“I have not failed…I have just found 10,000 ways that won’t work,” said Thomas Edison.  Sometimes I reflect on my experience with opening and ultimately closing my family entertainment center.  Why do some businesses make it while others fail?  Is it timing?  Location?  Lack of experience?  Luck?  Or maybe a combination of these, or none of these at all?  They say that 8 out of 10 new businesses fail.  That’s 80%!!!  That is a huge number.  Why would ANYONE want to take this risk?  People decide to start their own businesses for many reasons, but first, let’s talk about some reasons businesses fail.

The primary reason businesses fail is cash flow issues. However, there are many other reasons why and how they get to that point. Here are a few of those reasons.

Out of touch with your customers

When you see an opportunity in the market, we are often too quick to jump in with both feet and not explore and listen to our customers enough, or at a deep enough level, to gather all the necessary information.  Alternatively, we are only listening to a small segment of our customers and assuming that all or most of our customers share the same feelings or desires.  I have seen this often with new games or attractions.  We go to a tradeshow and try out or play a new game we enjoy. 

We spend thousands of dollars on the game or attraction and assume that all our customers will enjoy the game as much as we did.  A few months later, we are trying to find a new buyer for that game.  This same thing happens with our business plan.  We plan our business on the idea that we think everyone would enjoy, but we don’t receive enough information or feedback from our customers.  Approximately 10-15% of businesses fail because they neglect their customers, and 40-45% fail due to a lack of market demand for the products or services they offer.

No differentiation from everyone else. 

I realize that this is almost the opposite of #1. There is a delicate balance between reinventing the wheel and differentiating your business. Numerous proven concepts generate income in the right location or scenario; however, you also need to differentiate yourself.  If a similar business opened across the street from you, how are you different or better?  Approximately 15-20% of businesses fail due to being outcompeted. You need to have a value proposition.  What makes you different and better than other entertainment options your customers have? 

Who is Your Competition

Who are your competitors?  In the family entertainment space, we face considerable competition.  We have more competition than many of us would like to admit.  When I started my business, I underestimated the sheer amount of competition.  When planning our business, we always consider other similar businesses as competition.

Still, we forget that our competition is anything and everything a family might do with their time and money. This includes all kinds of fun at home, such as streaming movies and playing games. It also encompasses activities like hiking, camping, and visiting the lake. In my particular location in northwest Montana, I was near Glacier National Park. 

Busines Plans

In my initial business plan, I considered the 4 million visitors each year that we would receive BECAUSE of the nearby park as potential customers.  And they were potential customers; however, I later found out that they were only customers when the weather stopped them from going to the park.  Summer ended up being my slowest season, despite having 40 times the population in the area.  My competition was the national park, the lake, camping, fishing, and outdoor fairs & festivals, which I failed to account for in my initial business plan.

Failure to communicate

Do you have an amazing business idea that appeals to everyone?  You know who your competition is and have a value proposition that sets you apart.  Your value proposition can’t just be a slogan or buzzword; it has to be what TRULY sets you apart.  You need a value proposition that resonates with something your customers want and/or need, and that sets you apart from others in your field and competitors.

You must convey that message effectively to your customers.  This is one of the areas that often leads to the failure of many new businesses.  Build it, and they will come was only a slogan in the Field of Dreams movie; it doesn’t apply to real life.  You have to communicate and tell a compelling story to your guests. 

Internal breakdown

Many underestimate the sheer amount of knowledge and skills required to be successful entrepreneurs. As a business owner, it is essential to understand your strengths and weaknesses. You should build your team around your weaknesses and hire those who can fill in areas where you are weak. It’s estimated that around 20-25% of businesses fail because they don’t have the right team.      

So, with such a high probability of failure, why would ANYONE want to start their own business?  There are many reasons why people choose to start their own businesses. 

1. CHALLENGE—Some people seek challenges. Starting your own business poses challenges that you could never encounter by working for someone else. 
2. FREEDOM – Another reason is the freedom to be your own boss.  Even though many go into business with the false idea that they will work fewer hours than working for someone else, having the freedom to choose the hours you want to work is a benefit of owning your own business.  This benefit can also be a double-edged sword.  When starting a new business, let me assure you that a 40- or even 50-hour work week is a myth that business owners only dream about.  You will put in countless hours for little to no pay.  However, once you are established, you will have the freedom to be more selective about the days and times you choose to take off.  Remember, if you have kids and are starting a family entertainment business, you must be at work the most when the kids are out of school.  This will mean that you will work the most during weekends and school breaks and will NOT be spending that time with your kids.  If you’re starting a business to have more freedom to spend time with your kids, you might want to consider a different type of business. 
3. POSTERITY – People start their own businesses for pride and posterity.  Everyone wants to leave a legacy and pass something on to their children.  What’s cooler than leaving a profitable family entertainment center to your kids? 
4. MAKE A DIFFERENCE—Some start their own businesses to change the world. They identify a need or demand and want to fulfill it.   
5. MONEY – Money is usually at least part of the motivation to start a business.  Not only are there tax benefits that accompany running your own business, but there is also the freedom to know that you can directly affect your destiny and ability to make money.  And although the first few years may be rough, owning your own business is a high-risk, high-reward proposition.

Why did I start my business?  Probably a little bit of all of those reasons.  I felt that there was a need I could fill and make a difference.  I liked the idea of a challenge, freedom, and potential for future profits.  Why did my business fail?  There are many reasons and answers to this question, and I have explored and soul-searched, thinking I have found the answers. Stop by the next time you see me at a trade show, and we can discuss it. 

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