As a solo entrepreneur, you’re going to be trying different things. Some of these will work, but others won’t. The key, however, is to learn from what you’re doing so that you make progress on your journey to success.
Building a business is an ongoing process of trying something, making occasional mistakes, learning from successes and failures, and trying again – this time on the basis of what you’ve learned. In this context, a mistake is just a step in the process of learning what works.
With that said, here are three warning signs which show that your business is headed for failure. As you try new things, make sure these issues are addressed.
Simplicity is an important aspect of success as a solo entrepreneur. Unnecessary complexity tends to cause more problems than it solves. Thus, you should be concerned if your business, or a solution to a specific problem you solve, is starting to get too complex.
Ironically, another warning sign that your business is headed for failure is success. Successful companies can fail in an instant. Here are three reasons why:
- When your business is succeeding, you may forget to take the time in order to understand the real reasons for your success. You won’t realize that things need to change until it’s too late.
- When you succeed in your industry, others will notice and want to enter your industry as well. Success can result in more competition.
- It’s just natural to let your guard down – at least a little bit – when you achieve success.
Success is often achieved when a business has mastered the skills that are required to perform well in the current environment. But when the environment changes, that business may be slow to respond appropriately.
As a solo entrepreneur, this reiterates two important principles:
- You need to reinvent your business regularly, and
- You must understand the true reasons behind how your business creates value.
If you wait for competition to emerge, or for problems to become apparent, maintaining your prior success will be more difficult. It’s better to assume that you’ll be facing competition from the beginning and act accordingly. Thus, you need to be reinventing your business even everything is going well.
Not Recognizing and Correcting Mistakes
The trait that separates entrepreneurs that succeed from those who fail is this: an ability to recognize that a serious mistake is happening and take action to prevent the ultimate failure of their business.
Actions that you can take include:
- Regularly validating your assumptions
- Getting as much feedback from your customers as possible
- Monitoring your competitors and the market’s response to their initiatives
- Creating metrics to serve as warning signs of important industry changes
If customers are thinking about doing anything differently that’ll impact your business, you need to recognize this change and act on it as soon as you can.
Another helpful exercise is to make a list of things that could seriously hurt your business. These include the loss of an important marketing channel or central client business, among other things.
Once you have your list, ask yourself:
- How do I know these things aren’t happening now?
- What if my assumptions are wrong?
- How can I test this understanding?
Only you can ask yourself the hard questions. Ignore them at your own risk.
To learn more about why businesses fail as well as how to prevent failure, check out Go It Alone by Bruce Judson.
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