10 Reasons Why Businesses Fail

One of the best presentations we heard during the Robert Kiyosaki seminar last month was one by Kelly Ritchie.

Kelly is one of Rich Dad advisors and wow, he was a powerhouse on that stage. With massive energy and lots of humour, he made sure we knew what he was talking about. When we met him after his session, he was the big, friendly Aussie that we knew he was. (He’ll be in KL again in July to conduct his Cashflow Club seminars.)

His personal story is interesting. He was successful at his business but he was really a big S on the cashflow quadrant (if you don’t know what it is, it’s Self Employed).

He was in his own words, “a super super S”.

The difference between being an S versus being a B on the same quadrant is that the B (Business Owner) can leave the business and it will still run without him. People who are in the S quadrant cannot do so without ruining their business. The S people are the people who run the business. Without them, their business fails.

Most people who are super super S are the smartest folks in their business. But it also means the business runs them, they can’t take a day off, they’re NEEDED desperately to run the business or it all collapses.

Here’s where things are different in the B side of the quadrant. The B (Business Owner) should not be the smartest guy in his business. His goal is to work with smarter people and run the business on systems. This means he’s not chained to his business. He can leave for a while and the business still runs as efficiently as ever.

I guess Robert wised him up to the fact that he really ought to stop being a super super S.

Kelly’s 1 hour talk was on 10 reasons why businesses fail.

Kelly himself is an entrepreneur and business owner. He’d joined the Rich Dad Company in 2005 as a franchise advisor as Kelly is experienced in setting up business franchises in Australia and North America. Right now, Kelly is in charge of Rich Dad’s Franchise, a global franchising business. (Someone who had heard him speak a few years before said he spoke much better this time around.)

Nic, Krista & Kelly Ritchie

The first 3 reasons are simply about failure to sell.

If you cannot sell, Kelly says, your business is doomed.

DOOMED. Ya hear that?

#1: Selling yourself.

The first thing you sell is yourself. That means how you look, what you wear, how you speak. It’s the visual appearance that helps you sell yourself to your potential customer. Here’s where I completely agree. It’s not called vanity. It’s called respect for yourself and the people you meet. At least look presentable and neat if you can’t be fashionable. I really don’t want to look at your torn jeans and scruffy I-fell-outta-bed hair.

#2: Selling the relationship.

The next thing you need to sell is the relationship. Kelly emphasises that you need to know what the relationship is between you and the prospect. If you don’t know what it is, then how are you to sell what they need? What is the connection between you and the other person? What are you tryng to do? Get this right first.

#3: Selling the product.

Only if you have managed to convince others of YOU and the relationship, can you sell your the product. I would add that you have to believe in your product. If you don’t, you ain’t gonna sell anything. If you don’t have enthusiasm for the product, how about faking the enthusiasm? Fake it till ya make it.

#4: The Big Reason.

What is the big reason that prompted you to start your business? Basically it boils down to your mission. Is your mission sound enough? Is the WHY convincing enough? If the “why” is missing, you’ll give up the business easily. If you don’t know your “why”, you best find it. The Big Reason keeps you ploughing along even when challenges seem big and hairy and burly.

#5: Code of conduct

Besides The Big Reason, what holds you together is your code of conduct. It’s what we call Principles. I read once that Robert Kiyosaki gave up his velcro wallet business back in the 1980s because he didn’t like the idea that his wallets were produced under dire sweatshop conditions in China. Someone once said that if you don’t stand for something, you’ll fall for anything. True. What guides your business? Would you do something illegal, dishonest, unscrupulous? Would you do something that goes against your personal convictions?

#6: It’s teamwork.

Robert Kiyosaki takes a lot of examples from his military background as a US marine. In the military, it’s about teamwork. Kelly reiterates the same. If you are the smartest guy on your team, your business is in big trouble. To grow, you have to build a team of people smarter than you. It’s imperative to build a strong team as no one can do it all alone. Find your teammates and work with them.

#7: Lead!

A business needs a leader. You have to be able to lead your team if you want to win. In order to lead, you have to grow into the role of leading. You have to rally the team around and keep them motivated and inspired to work with you. A leader is a tough role but any business that seeks to succeed needs a fine leader. Learn to lead.

#8: Price versus cost

Kelly was amazed that most businesses fail because they didn’t know the difference between the price and the cost of a product. This is the number one art of business. What does it cost you to produce your product or service? It’s not just about the physical materials; it’s also about the time you spent (time is not free), your team’s input in addition to other resources. Know your price and know your cost.

#9: Bad partners

Most businesses fail because of bad partners. Yes, know your partners well. If your partner is lousy, what makes you think your business is going to be rosy? A bad partner however may seem bad at first glance. So you have to be choosy and work with really good partners if you want your business to succeed.

#10: Procrastinate

The final crunch is that most businesses fail because they are too afraid of risks. They don’t want to do the real stuff that grows their business. So instead of say, calling up prospects, they’d do paperwork or filling. Instead of handling a tough task, they do the easy ones.

4 thoughts on “10 Reasons Why Businesses Fail”

  1. Thanks for this short, but clear advice. I can vouch for a few of his points above, even though I’m not running my oqn business but am doing marketing for our department’s courses. Another point he could have added is poor planning. This includes strategic planning, resouerce planning and people management and planning.

  2. Yes, i fully agree with all the 10 pointers above including Prabhjit’s , but i beg to differ one more important factor is that if there is no “PASSION” , there will be no spark in the business . Everyday will be a dragged

  3. Hi Prabhjit – Yeah, what you pointed out actually comes under systems. If there’s no systematic way of doing things, things always fail!

    Hi Karen – Yes, passion is one of the key intangibles in business. Passion can summed up as – if you weren’t paid to do this at all, would you still do it happily? Most people who look at the money (start a biz because they are eyeing the money) will quit when the going gets hard as it’s all about the money and not an ounce of passion.

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