineffective marketing. From a massive mailing to local companies that I never qualified, to a decal on my car, to flyers that sat stacked on my desk for two years, I had my marketing focus all wrong. Not to say any of those things won’t work, but they certainly didn’t work for me, at least in the way I was executing them. I thought that by doing something, I was doing the right thing, but all I was doing was wasting time and money by floundering around with no idea of what to do next.
The lesson is not to market your services for the sake of marketing or because an idea sounds good. You need to be focused and intentional in all marketing activities. This is accomplished by defining your business and your goals, and then researching until you uncover the most effective way to market to your target audience. There is a right technique for every business, regardless of marketing budget. Take the time to figure out the right way from the beginning.
1and1.com
Lesson #2: Systems are necessary.
After being scattered, disorganized and stressed with the administration of my business, I learned that you need systems; you need processes; you need standards. Having a set way things are done in your business — from billing, to data management, to your work process — is necessary because it enhances productivity and allows you to take on more. Plus, if you ever want to work with subcontractors, hire employees or otherwise expand personnel, you need documented systems for everything that make your business move.
Lesson #3: Don’t let financial pressure derail you.
Shortly after starting my business, I was laid off from my job (an Internet startup who joined the ranks of failed dotcoms). Then 9/11 happened. I was plunged into full-time business ownership in a matter of weeks. I found myself starting to worry about money, and I took a series of part-time jobs. This was the exact opposite of what I should have done, which was to take my fear of financial shortcoming and turn it into the fight to make my business succeed. I lost precious time at part-time jobs that were completely unrelated to my goals and should have spent that time working on my business.
Financial pressure is tough to deal with when you’re self-employed, but if you’re serious about being successful as an entrepreneur, you can’t let that push you off course. Whether for you that means taking another job, cutting your rates or taking on work that doesn’t support your business goals, it’s a vicious cycle that can hinder your success.
Lesson #4: Be honest with yourself.
In my struggle with my first business, I learned some valuable things about my passions, my skills and my dreams. What I realized was that I wasn’t satisfied with design alone, and my desire to support small businesses in other ways lead me to change my business model. The most successful entrepreneurs regularly check-in to make sure they are staying true to themselves and their business goals as they change over time.
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