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Why do businesses fail?
Overcome your fear of business failure through innovation and marketing
Did you know that a staggering 96% of businesses will fail over a 10-year period of time? And as for the remaining 4%, it does not necessarily mean they succeed–it means that they’ve survived.
So why do businesses fail? What makes one entrepreneur succeed while another experiences business failure? What makes the difference in saving a failing business? Peter Drucker, one of the greatest business minds of our time, maintained that it all starts with two key factors: innovation and marketing.
Innovation to save a failing business
Innovation means finding a better way to meet your clients’ needs than anybody else. Anybody can make some money for some amount of time. But if you want to become successful and sustain that success over years and over decades – if you want to build a brand – then you have to find a way to add more value than anybody else in the game. And that comes from constantly innovating.
Too often, a business will fall in love with their product or service and neglect the need for innovation. This can pose very real problems, as the economy, technology, the culture and competition are constantly evolving. It’s a different world we live in today, where the only constant is change. And if you aren’t staying ahead, you’re falling behind.
Consider the technology industry today. Do you know what the life cycle is on an average product today in the technology business? About six months. And in some sectors, like the app business, it’s just a month. People expect continual innovation and improvement, and if you don’t take deliver that to them, someone else will.
So, to circumvent business failure, rather than falling in love with your product, fall in love with your client and figure out every single way you can meet their needs. Anticipate what they want, what they need and, when possible, try to determine what they might not even know they need yet. Turn your customer into a raving fan – somebody who will tell everybody about your product or service or company. Because when you create that sort of impact, you’ll start to build a brand.
Overcoming your fear of business failure
Running a failing business is one of the biggest, if not the biggest, fears of any business owner. However, as you develop your entrepreneurial and managerial skills, you will find that one of your greatest assets in running a successful business is overcoming your fear of business failure. Without minimizing the validity of your fears, you need to learn to view business failure as merely a step in your path to success instead of a barrier to success. One of Tony Robbins’ central philosophies is that our mindsets create our realities; what we believe influences what we are able to achieve. As entrepreneurs, when we embrace strategies for turning business failure into success, we transform our mindset from one of defeat into one of empowerment. And when we are empowered, a failing business is not the concluding chapter in our story; it is only the beginning. Don’t give up on the hunt because you are afraid. Instead, stay hungry in your search for success. Your hunger will motivate you and pay off in the end.
Marketing to prevent business failure
Whether your company is large or small, marketing is the next critical step. Why do small business operations fail? If you cannot find a way to market your product or service, then your business will have a hard time getting off the ground. Because the truth is, you could have the most innovative product or service, but the best product doesn’t always win. Do you think McDonald’s has the best burger? Probably not. But their marketing strategies are top-notch.
To market effectively and prevent business failure, you have to understand what your “X-factor” is. You have to know what your added value is. What is it that you are here to deliver and how can you improve your customers’ lives?
Take, for example, FedEx founder Fred Smith. Among other tips for running a successful business, like hiring the right people and keeping a sense of humor, Smith emphasizes the role of effective marketing in keeping a business not only afloat but also profitable. Even in FedEx’s early stages, when profits were slim, Smith invested in three market studies for testing the value expedited shipping would add to his product. Smith’s research paid off: FedEx is now a household name, in large part due to its corner on the market via expedited shipping.
To prevent business failure, you need to keep your competitive advantage alive through effective marketing. To help discover what your true value is as a business, you must ask yourself core questions like: What does the marketplace need? Who is my customer? What can I do to make my offer irresistible? And perhaps one of the most important questions you can ask yourself is, “What business am I really in?”
What business are you really in?
Apple is one of the most valuable companies of our time, with a market cap of $600 billion and a stock that is soaring above its competitors. But it wasn’t always that way.
Apple’s founder, Steve Jobs, was fired from the company in 1985. Before re-hiring Jobs in 1997, the failing business operated at a loss and inched toward bankruptcy. In fact, Michael Dell was advising decision-makers to shut Apple down and give its shareholders their money back. But Apple persisted, and Steve Jobs asked himself one of the most critical questions in his lifetime: “What business are we really in?”
At first, the answer was simple – Apple was in the computer business. But how were they supposed to win back customers when 97% of all computers across the United States were run by Microsoft? That’s when they realized that no matter how good their product was, Microsoft was embedded and entrenched in the masses. After all, it was one of the main reasons Apple found itself in bankruptcy.
So Jobs asked, “What business do we need to be in?” And Apple decided that it needed to be in the business of connecting people to their passions – to their photographs, their music, to each other.
Change your offer, change your life
Answering this question created one of the most life-altering shifts for Apple. The company transitioned into building simple, cool technology that connects people to what they love. Upon rehiring Jobs, the company arranged a partnership with Microsoft which signaled the company’s turnaround. When Apple launched the iMac just one year later, the firm returned to profitability and made its mark. Before long came the iPod and iTunes, then the iPhone. Their net sales soared. And since that point, Apple has never stopped innovating, and their marketing campaigns have helped propel the company to an entirely new realm. Had Jobs viewed his firing as the death toll of his career (and company), the firm would have never experienced its revival.
Today, is Apple really in the computer business? Only 14.7% of their business is computers. Which means 85% is not – the vast majority is made up of iPods and iPhones. So how important was it for them to answer the question of what business they are in?
If success is about innovation and marketing, then you have to decide who your customer is, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business. Because it ultimately allows you to change your offer. As we say, change your offer, change your business – and change your business, change your life.
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Legal Disclosure: Tony Robbins is the Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning. This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice.