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Why Businesses Fail:The Answer Will Surprise You


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Why Businesses Fail: The answer will surprise you.

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Why Businesses Fail:The Answer Will Surprise You

  1. 1. Why Businesses Fail The Answer will Surprise You Al Walsh Walsh Enterprises Business & Financial Advisors Huntington Beach, California USA [email_address] (714) 465-2749
  2. 2. <ul><li>A great deal has been written on this topic. It seems like there are “experts” around every corner. Having spent the past three decades building businesses, and helping others build or save theirs, I’ve come to my own realization. Businesses largely fail because of EGO . </li></ul><ul><li>Certainly there are exceptions to every rule, but it’s been my experience that ego causes more business failures than all other factors put together. </li></ul><ul><li>Ego is often confused with drive and independence, which are admirable traits for a business leader. Anyone running a business, or contemplating one, needs to set the vision and tone. Ego, however, is a negative trait that leads business leaders to poor decisions and practices. </li></ul>
  3. 3. <ul><li>“ I need control.” </li></ul><ul><li>Ego causes people to build walls around themselves. They have difficulty seeking or accepting help or guidance internally or externally. Good managers and employees get frustrated and leave because they don’t feel trusted. Advisors and consultants know that the primary excuse for turn-downs is “money”, whereas the real reason is usually “ego” (flexible financial terms can be arranged). </li></ul><ul><li>Ego causes greed and an inability to deal appropriately with others. The classic case is the entrepreneur who expects an investor to put up most or all of the money, and take on most of the risk, while only receiving a miniscule ownership interest. Good luck with that! </li></ul><ul><li>Ego causes emotional decision-making. A chest-thumping posture is not the way to approach business decisions - yet that’s what happens in way too many cases; often without the awareness of the chest-thumper that they’re doing it. </li></ul>
  4. 4. <ul><li>Ego causes people to hang on to bad decisions and practices way too long. All business leaders make mistakes; especially new ones. They need to cut their losses and move on, but some people just can’t do it. The classic case is the business owner who sits and does nothing even to the point of staring bankruptcy in the face. They can’t admit that they made a mistake. They think that seeking help is somehow a sign of failure or personal weakness. Their ego just won’t let them. They get caught up in an emotional trap of their own making. </li></ul><ul><li>Then there’s the special case of the person who places themselves in the hands of someone else who’s offering a “canned business program”. There’s nothing wrong with buying into an already-established program or franchise in and of itself, but the decision is usually made on an emotional level. Con artists and scammers count on this, and appeal to their prey on an emotional level using heavy-sell tactics. Once in, the decision-maker magnifies the error by justifying it on an ego level; usually to their detriment. Like the business leader who sits and does nothing while their bad decisions ruin their business, the program participant stays in long past the point of awareness that they’ve been had. Lost time & money, and disappointment, are usually the results. </li></ul>
  5. 5. <ul><li>Earlier I mentioned drive and independence as admirable traits for a business leader. Let’s talk about drive first. </li></ul><ul><li>Unfortunately, some people mistake drive with a compulsive need to act to the exclusion of all else. Action is great, and necessary, but thinking needs to take place too. Emotionally-driven actions coming from ego usually lead to trouble. The results of actions also need to be monitored, and adjustments made, based upon results. There’s an old saying in the military that “no battle plan survives first contact with the enemy”. This is a simplistic but effective way, also applicable in business, of conveying the fact that no matter how well you plan, unforeseen events will occur and you need to adjust as you go. The leader operating on an ego-level has difficulty planning properly in the first place, let alone adjusting as they go along. </li></ul><ul><li>Independence is also admirable as a business leadership trait. You can’t very well lead if you’re a dependent personality. But being independent should not be equated with “operating in a vacuum”. No one has all the answers, yet some business leaders act as if they do. I even worked for one poor soul who thought that all of his managers were somehow out to ruin him. He made all the decisions, and they were basically reduced to the roles of clerks. The business reflected this in lost opportunities, inefficiencies, poor morale, and departures. </li></ul>
  6. 6. <ul><li>Regardless of whether you’re the leader of a global $multi-billion corporation, or a want-to-be entrepreneur contemplating a new enterprise, you need to “check your ego at the door” if you want to succeed. </li></ul><ul><li>This is particularly applicable to new businesses; when you’re most financially vulnerable and most inclined to make mistakes. </li></ul><ul><li>Business is challenging enough without letting ego cloud your judgment. </li></ul><ul><li>Be rational. Be reasonable. Research, think, and plan. Monitor and adjust. Cut your losses when you screw up or events turn against you. Seek assistance. Learn. </li></ul><ul><li>Good Luck, </li></ul><ul><li>Al Walsh </li></ul>