AQ Blog #67 – Failed Business … For Usual Reasons

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We met every day, from noon to evening, and talked and talked. Too many ideas were there, most of whom had to be killed due to their impractical nature. JNS always deferred to me and respected my opinion. It was totally different to what I had been doing, but it was exciting, and it was fun.

Two months later, we launched the first phase of the new project. It did better than expectation. It boldened JNS and everyone. Preparations started for a Mega second phase. It came after about three months. It was a Mega Show and it received Mega Reception. The ball rolled.

Meanwhile, I had started marketing in Lahore and Faisalabad. I hired a smaller team in Phase I and later enlarged it for Phase II. The initial take-off was fine. I had never considered running my own business, but here I was, pushed into it and doing it. The Mega second phase started falling apart rapidly. In hindsight, I can say that the company was not fully prepared to handle the task.

Things started getting awry. My set up was not doing well either. I added few more products from another company. The business was running and pulling itself but not generating enough to sustain me. I was getting disillusioned. I had never intended to go into business; I got pushed into it somehow. I also have no hesitation in admitting that all that could have been done was not done. I closed my so-called business at the end of 1998 and started looking for a job. I had invested little money in this business as I didn’t have a lot to spare. I did not lose much money in this venture, but I did lose time and face.

This is the typical story of a lot of managers, senior and junior, who go into their own business and lose. In my observation, for one successful manager-turned-entrepreneur business, there are one hundred failed ventures. Why is it so? Why does it happen, so repeatedly and predictably?

I see five patterns as reasons.

1. Managerial mindset is different from entrepreneurial mindset. While an entrepreneur is looking for opportunity, a manager is busy in setting up things. Starting a business from scratch and building it up is not part of managerial training and orientation. Managers build and grow running businesses. Entrepreneurs build from bottom up, from nothing to something. This is such a huge difference that it etches the failure in the foundation. I have talked to many seasoned managers while they were planning to go into business. Their confidence arises from the fact that they were running billion-rupee business or running a thousand strong team. True, but they did not start it. They were assigned to it and they ran it.
2. Resources-on-demand. Managers get resources on demand. They would grumble and cry if they did not get enough resources. They do not generate their own resources, on their own responsibility. That is a key difference. Entrepreneur knows he has what he has, and no one is bringing resources from elsewhere. When managers start business, they quickly consume their capital on necessary (business) and unnecessary things (office, décor) and then complain about lack of resources.
3. Shared Responsibility. No manager has the ultimate responsibility of sustaining the business. He has a part of responsibility. Therefore, managers are not used to the position, the-buck-stops-here. Even the senior most managers are supported by senior managers. Entrepreneurs have to take up the responsibility all upon themselves. Managers go home on time, go on vacations and go out if things get rough. Entrepreneurs do not have any such relief. Finally, the managers do know that the business will not fall apart if they are not there, because the overall burden is shared by many. Entrepreneurs know they are a one-man army, the first line of defense and the last line of defense, and there is no one to share responsibility with.
4. Partial View. Even the senior middle managers have a partial view of business. They may know enough about business, but they don’t know anything about finance or regulatory issues or taxation and so on. The more senior a manager, the more difficult it is to learn new things. Entrepreneurs are not trained on everything either, but they know from the outset that they have to know it and they learn fast.
5. Option of going back to job. Finally, the mother-of-all-reasons. Managers always carry the notion that they can go back to job. They keep this option open in this mind. With this window open, they never try to run the business like their life was hanging on it. If they know this is the end of life and they have no option but to succeed, they will behave differently. Entrepreneurs never think like this. They do not have an open window behind them. They understand their life depends on it and they give their everything to it.

I would ask all aspiring managers who wish to go into business, to look inside honestly and objectively. If you are not ready/ fit to do it, please don’t.