Why Entrepreneurs Fail: The Reality

Why Entrepreneurs Fail

Influential people often say very impressive things. Those statements sound very profound, we often fall in love with them and we quote them quite often creating a myth which is not real.

Being a research oriented person, I am somewhat skeptical in nature and do not get swayed by these seemingly profound statements. I want to pick up on one of such widely quoted statements meant to inspire people, but unfortunately, I feel that misleads impressionable young people.

There was a recent conference organized by Leadership in International Management and in their research finding, they stated that 90 percent of Bangladeshi business start-ups fail within five years. To me, this is not very unusual or unexpected, except that the rate is significantly lower (it is about one third of start-ups, still high) in the developed countries. The reasons stated are also similar to what happens worldwide: lack of interest in or understanding the importance of planning, lack of skills, etc.

I just hope that people will not say things like "a true entrepreneur never fails" and what we should really study is what these 'true entrepreneurs' do that make them successful. Somehow, it implies that planning, skills, knowledge of the business are superseded by that trait of the successful entrepreneur. Studying what accounts for their success is certainly insightful. But there are also other things that may be more powerful for "would-be" entrepreneurs.

You must have heard the saying "learn from your mistakes". It is certainly a good advice. An even better advice is to learn from anybody's mistake, especially if this "anybody" tried to venture into a risky unknown domain. Think of Benny Luo, owner of Nextshark, who failed many times (he is known as serial entrepreneur). Let me quote Benny Luo, "--- one day I realized that after each failure, I always gained some valuable knowledge of things I could apply to or avoid in my next project. That was the attitude I adopted after every failure from then on, I focused on what I gained instead of what I lost, because that's what really matters in the end." Would you have recognized Benny for his "traits" until he finally achieved success with Nextshark?

Now, if you say that "a true entrepreneur never fails" and you go on to find true entrepreneurs from a pack of successful entrepreneurs, I have already lost the argument with you. You have already defined all successful entrepreneurs as "true entrepreneurs" and those who, to this point, failed to make into that category have been bunched together into "not true entrepreneurs" in your definition. Think of Charles Goodyear, who invented vulcanization of rubber needed for producing tyre. Goodyear died in debt and penniless. But many years after his death, the Seiberlings made a fortune from selling rubber tyres to Henry Ford when automobile industry took off. Later generations of Goodyear family lived well with the royalties of Goodyear's patents. The Seiberlings had enough money and managerial skill, a disciplined way of approaching the business, and the timing was just right for Frank Seiberling. Even when you think of Bill Gates, one has to wonder what might have happened if he were not presented with the opportunity to build the disk operating system (DOS) for IBM when the original developer (Gary Kindall of Digital Research Incorporated) refused to meet with IBM brass because he harbored strong disdain for big corporations. Opportunity rarely knocks twice.

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Account BenefitInstead of pointing young people toward an abstract indefinable trait of a "true entrepreneur", we should promote the importance of education, skills and training, and do not undermine the importance of planning and managerial skills. It may be true some people may be better at risk taking, some people may be better at recognizing what truly matters in entrepreneurial decision, but unless sound management principles are applied, whether it is by the entrepreneur himself/herself or by a skillful manager, the chances of success by the entrepreneurial venture is not very good, and all the "hard to define trait" of the entrepreneur will be of no use.

Very few among us have a good comprehension how good is a good student in the developed countries. They have focus, they are strong in fundamentals, they know how to separate truly useful statements from worthless quotes, when they have deficiency, they know what they are and how to get help to overcome those deficiencies. There is a deep knowledge pool, and when someone is uncertain about something, there is no hesitation to access the pool of knowledge, seek advice from an expert rather than seek and pray for a miracle or some "heavenly trait".

To be a successful entrepreneur, you have to be intelligent, not necessarily a genius, and have a strong foundation of the basics which you probably built at your school. You are not swayed by fluff. You value skills, knowledge, and a systematic approach to solving a problem. You don't hesitate to seek advice from a knowledgeable person to advise you on something you have some uncertainty. You are tenacious. You never underestimate the value of looking ahead with a good plan and some alternative scenarios. You are focused, you have a very good idea what is important and what is not. Sometimes you will make mistakes, but it will never cripple you. You will learn from it and will go on.

Witten by Prof. Dr. Sharif Nurul Ahkam is the Dean of the Faculty of Business Administration at Eastern University
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