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10 Reasons Even the Best Business Models Fail


Have you ever wondered why even the best business models fail? In fact, according to a study conducted by Bloomberg, almost 8 out of 10 businesses fail within 18 months of starting. That means a whopping 80% of enterprises fail that early after their inception. So the question out there is what is the big lesson to learn from this massive failure record?

On the face of it, a primary reason why even top business models seem to fail looks to be a lack of cash. But is running out of cash the only reason? Are entrepreneurs so bad at cash management or is there more to this story? Well, the reality is the financial crash is only the eventual end; the crack appears well before that. Most times these problems have the beginning right at the foundation. Either a problem with the basic model or even the execution of the model proves to be the problem point, and this is what leads to the eventual crash. It is only when matters come to the financial crunch, they come to the forefront. Here is a quick lowdown on the 10 most common reasons why even the best business models fail.

Top Reasons Even the Best Business Models Fail

1. Lack Of Connect With Customers

The customer is king. As an entrepreneur, you must remember that your product is as good as the customer likes it. So often you see even the top business models failing because the entrepreneur suddenly decides to retreat in the background and loses connect with the customers. It is very important to keep a continuous check on your customer’s preferences:

  • What is the top trend amongst customers?
  • Do customers still like your product?
  • Do customers want new features in the product you are offering?

Additionally, as an entrepreneur, you need to pay extra attention to any negative review that the customers would come up with. That by far is the single most important element that can help you to improve the product offering and plug the loopholes.

2. No USP Result In Best Business Models Failing

A major reason that you see even the best business models failing is the lack of unique proposition or inability to differentiate the brand from 20 others in the market. The basic of business is that the entrepreneur should always work out the unique selling point of the product. If they fail to do that, it clearly results in a bad response for the brand, and this could eventually lead to the business model failing to take off. So take time off and understand what makes your business special. It is this fact alone that will help you create a brand with high customer recall and help your business flourish.

3. Entrepreneurs Fail To Communicate

Failure to communicate is another key reason why you even top business models could potentially fail. Even you find a unique selling point and take pains to connect with the customer; you could potentially blow your opportunity if it is not communicated effectively. You have to look at delivering your message in a clear, concise and a compelling manner. This alone will ensure that the product or the brand that you are offering becomes a sure winner at all cost.

4. Failure in Appropriate Execution

The best business models could fail if the idea that is driving the business is not executed in an appropriate manner. As an entrepreneur, you have to understand that executing the idea is almost as important as conceptualizing it. It is, therefore, important that you oversee the executing process as keenly as you would do the execution element. Lack of proper execution might result in even the best of businesses collapsing like a house of cards and not being able to realize its original potential that might have been envisaged by the founders.

5. Need to Patent Property

Intellectual property right is a major concern area, and even the top business models might see their foundations floundering, even the products are not patented appropriately. Just merely registering your business is never sufficient. You must take care to also create appropriate copyright for your business as well as make trademark. Without this kind of appropriate safeguarding of intellectual property, you can easily squander the unique opportunity that you might have latched on. Someone smarter than you could even go on to patent a product created by you if you are not careful.

6. Need to Create a Strong Team

A strong team is a key requirement to build a strong business. So while you might have a great concept and manage a unique brand positioning, without a strong team effective execution is nearly impossible. As an entrepreneur who does not want their business to fail, you must pay attention to pick every team member carefully and then work with them tirelessly. It is only through this unique approach you will be able to create a team that is strong and confident and which can execute your concept just the way you imagined.

7. Underestimate Resource Requisition

Top business models could run the risk of failing if they are unable to assess their resource requirement appropriately. Your initial fund requirement is not the only resource that you need. To maintain continuous cash flow and even account for a contingency fund, it is important that appropriate resource allocation is done. If you suddenly divert funds, your daily running of the business as well as the cash flow situation gets impacted severely and might even result in ultimate collapse.

8. Lack of Planning

That brings us to the next important reason why we see many businesses failing. You might have often heard business leaders emphasize the importance of planning. Yes, an efficient business plan inevitably is the backbone of the best business models that you might choose to execute. Without planning and proper accounting of expenses, funds vis a vis requirement, a collapse of the business model is almost an absolute certainty.

9. Failure of Leadership

Just by choosing the best business models, you cannot guarantee success. A lot depends on the overall efficiency of the team that runs it and the entrepreneur who leads the team. Therefore, it is wrong to assume that just by creating a concept, an entrepreneur becomes a leader. Leadership is a completely different ball game. It needs diligence, keen vigilance, agile response and most importantly the unique ability to stay ahead of times, to continuous innovate and motivate the team to share the passion with which they are driving the business. Therefore, a potential failure of leadership and high handedness by the leader could often lead to the business model failing.

10. Not Timing Expansion Correctly

Scaling up the business is almost a necessity to help the business grow. But the how and when of any such expansion is very crucial. If you are not able to scale up appropriately, you will fail to realize the revenue that you planned to generate. As a result, the business could begin bleeding and even collapse if not handled properly. Therefore top business models have also experienced failure when they have not been able to these basic rules of any expansion drive undertaken.

Conclusion

Top business models, therefore, can only function efficiently when the associated elements of a successful business venture work in tandem with it. It becomes very important, even for the best business models to work in sync with current realities. The moment an entrepreneur loses sight of the current necessity and the reality, the base of the business begins to flounder with even potential collapse if not addressed on time. Therefore we can safely conclude that a business model by itself cannot guarantee entrepreneurial success, it needs disciplined execution by a motivated team under the able leadership of a passionate entrepreneur. The profitability is directly proportional to efficiency in this case.



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"Whether you think you can, or you think you cannot, you are right." - Henry Ford

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3 thoughts on “10 Reasons Even the Best Business Models Fail
  1. I wonder what the site managers think about dropshipping business. I think that, if you want to build a business which doesn’t tie you to one place, dropshipping is the way to go. Do you think that is a good and reliable opportunity?

  2. a golden topic for the continuation of any running business or its start up.

    thank you.

  3. Great question, would be good to hear an opinion on that also.

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