Overthrowing the Dreaded Business Failure Rate January 22, 2007
Posted by The Probabilist in : [Articles], Business, Entrepreneurship, Beliefs, Vision, Work, Assets , 2 comments
Nine out of ten new business ventures fail within the first five years. I don’t know about you, but I’m tired of hearing and reading that statement - simply because it just isn’t true! I wrote previously in what ways a business may come to an end and I felt I should make some further clarifications and explanations to debunk the 9 out of 10 failure rule for good. Following I’ll present ten different scenarios for businesses that last for up to five years and conclude a more accurate failure rate analysis from the results.
1. The business is still around. This is the one out of ten that still exists and shows a healthy pulse. Congratulations! I hope the business is treating you well and you’re working less while earning more in comparison to being a full-time employee in cubicle land. Remember that during the next five years your chances of survival are still the same as during the previous five years. These words aren’t even remotely discouraging to you or your efforts since you already feel invincible by now. But please do read the following ones just to give yourself a heads-up on possible outcomes that may not be that bad as the failure statistics try to terrorize us with.
2. The business got sold. If this is considered a failure, then count me in. A great portion of business start-ups launch specifically with the vision of being sold for big bucks in the coming years. This certainly isn’t the aim for my own blog venture, but I do wonder what the founders of YouTube have to say about the sale of their business. I’m guessing they’re feeling a bit down seeing as they failed pretty badly - in the statistics of things.
3. A better opportunity presented itself. This is the case of a business being alive for say, three years doing just fine when suddenly some new idea leaves you sleepless at nights. It might be your entrepreneurship contacts and friends deciding to put all heads together and start a completely new and innovative business that has far more potential than your current, slightly above average cash cow company. For the thrill of things and excitement thereof, who wants to run a business that ended up monotonous after a couple of years when there’s a chance of far bigger deals to be made in something completely different? Statistical interpretation: failure.
4. There’s an entity shift. Consider the previous scenario, but instead of joining or creating something completely different, you simply change the entity form to a more suitable one after you’ve noticed changes in your income generation or business model. Maybe you’re successful enough to make it into a franchise system, or you’ve simply decided to move elsewhere while still doing what you already have found yourself successful in. Statistical interpretation: failure.
5. Retirement or health related hindrance. “You’re old, sick and tired - you have failed.” How’s that for a comment to receive when you shake hands with your successor as (s)he takes over your business from you? Note again how this scenario doesn’t tell you anything about how profitable or growing the business has been before the shift happened. Saying that the inevitable or unrelated (e.g. physical accident) is accounted and marked as a failure is just plain silly.
6. Unknown, other or misc. reasons. While I’d like to let you know all possible reasons for a business to close down, there will always be the entrepreneurs checking this box when explaining the fate of their business. My own interpretation is that it is far more likely that these reasons stem from personal choices rather than failure related causes.
7. Not making a go of it. We’re gradually shifting lower and lower in the greyscale of success and failure, getting to a point quite exactly in the middle of both of them. This scenario means that the entrepreneur seized the business because it wasn’t as profitable as it required personal effort and labour. Working 14 hours per day might not be very motivating if you receive the same pay as being a nine to five employee. Note however that once again there’s no failure involved, only subjective opinion of how much the running of the business is worth to the individual entrepreneur.
8. Prevention from further losses. Now we’re getting very close to what some might define failure. This is the scenario where the entrepreneur is red-lining - losing money month after month. However, the creditors are still getting their agreed-upon payments, which means that only the business owner is the suffering party. Is this a case of failure? That’s up to you to decide. And when it comes to personality, defining yourself as a failure has never amounted to anything good compared to just accepting that you’ve tried something that didn’t succeed. Your creditors want you back for your next venture unless you’re occupied with banging your head against the wall and not realizing that you just have to bounce back.
9. Bankruptcy. Failure at last. At this point I have to give in and define this scenario as a failure. Undeniably, there has to be at least one outcome you want to stay away from knowing that nothing good comes out of it. This still doesn’t mean that the entrepreneur behind the business is a failed human being. You will find it long and demanding to dig your way out of the rubble and after that’s done, the future is up to you. Do you throw in the towel or do you learn from your mistakes?
10. The statistical anomaly. Some say the failure rate is 80 % and some say it’s 90 %. I say you decide this for yourself. Appoint this last scenario to any of the other nine ones that you’ve found most dominating over the others. If it’s failure to the worst degree then choose the 80-20 rate and if you think it belongs closer to success then choose the 90-10 ratio. This scenario is you in the making as you give birth to your next business venture.
Conclusions
My objective with this article was to turn the failure rate completely topsy-turvy. I wanted to show in a most simple way that the ratio of success and failure is completely inverted in comparison to what you might have believed previously about entrepreneurial success and failure. While the statistics say that 9 out of 10 fail, I state that 9 out of 10 succeed and only one fails. Note that this analysis does not take into account how common the different scenarios are in comparison to each other.
In my previous article I also defined entrepreneurial failure as the choice to stop being an entrepreneur. I’d also like to apply this statement into the 9 out of 10 rule. An entrepreneur that decides never to fail (as in not having the business vanish within the first five years), lives with the mind-set that they are ready to attempt 10 times before making it big. They know that most often you have to go with trial and error, or the ready-fire-aim approach. However, those who don’t share this mind-set are likely to quit after their first attempt.
When you apply this to the given ratio, it gets distributed something like this:
The most important insight you can gain from this article is that you first have to define for yourself what a successful and what a failed scenario is to you personally. Just because the mainstream statistical notion says that only a business running for at least five years is a success, doesn’t mean you have to think in these terms. Some may define the greatest success scenario as running a business for three years, selling it and retiring for good. Some may define success as running a business until their health stops them. And some are serial entrepreneurs and thrive from the thrill of starting fresh on a frequent time frame - while still being tremendously successful at almost every venture. Make up your own mind what you want to achieve, understand what the statistics mean and start creating your own, personal statistics of success. Failing or attempting a few times may be exactly the experience it takes to gain all the wealth and success that come from the business that ultimately succeeds - strictly under your terms.
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Topography of Self Growth January 19, 2007
Posted by The Probabilist in : [Articles], Calculus, Consciousness, Creativity, Goals, Personal Growth, Purpose, Beliefs, Vision, Work, Abilities , 5 comments
One of the greatest frameworks for understanding the path of increased personal development and attaining higher levels of consciousness is the analogy of topography as your growth map. Topography is the study of surface features and is most easily described as the brown, curved patterns on a map that signify elevation. Although one likes to think that personal growth follows a simple formula of continuously improving oneself, you may not achieve the best results of who you could ultimately become just by following that procedure.
To better understand my point you’ll also need to apply the basic understanding of local and global extreme points. This mathematical conception explains that if your current location is on a curve (equation of the n:th degree), then you can move upward or downward to either infinity or to a local maximum or minimum point. A global extreme point is found when you have several equation curves in the same graph and calculate or observe the greatest extreme point from there.
Now, when we combine these both concepts together we’ll start to get a glimpse of how vast the topic of personal growth really is. Imagine that your current personal “size” or level of growth is found on a topographical map. Depending on the point you’re currently at, you may see valleys and hills of different sizes below and above you. Maybe all you can see is a swamp that swallows you like quicksand and your perception of improved positions is hindered by a fog. Or maybe you only see snow-clad mountain tops where clouds present a barrier telling you that you can’t stumble and fall from your current peak performance.
The limit of this perception on your growth potential is that you only see up or down a road you’re currently standing on. You see no other paths. The thing is that there are plenty of paths leading to different local maximum points and the one you’re currently at is very unlikely to be the most optimal one - because there are an unimaginable amount of them and they increase in numbers all the time as humanity itself advances. Being open-minded is your best bet on literally expanding your horizons.
The thing about your current path that may keep you trapped, is the comfort of knowing how to behave and act in it just to get by on a daily basis. And even though you may have pushed yourself to be the best you can be in that line of development, you’re fooling yourself to believe that you’ve now reached the pinnacle of personal development and there’s nothing left to do. You’ve found yourself at a local maximum point unable to see the mountains next to you.
In order to start climbing one of the mountains next to you that will enrich your life with an even greater scenery, you are required to acknowledge at least these following steps. Firstly, your current size or point of development as a growing individual is defined by the sum of all different aspects of personal development - health, wealth, relationships, environment, security, happiness, locus of control, values, etc. The list goes on. Therefore, think first of yourself as the map reader, and think of the sum of all these growth areas as your ability to see where you are and what you can achieve.
Secondly, choose the area within your life that is at its worst shape, the one that is currently sitting on an anthill unwilling to make a difference. This is your major point of concern as of this moment. Why? Because it’s dragging everything else about you down and most strongly disabling yourself from expanding your big picture view of your personal development map any further.
Thirdly, it’s a question of leaving your old beliefs behind in order to accept, attract and allow a new belief in its place. This is the process of walking down from your anthill first so that you can start walking up that bigger mountain. It’s a scary thought even dumping whatever you had before, the one that gave you the comfort of a pleasant sunshine every now and then, but it has to be done.
To better grasp this view I’ll give you some examples. Walking on your current hill of development might for instance be eating the same food as usual, but trying to optimize how much you eat and when you eat. You might achieve the best result possible on that path, but it’s only as good as the hill you’re on. A new mountain is changing your diet completely and the different mountains around you are simply different diet programs. Another example is how you generate income. Working a nine to five job in the same industry and work task can only get you so and so far. Quitting your job to do something that has the potential of much greater income is again a question of leaving your past anthill to start pushing yourself up an uncharted mountain. Only by walking this path are you able to start expanding and drawing new areas on your topographical map of personal development.
Fourthly, you need to advance as many areas of your existence or areas of personal development as you can. Every side of growth is intertwined with the others. Eat healthier and it’s easier to exercise more. Exercise more and you feel mentally empowered. Use your brain and its different intelligences and you generate more income. Become wealthier and you have more time to do what you love doing. Do more of what you love doing and you become happier. Become happier and your relationships improve. And so on.
This is my way of using topography and some concepts of mathematics to give a better understanding and perspective of how to most optimally pursue personal growth. Remember that you can’t achieve more or perform better than you can identify within your level of understanding as possible. The thing about the areas of personal development is that there really isn’t a global maximum point to be found. Local highs are the traps that give you a feeling of comfort, ease, false pride and feeling of achievement that keep you trapped. Remember to constantly view where you are and take a few bold steps to the unknown so you can expand the radius of your perception. If something new that you try turns out to be an even smaller anthill, then you can always turn back to your current level of development, no matter how small or big it is. We all have our own levels from where to start our journeys.
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