Businesses fail – that’s an unavoidable fact. Some studies put the failure rate of businesses in their first 5 years at around the 70-80% range. So let’s face it – your chances aren’t great.
Failure isn’t something unique to small businesses, either. Even the biggest of the big dogs have come crumbling down, and usually for the same reasons as small businesses. Let’s take a look at some of the reasons the biggest names in different industries have faltered and shriveled away.
Failing to adapt
To this day, Kodak is synonymous with cameras of all sorts: “Kodak moment” was officially part of our lexicon for a number of years, and Paul Simon’s undeniably groovy “Kodachrome” was a heartbeat away from being a #1 Billboard hit. Simply put, Kodak had a stranglehold on the consumer film market. The 1990s, however, put the company on a path to bankruptcy, when Kodak was hesitant to invest in digital photography over fears of the new technology cutting into the profit of physical film. Other companies eagerly swooped into the emergent market, and Kodak was left on the outside looking in until they filed for bankruptcy in 2012.
All this, despite the fact that Kodak itself invented the core technology currently used in digital cameras. Kodak failed to capitalize and adapt its business model to accommodate the newly emerging market and failed as a result.
Prioritizing the wrong things
Businesses need to know who butters their bread. For 98% of businesses, the people with the butter are your customers. Unfortunately, electronics retail giant Circuit City may not have received that memo. In addition to the mistake of failing to adapt to the growing video game and mobile phone markets, Circuit City compounded their problems by not focusing on their customers: they frequently chose the cheapest real estate for their stores (which were inconvenient for customers to access), and they also had a penchant for laying off their highest-earning store employees to cut costs – those same employees usually being the ones who gave the best customer service. When it comes to sustainability in business, there is almost never a profit margin big enough to remedy poor customer focus.
Growing too fast
Success can be intoxicating to business owners and investors. Like sharks in the water chasing a drop of blood, business owners’ judgment can easily be overpowered by their desire for bigger and better success. An all too common story from the 1990s is dot-coms failing after the internet bubble burst. Pets.com was one of the most famous stories of failure – having secured spots in the Super Bowl and Macy’s Thanksgiving Day Parade, the company’s brand awareness blew through the stratosphere. Based on this hugely positive feedback, Pets.com made huge investments into their infrastructure and warehousing, only to be bitten (no pun intended) by middling sales and the lack of a large enough market to support their growth. The company eschewed traditional market research and instead chose to grow based only on their advertising performance, leading to a business life of barely 2 years before ceasing operations in 2000.
These are by no means the only reasons why businesses fail, but they are some of the most common mistakes that business owners make. What tends to separate successful businesses from the not so successful ones are knowledge and preparation. Learn how to align your marketing strategy with what your business really needs, and avoid the mistakes that can cost your business everything.