- Yeah.
So failures suck at the moment.
It hurts.
Nobody likes to look stupid
or feel like people are judging them.
But, I also know this,
that everybody forgets your failures
once you succeed.
(upbeat music)
Why do companies fail?
Like you may have heard the stats
that 50% of companies won't make it to the first five years,
or 80%, I mean, it's literally depending
on the data and the statistics you look at,
it's a little different.
But the truth is, from my experience is,
that 90% of companies won't even make it to,
I think it's even less.
It's like 3% will make it to 10 year mark, okay?
But regardless of how many make it,
I'm going to share with you guys the number one reasons,
the five, that literally kill the business.
And if you know these, you can avoid them,
you're gonna be in a better spot.
And I know if you're, today in your business,
worrying about revenues and just feel like,
you know what, you're not making the sales
to be able to fund the growth of the business.
Or you're looking at your cash flow statement,
are you, because you should be.
Ask your accountant for a cash flow statement.
If you're asking for that, and you're looking,
you're doing negative operating cash flow every month,
then you need to fix that.
Or maybe the people on your team are frustrating the crap
out of you, and you're just like,
"Why can't you see my vision?"
It's probably because you didn't set one.
But I digress.
If those are frustrating parts of your business,
all good things, I'm gonna teach you why,
the five reasons that companies fail,
and if you do this right,
you're going to have staying power.
I really believe that if you put the time
and energy today, right, and there was this great quote
that says something like, "If you live a life
"that other people won't, then you'll be able to lead a life
"that other people can't."
Meaning that if you put that time and energy today
so that in a few years, as your business grows,
you'll be able to live a lifestyle
that they could never dream of.
Nor could you, right?
If you think about it, like it doesn't take a whole lot
to build that cash flow, build that momentum,
to build an asset that in five to ten years you could sell,
and live off of the proceeds from that sale.
I've been fortunate and blessed
to have done that a couple of times.
And it sounds crazy, I remember the first time
that somebody even introduced me to that concept,
I was like I can't even understand
how you would go about building something
that somebody would buy, right?
And I remember the first time I did it.
I was sitting on the end, you know,
it sounds kind of douchey, but I was standing
on the end of my boat, I was sitting there
with my in-laws and my wife.
And I got a call from my co-founder, Ethan,
and he told me the paperwork's signed,
everything's done, and it was a magical moment.
You know, it was one of those times
and places I'll never forget where it was at,
and the feelings that I had,
and just how blessed and lucky I felt
to just live this kind of life
where that's even a possibility.
So I want to share with you guys the strategies
to help you avoid this,
because I was talking to my buddy, Will, not too long ago,
and he actually made the argument.
He wrote this great article on Forbes.
Just search Will Schroeder, Forbes,
and it was something like a million dollars,
but his argument was, "How much money do you really need?"
He walks through the economics of, like okay,
you want a nice house, you want a nice car,
you want all these things, you want to live a lifestyle,
you want to eat our at restaurants.
I mean, at the end of the day,
from a cash flow per month, it's not a lot of money.
Some people are like,
"I want to build a $100 million company."
And you could and should.
You should set your dreams and vision high.
I love that.
But when you look at like, literally,
how much money it would take to live a lifestyle,
not flying private.
That one is a little bit of a bump in the cash flow,
but just the other aspects of your life,
it doesn't take a whole lot to get going.
It's really about staying power and growth.
Incremental growth.
So just avoid the next five things that I share
with you.
This is when I've talked to entrepreneurs
and I've been fortunate enough to sit down
and be able to review companies that have failed.
I work in an industry, in the software tech industry,
where a lot of my friends build companies and fail,
so I see the aftermath and I'm able to sit down
and ask them the questions.
I go through, and number one think that kills a company
is they can't pay the bills.
Which sounds so flippant.
You're like, "Duh, Dan, they can't pay the bills."
Literally, they run out of money.
The reason I share that with you,
because most entrepreneurs aren't even paying attention.
That's my challenge.
Is you need to build the metrics, the dashboard,
the reporting, to give you that number.
Are you running out of money?
Are you operating at a negative cash flow,
and how much cash do you have in the bank
to the point of how far can you project
when you're going to run out of money?
Do you wait until the month,
where it's like, in four weeks I'm out of money,
or do you decide six months prior to that point,
regardless if you raise money from investors
or you're self-funding off
of your own positive cash flow?
Do you wait to make different decisions?
And that is, that to me, is the opportunity for you.
Make sure that you measure the amount of money
and kind of like the timeline and horizon that you have
to continue to build the business.
So don't run out of money,
because that is the number one reason
people close their business,
is because they can't pay their bills.
Number two is they offer a product that nobody wants.
I mean, it's really that straight forward.
They created a service or they're selling a product
that nobody wants.
And I know some of you guys, it's going
to hurt your feelings, because you're like,
"Well, I love this thing I built,
"and why doesn't anybody want it,
"and I just need to change my market."
I get this all the time, it's like,
"Dan, I got this product
"and I can't figure out who my customer is."
No, your problem is that you've built something
that nobody wants.
You think there's a market for the technology,
you have a solution in search of a problem.
That's not the case.
You have a solution that nobody wants.
And the faster you can admit to that,
and if you have the capital
to keep trying another iteration,
you'll be able to resolve that problem.
So the second reason why companies fail
is they offer something or build a product
that nobody wants.
The third, and this one is 95% of companies are guilty
of this, is they fail to attract paying customer
in a cost effective way.
Let me unpack that.
They don't have a marketing program.
They don't understand that if I invest a dollar
that it's going to generate a $1.30 in the next 30 days.
They don't know where to invest their time
or energy to even get a new customer.
A lot of service businesses, they're dependent
on their relationships.
They don't have a structure, a process, a system,
to get new customers in a way that's inexpensive.
Recently, I was reading the Chapter 11 bankruptcy
of a company called Nasty Gal.
When you look at the numbers of capital raised
and that brand, they're a fashion brand, Nasty Gal,
you can see where their revenues tanked in 2014.
Prior to that, from 2009 to 2014,
they were on this uptick.
You know what changed there?
My gut is that they stopped spending money
on paid acquisition.
They got addicted to spending money that wasn't profitable
in returning a customer that stuck around,
that made them money.
And as soon as the venture capital money dried out,
boom, revenues tanked.
Like by 20 or 30% in a 12-month period.
And that is your opportunity is take the time
to build a model, a marketing program,
that will attract a customer that's willing to pay,
a paying customer, for all you freemium folks out there,
you crazy people, that allows you to do that
in a cost effective way.
So that's three.
Four, for me, is really to build a winning team.
You know, at the end of the day,
it doesn't matter what you're selling,
what your offering, it comes down to people.
It's business is a people business.
The language is financial and business is a people.
If you don't build a winning team,
if you don't put the time and the energy
to recruit incredible people for your business,
then you will struggle to grow.
Because you're gonna hit their Peter Principle.
Their level level of competency.
Okay, this is a real thing on Wikipedia,
the Peter Principle.
Essentially, the argument is people get promoted
to their point of incompetency.
And this is why, you know, you can make fun
of governments and archaic businesses,
but that's what's happening.
And you're probably accountable for it, too,
because at the end of the day, you're responsible
for the people you hire.
And you say, "Well, I don't have the money
"to hire great people."
No, you're not creative enough.
You're not resourceful enough.
You didn't present them an opportunity
that is exciting enough for those great people,
'cause it's never about money.
Money is the fourth item on the list of reasons,
and there's five, that people are going
to join your company.
And I go over that in other videos.
But to me, your opportunity is to create a winning team.
If you don't, suffer the rath.
That is the fourth reason businesses go out of business,
because they don't have a winning team.
And the fifth is they can't create systems.
They don't know how to build a repeatable, scalable system
for their business.
They actually could have success.
They could be doing something that's working
and not take the time to actually say, okay,
"What's step one, two, and three for us to repeat this."
Recently I was on a call with a client that I coached
and I was listening on their team meeting.
At the end I said, "Look, that person on your team
"that you have that's doing this function,
"is there a process for how they do that?"
Because I see that as a bottleneck,
as you scale the business.
You want to triple the size of the business
in the next twelve months?
Awesome, I'm going to help you do that.
But that role, specifically,
if you don't start extracting that
from that person, right, their skill, their talent,
so that you can evaluate it, improve it,
and then train three or four other people on it,
that is going to be the reason
you don't hit your goals this year.
They don't create systems.
That is the reason businesses fail.
I'm not saying, day one.
This is the other mistake.
Day one, you sit down and you create this frickin' Bible,
because you don't know.
Day one, you probably don't even have sales,
or your have very little sales,
or you don't even know how what you're doing,
if it's going to be the thing you are doing in the future.
But usually around the half million to a million mark,
or year two to three, you should start having 20%
of your systems, your programs, documented,
repeatable, in a scalable fashion.
That is your opportunity.
It's the five reasons companies fail.
Number one, they can't pay their bills.
They don't have the money to actually pay the bills,
pay the team, payroll.
Two they offer a product that nobody wants to buy.
There's no customers.
They think it's a marketing problem.
It's a product problem.
Three, they fail to attract paying customers
in a profitable way.
So they don't have a marketing system.
Number four is they don't build a winning team.
Number five, I'm going to share with you the number one,
I'm going to give you a bonus one,
but number five is they don't create systems.
Now here's the deal, the number one reason,
which is number, it's six, but it's the number one, overall,
the reason that companies fail, okay,
I'm looking at you.
You're watching this video you probably don't fit
into this category, but for your friends.
Maybe they're watching, maybe you know somebody like this.
Is they're not willing to learn,
or they don't have the skill, right?
If you don't have the skill,
most entrepreneurs get
into businesses they've never done before.
Or they have experience doing the work
but not actually running the business.
If you don't have the skill or willing to learn,
then you're doomed to fail.
You'll always tap out.
You won't grow the business.
And that, to me, is the overall arching
high-level challenge, and the reason why.
If you say, "Well, okay,
"these are all these five reasons companies fail,"
but the one that's even bigger than that is
they weren't willing to learn.
They weren't willing to watch this video,
this YouTube video and stay to the end
to really get the nugget to say,
"Okay, how do I learn more,
"how do I understand my industry better?"
"Where do I get that source of information?"
That is the number one opportunity for entrepreneurs,
is to get that growth mind going on.
So, as per usual, I want to challenge you guys
to live a bigger life and a bigger business,
and I'll see you next Monday.
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