British business magnate and founder of Virgin Group, Sir Richard Branson has superb advice for all entrepreneurs. “Don’t be embarrassed by your failures. Learn from them and start again.”
Sir Richard Branson had launched his first enterprise of growing and selling Christmas trees and parrots at the age of 16. The business failed miserably. And his second business, a magazine known as ‘The Student’ met with some success after facing initial problems.
Therefore, this piece of advice from one of the wealthiest persons in the world who met a lot of failures on the way to become a billionaire, rightly proves that failures at business do hold some vital business lessons.
10 Business Lessons Only Failure Teaches
Understandably, no entrepreneur ever wants to fail at business. Unfortunately, sometimes failure becomes inevitable due to our own faults or external circumstances. But instead of being overwhelmed by these setbacks and brooding over them, here’re top 10 business lessons that the only failure at a business can teach.
And with these lessons, we could bounce back and launch a successful enterprise or revive the faltering one if possible.
1. Long Credit to Customers
Selling on credit is the greatest enemy of every business, regardless of its size. If we observe closely, even multi-billion Dollar such as Amazon never sells on credit. Instead, they will provide payment on easy instalments only.
That too if you have a credit card or a bank guarantee. The reason is simple. Selling on credit deprives your business of vital cash flow. And very often, clients that buy from you on credit default on payments.
While it’s nearly impossible to do business without providing at least some credit facilities, every entrepreneur needs to be extremely cautious. Unless the buyer has a sound financial record and is known for timely payments, providing credit can prove disastrous.
Your business requires regular cash inflows to pay suppliers and meet operational expenses. Long credit could deprive your business of this vital resource and cause its failure.
2. Wrong Business Plan
Doing a profitable business successfully requires a superb business plan. This is another vital business lesson that you could learn from failure, should your business fail.
In fact, most businesses that start off without an astute business plan are heading for failure. They’re merely shooting in the dark, hoping to find customers as though by some miracle.
Whether miracles occur or don’t is debatable. But even a miracle won’t save a business that works with a wrong business plan. Therefore, let’s see what’s exactly a wrong business plan that leads to failure?
A wrong or shoddy business plan is the one that lacks proper research. It doesn’t identify the target market or have a proper roadmap for sales and marketing. Nor does it have any details about how the enterprise intends to do business and grow. It lacks short, mid and long-term goals for the business.
If that’s your case, it’s high time to sit back and hire a good business consultant or consultancy firm to draw a fabulous business plan. That can help save the business from failure. And if you’re already a failure, don’t worry. Get a good business plan and launch again.
3. Hiring Relatives & Friends
Another superb lesson to learn from a business failure? Never hire relatives and friends as employees. Undoubtedly, there’re countless, successful family-run businesses around the world.
However, the same doesn’t really work for every entrepreneur. To own a successful, family-run business, every member has to be qualified enough to handle various tasks and exert extra efforts. This often means sacrificing some degree of social life and household tasks.
It’s almost impossible to pull up friends or relatives when they do something wrong that affects the business. Because doing so would spoil what could be perfect relations.
Also, relatives and friends would take quite a few things for granted. For example, they could report late or leave early, ask for cash advances and even expect to get away with blunders that can hinder the business.
Instead, it’s always better to hire experienced employees that would give value for the wages that you’ll pay. Such persons will work according to your instructions and there’s no need to fear spoiling relations because this is just a professional relationship.
4. Neglecting Online Presence
We live in the digital era where the Internet plays a major role in our daily lives. The same holds true for every business. Therefore, if your business is floundering or has failed, one of the business lessons is that you’ve most likely not put it online.
Meaning, you didn’t create a website for the business or a blog or don’t have a social media presence.
There’s a famous quote by Bill Gates, founder of Microsoft that I often use while speaking about the importance of businesses going online. “If your business is not on the Internet, soon your business will go out of business,” he says.
And this axiom came true to its word during 2020 when several small and large businesses had to close shop or declare bankruptcy because they weren’t able to serve customers online.
Studies clearly indicate that 90 percent of all buyers research about products and services through websites and blogs before arriving at a decision to buy something. And your business could’ve failed because customers were unable to learn more about your offerings.
If that’s indeed the case, it’s high time to put your business online with a wonderful website, social media presence, digital marketing and a blog. It doesn’t cost much and profits will justify the expense. And better still, it can prevent your future ventures from failing.
5. Poor Customer Care
“People will forget what you said, people will forget what you did. But people will never forget how you made them feel,” said noted American poet, Maya Angelou. The same adage holds true for customer care. And this is one of the greatest business lessons you cannot learn without failing at business.
Poor or inadequate customer care has led to downfall of several large organizations. Because, when a customer will walk away and never return to your business if you don’t treat them right from the moment they wish to buy something and even after the sale is complete.
Even your neighborhood grocer or baker has to provide proper customer care to face the bleak prospect of losing valuable customers. Therefore, reflect on areas where your business would falter on this vital element.
And take corrective measures to provide excellent customer care. This can save a losing business and revive it. Or help you launch a newer venture that genuinely cares for its clients.
6. Get Rich Quick Ideas
Trust me, getting rich quick business ideas never work and will invariably fail within a short time. And if your business comes in this category, failure is inevitable.
Sadly, the majority of people launch businesses with ideas they falsely believe would lead to instant success. Most entrepreneurs that launch businesses with get rich quick ideas usually lack the necessary skills as well as the all-important business acumen.
The vital business lesson here: never open a business with an idea that promises instant success and quick riches. If these ideas really worked, you would have countless millionaires on this planet, which isn’t the case.
Instead, look for business ideas where your qualifications, skills and experience comes handy. Because, you’ll know a lot about this specific field of business and could make it successful. Of course, it would require some business acumen too. This comes over a span of time.
7. Underpricing & Underselling
Underpricing means offering prices lower than the actual market value of your products. Underselling implies heavily discounting your products and services to compete with rivals and grab a market share.
Both are correlated and causes businesses to fail. If you’ve done this in the past, it’s high time to forget both these undesirable ways to establish yourself in the market.
Generally, business owners indulge in underpricing because they’re unsure about the price customers would be willing to pay. Hence, they settle for lesser profits, hoping it could result in higher sales. That more sales would eventually lead to better profits. This is a false belief.
And underselling to compete with established rivals in the field is also disastrous. Because your business wouldn’t be able to maintain lower prices for much long. There’s also a possibility of competitors dropping prices to counter your business offerings.
They might record lower profits for a short period but not run into losses. Such underselling could spell doom for your business.
A superb business plan authored by a professional and proper market research can help prevent underselling and undercutting. This could prevent the failure of your business.
8. Leaving Everything to Employees
Leaving all tasks to employees and the absence of proper supervision is something you would definitely learn from failure at business.
While you could have highly qualified and skilled employees, they won’t be able to do much without your direct supervision. That’s the reason even the largest corporations task top executives with supervisory and administrative duties.
In all probabilities, your employees would work honestly and work to their fullest abilities. However, they’re also human and hence, prone to errors and mistakes. That’s where your presence and supervision plays the key role.
Unless you provide employees proper instructions and directions, they won’t be able to function as a cohesive team. As a result, your business can fail. And the only person to blame would be yourself.
9. All by Myself Attitude
While still on the topic of employees, here’s yet another business lesson from failure. And that’s to get rid of the proverbial ‘All by Myself Attitude.” As a business owner, there’re several important roles you’ll have to play. There’ll definitely be very crucial decisions you need to take. Therefore, the ‘All by Myself Attitude’ never works.
Delegating work to employees, depending on their qualifications and skills is the best thing to do for avoiding failures. Instead of looking at what an employee can’t do, focus on their strengths rather than weaknesses. And delegate work accordingly. A centralized model of business meets limited success.
By delegating routine tasks and functions to employees, you get adequate time to focus on critical issues that could help your business to succeed and prosper. If you’re among those entrepreneurs that believes in micro-management, better get rid of that attitude. Or, you would most likely fail at other ventures too.
10. Absence of Turnaround Plan
A good business always works with a turnaround plan. This enables them to steer through any problems that can arise due to internal problems or external circumstances to survive.
Obviously, you can’t expect conditions to be favorable all year round for any business. Therefore, the steps you take to counter adverse situations is something you’ll need to learn from failure to prevent a business from failing.
To create a good turnaround and contingency plan, it’s best to stay in touch with news and current affairs. And a proper internal audit of your operational systems that considers inherent weaknesses and strengths of self and staff. This helps counter any foreseeable and non-foreseeable situation.
Other Lessons from Business Failures
There’re several more business lessons other than ones in the above list. You could learn from failure as well.
- Overspending: Occurs when business owners dig into their profits to afford luxuries, depriving the enterprise of cash.
- Customer Appeasement: giving away gifts and freebies to every customer in the vain bid to gain loyalty.
- Business with Seasonal Demand: any business that depends only on specific seasons and festivals to get customers, is a sure failure.
- Wrong Location: choosing the wrong location is also one of the reasons for businesses to fail because of logistical problems and cost of service and product delivery.
- Tall claims: and finally, never make tall claims about your product or service because it leads to unhappy customers and negative word-of-the-mouth publicity.
While failure at a business can occur due to various unexpected factors, it’s always possible to avoid these with due diligence and proper measures. Even a large multi-billion Dollar- Airbnb- was about to fail.
However, its founders managed to prevent failure by learning from failure. You too can do the same.