Why Businesses Fail (And How Turn It Around)

by | Mar 15, 2017 | Empowered Professional

According to the US Bureau of Labor Statistics, 60{db95e0fd77ae6d141d4535e2bf7b464d98e4151322120f553d7786be9a7303be} of businesses started today will fail within their first 10 years.

There are even higher percentages of failure referenced by sources like Forbes, Bloomberg, and Inc.com. They claim that the failure rate is closer to 90{db95e0fd77ae6d141d4535e2bf7b464d98e4151322120f553d7786be9a7303be}!

Business owners today should take this to heart. No business is “safe” from failure. Even for businesses that have the latest product that many customers need or want, failure is still possible.

Let’s think about this…

Why did Borders go out of business, while Barnes & Nobel is still in the game? Why is Sharper Image a thing of the past, while Brookstone is still healthy? These companies sold roughly the same products, so what caused some of them to fail?

There are 4 stages of business health, ranging from healthy and growing to an unhealthy dissolution.

Do you know what stage your business is in today?

This article will walk you through the four stages, how to evaluate your current status, and show you how to maintain to a vivacious, growing business.


Why Businesses Fail (And How to Turn It Around)

Stage 1: Creation/Building Stage

Do you remember the first few months after you started your business? It was an exciting time!

This is a time characterized by passion, desire, focus, determination, and optimism. In addition, there was plenty of new business and quality lead gathering.

Quite simply, at this stage the business is healthy and growing!

But, why? Why is the business so healthy at this stage?

The attitude of business owner during this time makes the difference. At the beginning of a venture, the creator has a single-minded focus on building and nurturing the business.

In addition, the owner knows there is no room for complacency. The risk of business failure is very real at this detail. Many times, owners are putting their financial wellbeing or reputations on the line. There is a high price for failure and the creator feels that burden.

Because of this, they have their hands in every project. They are part of every decision and oversee every project. From marketing to sales, they know they are responsible for getting their business off the ground.

This absolute focus, dedication, and ownership is what causes the growth. They know if it’s going to happen, they have to make it happen. In addition, the things they do are out of the love they have for their business. They work long-hours, continually seek leads, and see business opportunities everywhere.

Stage 2: Management Stage

At this stage, business isn’t so new anymore. Business growth has plateaued and the owner may feel as though they have taken their “foot off the gas”.

We call this the “management stage” because this is often the stage where business owners stop taking an active role in the growth of their business, but instead abdicate this responsibility to someone else.

Note that we used the word abdicate, not delegate.

Delegation means giving responsibility for a task to another person with the assumption that the delegator will still be actively invested in the outcome.

Abdication means giving the responsibility for a task to another person with the assumption that the abdicator is no longer taking ownership of the task.

When we abdicate any part of our business to another person, we no longer have control over that part of our business. This is a dangerous practice that usually results in a loss of performance.

The focus shifts and is no longer on the creation or growth of our business, but in the management of people who are now responsible for processes and execution of its vital systems. When we completely abdicate these systems of our business to someone or something else, our vision and drive will disintegrate, and the company will follow suit.


Stage 3: External Blame Stage

As discussed above, the abdication of key systems will start to cause the creation and growth of our business not only to plateau, but then to start to decline. At this stage, we have two choices. We can either take responsibility for the business again, or we can begin to blame outside factors.

When we decide on the latter, that is, we decide to blame, we sink into stage 3.

We begin to defend why things aren’t growing. We look around for excuses and start comparing our business to others in the marketplace.

But, the economy is so bad! Other businesses are struggling too!

Technology moves so fast! Our products are becoming obsolete!

People just aren’t buying like they used to! These millennials just wont listen!

Instead of going into creation mode to find solutions to changing circumstances, we instead take the easy road and make excuses for loss of business. We justify circumstances to our employees, our investors, and even our spouses.

The problem with this stage is that when we start making excuses, we decide that we no longer have control over our own success. And when we do this, we begin to believe that we have no control over our success.

[tweet_box design=”default” float=”none” excerpt=”When we begin to make excuses, we decide that we no longer have control over our success. #SuccessTips @piciandpici”]

When we begin to make excuses, we decide that we no longer have control over our success.[/tweet_box]

Stage 4: Internal Blame Stage

Business is declining steadily. At this stage, it is becoming apparent that the problems are not coming just from external sources, but also from internal sources. Employee morale may be low, turnover high, and accountability nonexistent.

In this type of situation, it can be easy to begin to blame other people for these losses. We begin to blame employees, vendors, clients, and even the people in our personal lives long before we take a step back to look at our role in the situation.

When we begin to blame other people, we have reached stage 4. And unless we change our attitude and take responsibility, the business will continue to decline until it closes its doors.

It’s now time to honestly evaluate the stage your business is in. This is what I like to call a fresh fruit check. Do you have fresh fruit on tree?

These questions may help you evaluate your status…

  • Are you staying engaged in your business?
  • Are you staying motivated?
  • Have you abdicated key systems of your business?
  • Are you aware of all the areas of your business?
  • Have you found yourself blaming circumstances, like the economy?
  • Have you begun to justify failures?

Real World Case Study

We had a contact who had a busy, healthy, growing business. She was bringing in many new clients and closing lots of income producing contracts. Her business was in stage 1 and doing great!

However, she began to stop bringing in new clients, choosing instead to manage them. Her plan was to manage her existing client base and hope she didn’t lose them, instead of actively looking to bring in new ones. And, unfortunately, if you wait to lose clients before bringing in new ones, you will lose momentum and experience a dip in business. She had chosen to place her business into stage 2.

At this point, she did begin to experience a decline in business and income. However, instead of going back to stage one and seeking to bring in new clients and generate leads, she chose to settle into blaming external circumstances.

At this stage, she gave me a call. When I asked her how her business was doing, she stated, “We’re not really growing. But, there’s not much I can do about it. I’m going to sit on this and hope the economy will get better.”

You can very clearly see how she naturally progressed to stage 3.

A few months later, I spoke with her again. The business had continued to lose ground. She had been “forced” to lay off her staff. Instead of taking responsibility for what was happening, she instead justified her actions and blamed the outcome on employee morale and disloyal customers.

She had reached stage 4.

A company without a staff and with no growth is no longer a company. Businesses are either growing or they are dying. There is no exception.

[tweet_box design=”default” float=”none” excerpt=”Your business is either growing or it’s dying. There is no exception. #cupofjoepici #businesscoach @piciandpici”]Your business is either growing or it’s dying. There is no exception.[/tweet_box]

So, take a step back and look at your business. Is the business growing? Or is it dying?

If you are in a stage of decline, there is hope!

The good news is that when we are able to recognize in what stage our businesses are today, we can take responsibility and adjust our actions to get back to the stage of growth.

How to Turn Around a Declining Business

How do we get back to having a growing business?
We must redirect and turn from blaming to creating.

Honesty & Evaluation

First, you must be honest about the current status of your business and then make the decision that you want to change it.

Build A Business Culture

There needs to be an attitude adjustment within the business itself, starting from the ownership and management. Instead of a culture of blame (But, it’s not my fault!), there should be a better attitude of cooperation and responsibility (Let’s not point fingers, let’s get the job done.) When this attitude starts at the executive level, it will be adopted by employees and clients as well.

Find the Non-Negotiables

Do you know the specific actions that you need to take for your business to thrive? In order to find out, think about the specific actions that were taken during your initial creation that jump started that growth.

For example, in our business we know we must be able to generate leads, make phone calls, book appointments, do one-on-one meetings and sales presentations, and formulate a core story. These actions are our non-negotiables because we know we simply MUST do them in order to stay in business. Do you know your non-negotiables?

Start Creating Again

Once you know the essential actions you need to take in order to begin growing again, now it’s simply time to start doing them. Regardless of what has happened in the past, we have the opportunity to begin moving in a better direction. Start every day brand new!



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