Study Business Failures

One of dozens of strategies listed and linked to here:
How to Make More Money From Your Business


What can you learn from looking at business failures? You can learn what not to do, and that's a good start toward running a better business of your own. Actually, when you see the volume of errors and stupid policies in even successful businesses, you start to realize that as easy as it is to make mistakes, you have to make a whole lot to actually fail.

But what if you make fewer mistakes? What if you look at all the marketing disasters, dumb policies and outright business failures around you and use each to improve your own company? That's a recipe for bigger profits.

I once watched a small two-person service business do $102,000 in sales their first year, yet make almost no profit. One of their mistakes was over-spending on marketing and advertising, without any clear way to measure the results. The lesson anyone can apply: Find a way to measure the results of your advertising and look specifically for mediums allow for measurement. For more on how to do this see the page Measure Advertising Results.

I have seen a number of businesses suffer or fail due to cash-flow problems. Profits might be there, but because the owners did not know how to manage the money as it came and went, they were always in trouble. Look closely at the tragedy of a business which is profitable yet fails, and you might get motivated to make a plan to avoid a similar fate.

In particular you should look around for businesses which are similar to yours and have either failed or are struggling. If the failure already happened, invite the owner out to lunch and get the story. Otherwise watch and ask around.

This isn't just about dumb mistakes either. As the owner of a bookstore you might do well because of smart marketing that wins customers away from other stores. But in looking at the failures of other bookstores you might discover that the primary problem they have is that fewer people are buying books, and fewer are buying them from physical locations, preferring to shop online. You could realize that as soon as you stop getting the customers of failed stores because those stores are all gone, your growth will stop too, and your sales too will start to fall as the trend continues. It might be time to expand the coffee shop part of your store, or to invest profits into something else entirely.

There is a lot to learn from business failures, whether you read about them in financial magazines or do some more relevant research in your own town and own industry. Just be sure to use what you learn.

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