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 June 18, 1999

Careers & Education Businesses self-destruct for many reasons

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Many people dream of being their own boss and running their own show. Having been both employed and self-employed, I believe self-employed is better.

It’s like the cartoon that refers to a boss; “If you have to work for a jerk, it might as well be yourself!”

Problem is, statistics show that 70 percent of startups go broke within five years. There seems to be a five- or six-year mark where a business will either turn and do well or it won’t. The question is why do so many fail?

In my years of consulting to entrepreneurs, I’ve found eight reasons that cause the downfall of a business:

1. The person is not prepared enough. The founder hadn’t learned enough about business in general before jumping ship. Plans were not thought out well enough or were executed poorly. And competitors weren’t studied in depth.

2. More management is required than the person is able to provide. The individual left a big business in which he was surrounded by staff and had deep-pocket spending power. All of a sudden, instead of being a vice president of marketing, he is president, vice president, sales manager, salesperson, buyer, secretary, production worker, marketing, shipping and janitorial.

3. The person is too cautious and not enough of a risk-taker. When it is his own money, time and effort on the line, the person finds out he isn’t the risk-taker he claimed to be.

4. The finances aren’t managed well. Some simply can’t manage personal finances, much less those of a business. Without financial staying power, new businesses don’t last. Staying within budget, keeping overhead low, not wasting money, not making mistakes that cost money and delaying gratification are all part of managing business and personal finances.

5. A lack of discipline exists. The person can’t discipline himself to get up, get dressed, go into his home office and start to work. There’s too much freedom.

A friend of mine in Longmont is well-known artist Scott Fraser. He explained to me years ago that he doesn’t wait to “get inspired” to paint. He starts at 8 a.m., works until noon, starts again at 1 p.m. and goes until six. He does that five days a week, every week in his home office.

6. A lack of focus exists. Some people can’t stay focused. A zillion distractions occur as a matter of course, but unless your focused goal pervades everything, it will fall apart.

It could be like the Mercedes repairman in Denver. Many of his well-heeled clients also own Lexus’ and BMWs. They like his Mercedes repair work and constantly ask him to look at their other cars. He always (nicely) refuses. His focus is to be the best Mercedes mechanic that anyone can find in the city.

7. The person can’t (or more likely won’t) sell. She has to accept the fact she is in sales regardless of what her business is. Everyone sells. You persuade your spouse, your kids and your friends to do things your way. You get consensus from fellow team members. You negotiate the sale of your house, a boat, a bike or a car sometime in your life. You clean out your garage at a yard sale. You convince the tailor to throw in an extra free alteration. You get rid of the litter of puppies. All of that is selling. You don’t like to sell; you just have to do it, and do it well.

8. There are ego problems. Without a doubt, one of the greatest of all reasons entrepreneurial operations fail is ego. Donald Trump may speak the truth when he claims, “Every big vision is backed by ego.” But the truth is also that most failure is ego-driven: The person won’t do what needs to be done because she is afraid of looking dumb and making mistakes. Success takes a maverick streak in a person that doesn’t let ego get in the way.

When you start your own business, your ego has to be put aside. Now you will be required to do many things that were “beneath you” before. But if you do what needs to be done without letting your ego get in the way, you will have many opportunities to satisfy it later.

With awareness of the possible downfalls, you’ll more likely avoid them. I’ve been self-employed for 23 years, and to my way of thinking, it doesn’t get any better than this: to be able to support myself in the style I want without having to get along with a boss! If it’s the route you choose, I wish you the same happiness.

Debra Benton is president of Benton Management Resources Inc. in Fort Collins.

She is author of “How to Think like a CEO,” “Lions Don’t Need to Roar,” and “$100,000 Club.” Contact her with an issue you’d like her to address in this column by calling (970) 484-4687. Or visit www.TopSellingBooks.com.

magnum memo

Many people dream of being their own boss and running their own show. Having been both employed and self-employed, I believe self-employed is better.

It’s like the cartoon that refers to a boss; “If you have to work for a jerk, it might as well be yourself!”

Problem is, statistics show that 70 percent of startups go broke within five years. There seems to be a five- or six-year mark where a business will either turn and do well or it won’t. The question is why do so many fail?

In my years of consulting to entrepreneurs, I’ve found eight reasons that…

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