Why Entrepreneurial Leaders Fail in Business

The bible provides direction for those who have ideas for future projects. The idea can be the creation of an invention or a children’s book. In the second chapter of Habakkuk, it states that visions (or ideas) should be written down adequately so that it can be implemented. However, many new entrepreneurs quickly start businesses without devising an adequate plan. The main reason new entrepreneurial leaders fail in their business ventures is inadequate planning.

Many established business leaders have expressed what they believe to be the top reasons why businesses fail. Leaders including David Kohl (2008), Mark Landsbaum (2006), and Stephen Perry (2001) have studied and worked with small businesses. They believe that many unsuccessful businesses began without the development of a well written business plan before start-up. One result of not having a business plan is a shortage in capital, which is not identified until after the business starts (Kohl, 2008). Fer Reiss (2007), CEO of PublishingGame.com-/Expertizing.com, comments on what he believes is the largest problem with leaders of small businesses:

“The biggest problem and the largest contributor to small business failure is lack of proper planning. You need to plan all aspects of your business-from how much money you’ll need, to what equipment you purchase, to which location is optimal, to how you’re going to handle staffing. Many entrepreneurs have a great idea for a new business and start it without spending the crucial time to sit down and plan for its success…Creating a business plan is boring and time-consuming, but if you don’t have a plan for success, you won’t succeed (p. 1-2).”

There are many business leaders whose businesses have closed sooner than what they have expected. Their businesses may fail due to inadequate money management (i.e. accumulating too much debt.) However, as supported by other business leaders, there needs to be a well written business plan for businesses. The business plan would assist the leaders with establishing the budget and capital needed to start up the business. In addition to having a business plan, it is important that leaders and their partners are disciplined enough to implement the plan or are able to hire an accountant/bookkeeper to handle the businesses finances.

While business plans help develop a set plan for capital needed for start-up, they also provide direction for businesses and identifies the businesses target audience (or customers). Compasses and maps help drivers understand their present location and the directions needed to reach their destinations. Business plans that contain three to five year projections help business leaders understand their current location, their goals (for 3-5 years) and strategies of how to accomplish those goals. Business professional Rick Sloboda (2007) quoted a comment by author Michael Miller on businesses without audiences: “…if you don’t know who your audience is, you really don’t know why you’re creating a plan- and a plan with no purpose is a plan for failure (p. 2).”

Based upon the experiences of business leaders, it is highly important that new businesses establish and implement adequate business plans. Business plans increase the likelihood of their survival. Business plans help organize the important aspects of business (i.e. startup capital and marketing strategy). A leader who starts and attempts to run a business without a plan is destined for failure.

REFERENCES

Kohl, David. (2007). Seven Reasons Businesses Fail. Retrieved 8/5/2008 from,
www.cornandsoybeandigest.com/marketing/markettips/7-reasons-businesse- fail/index.html.

Landsbaum, Mark. (2006). Why Businesses Fail—And Why You Should Know.
Retrieved 8/5/2008 from, www.entrepreneurialconnection.com/Skills/module19/skills_home.asp.

Perry, Stephen C. (2001). The Relationship between Written Business Plans and the
Failure of Small Businesses in the U.S. Journal of Small Business Management, 2001, 39(3), 201-208.

Reiss, Fern. (2007). Why Small Businesses Fail. Retrieved 8/5/2008 from,
www.publishinggame.com/art_whysmallbusinessesfail.htm.

Sloboda, Rick. (2007). 13 Reasons Why Most Businesses Fail. Retrieved 8/5/2008 from,www.cmswire.com/cms/tips-tricks/13-reasons-why-most-businesses-fail-001862.php.