Why Entrepreneurs Fail

Entrepreneurism is broad, and I mean to be interpreted broadly, but primarily in the context of starting a productive venture from scratch.

The number 1 reason why entrepreneurs fail is a confusion in the order of importance between logic and passion. When entrepreneurs venture out, they often do so motivated by a deep passion–either for themselves, their idea, getting rich, serving their hallowed customer or for some other object of their passion. Armed with such passion, they are compelled to set out into the unknown. They take a risk and set sail.

This productive wanderlust is desirable, but only as an engine steered by unmerciful logic. Ventures these entrepreneurial protagonists pursue, by nature, do not have the benefit of already being established. Thus, in contrast to a regular job, the entrepreneur cannot merely follow known processes or even improve upon what exists. The act of venturing is one of discovery and then of building and then of refining, with the goal of course being to ultimately create a business of great value. On a continuum of intellectual demand, the “job choice” of entrepreneur might be compared to dual roles of inventor + marketer, film director + producer, or architect + developer. Admirers of such professions know that these all require tremendous mental dexterity individually, let alone in combination.

Yet passion tends to distort reality. The notion of the “future working itself out” is an alluring cop out as the entrepreneur passionately burns through time, energy, and money pursuing an ill-defined endgame on an ill-defined path to get there. And inevitably, when a cycle of failure sets in — missed deadlines, shortfalls in sales, expenses not turning into expected results — objectivity and reason become even further blurred by the mind-bending distractions of doubt; of answering to the disappointment of investors (or spouses and underpaid cohorts); of blaming “uncontrollable” variables that seem to haunt the entrepreneur and the venture with relentless ferocity.

Depending on the venture, the resources in play, the level of gamble, the level of partial success, it lasts until this passionate entrepreneur sputters to a stall. Truly, in this analysis, it doesn’t matter whether the venture was a colossal failure or it turned into a wee little business. The envisioned level of success was not achieved. The entrepreneur failed. And even at this end, most entrepreneurs still let their passion reign as they refuse to admit–even to themselves–that the failure was a result of their own error in judgment (whether at the beginning or along the way).

Yet, no research scientist would admonish himself for an error in judgment at the onset of an experiment. Indeed, the nature and purpose of an experiment is to test a hypothesis. And upon review of data, the idea is to improve upon relevant judgments and set forth further experimentation. The researcher contains the cost and time of testing hypotheses along the way in order to arrive at some destination of study. Also, along the way, the (good) researcher is ardently dispassionate, in a sage attempt to avoid bias in interpreting results. The researcher is able to remain passionate in purpose (as in, an engine), while allowing his objective logic to drive (as in, steering wheel).

The entrepreneur is similarly and necessarily required to make predictions, judgments and conclusions from start to finish. And wherever the failure along the way, that’s where the error in judgment is to be found.

This truth is almost foreign in the stark contrast with the chorus of excuses: “We could not predict the market timing” … “Funding for our type of business dried up” … “Larger competitors stole the market” … “The development team did not deliver” … “Pricing pressure made it impossible” … “My partner was at fault” … “Unforeseen costs killed us.”

These are all, in fact, errors in judgment. If the error shows itself early, could it not have been predicted from the onset? If it emerges later, was there not an opportunity to set a new coarse?

Not all businesses can succeed, no matter what. Some ventures that start for all the right reasons and operate under sound logic along the way, still will fail. Perhaps my title should be “why most entrepreneurs fail,” or perhaps better, “why most ventures fail.”

All fail because of an error in judgment. Most fail because of one or more avoidable errors in judgment. And, of these, most errors occur because the entrepreneur’s logic plays second fiddle to emotion (the less savory word for passion).

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