If you haven’Äôt already failed at something, you will. That’Äôs part of life. The problem with failure is the negative reaction we inherently have to it. But we learn our most valuable lessons from failure, and if we apply them we can often go on to be more successful.
Some famous failures:

• Bill Gates in 1971 opened Traf-O-Data. It closed in 1979.
  
• Abraham Lincoln had 12 political losses before becoming president.
  
• Thomas Edison made 1,093 inventions including perpetual cigar and cement furniture.
  
• Michael Jordon was cut from his high school basketball team.
  
• Walt Disney’Äôs first cartoon production company went bankrupt.
  
• Henry Ford’Äôs first two car companies failed. Then he rolled out the Edsel.
  
• Elvis Presley was turned down for his high school glee club.
  
• Quaker Oats and Pepsi went bankrupt three times.
  
  

Why businesses fail

In my many years of business ownership and consulting, I have identified 10 reasons why businesses often fail.
1. Not going into business for the right reason. Many people think they will start a business to be their own boss and have more free time. Most business owners actually work harder and longer with less pay at first than when they worked for someone else.
2. Not knowing your market. People who start businesses think they have products or services that everyone will want. You must do research before opening a business and really understand customers’Äô wants and needs.
3. Mistakenly thinking you have NO competition. Everyone has competition of some kind and sometimes competitors even do something right! That’Äôs a hard thing for a business owner to admit, but you must honestly look at what the competition does right as well as wrong. Then you have to understand what really makes you unique.
4. Not knowing how much business you really need to be successful. I’Äôve heard this many times: ’ÄúI only need 1 percent of the market and I will be rich.’Äù Do research and be realistic. Really understand the market and potential of your product or service. Build your forecast from the bottom up, not from a top-down, broad-market-percentage approach.
5. Forecasting income and expenses, and saying, ’ÄúMy income estimates are conservative and my expenses are high.’Äù That’Äôs not forecasting; it’Äôs making up numbers. Bankers and investors don’Äôt want to hear it. They want to hear what you can do and how you arrive at those numbers. You must do realistic, achievable estimates, then see where your actual numbers differ to understand why you did better or worse.
6. Existing businesses are often afraid of change. They think this is the way they have always done things. You must be innovative and adaptable. Anticipate and make changes when needed. Be ready and willing to take advantage of opportunities that arise.
7. Not knowing daily where your business is financially. Many business owners wait until tax time for their accountants to tell them what their business did last year. That’Äôs a fast formula for failure. You should know your costs and understand how the cash flow through your business works. Have budgets and do financial planning. Keep good financial records throughout the year and manage growth. Manage your business finances purposefully; don’Äôt let them just happen.
8. Worrying too much about how much tax you are going to pay. That’Äôs not the most important thing you have to worry about. So many business owners get so caught up in managing their tax bill that they overlook the big picture ’Äî making money. If you are making money, you will owe taxes. That’Äôs a good thing. Use common sense and work with a really good tax accountant to smartly manage your taxes.
9. Not planning. Having a plan in your head isn’Äôt planning. Write a business plan, then execute it. Set goals and measure them. Work ON your business, not just in it. Every business should have four plans: strategic, business, marketing and financial. This does not have to be difficult and time-consuming. You just have to do your homework, then write things down with a purpose.
10. Thinking you can do this yourself. There is a difference in knowing YOUR business and knowing BUSINESS. Most people understand their product or service but don’Äôt really know how to run a business. Don’Äôt be too proud to ask for help and never stop learning.

Famous failure quotes

Thomas A. Edison: ’ÄúI have not failed. I’Äôve just found 10,000 ways that won’Äôt work.’Äù ’ÄúThe successful person makes a habit of doing what the failing person doesn’Äôt like to do.’Äù ’ÄúMany of life’Äôs failures are people who did not realize how close they were to success when they gave up.’Äù
Michael Jordan: ’ÄúThere was never any fear for me, no fear of failure. If I miss a shot, so what?’Äù
Henry Ford: ’ÄúFailure is the opportunity to begin again, more intelligently.’Äù
Robert Kennedy: ’ÄúOnly those who dare to fail greatly can ever achieve greatly.’Äù
F. Scott Fitzgerald: ’ÄúNever confuse a single defeat with a final defeat.’Äù

Loretta Daniel is director of the Murray State University Regional Business and Innovation Center. She can be contacted at 270-809-6071 or loretta.daniel@murraystate.edu.