Failure in Business: A How-To Guide for Reality

Ah, the American Dream. It seems that everyone wants to start his or her own business. Why wouldn't you? You get to be your own boss, set your own hours, and make all the decisions. But most people have this idea that being an entrepreneur is a fast lane ticket to a jet-setting lifestyle, complete with waterfront properties and expensive champagne.

Entrepreneurs who have succeeded – like the CEOs of PayPal, Micro Solutions Enterprises, Spanx, reddit, or any of a number of other industry giants – will tell you that this is not the case.

The reality is much bleaker: the vast majority of businesses in the vast majority of industries are doomed to failure. Failure is so common that smart writers are capitalizing on it by penning "How-To" books on succeeding in business.

Obviously, these books aren't working. So why not take the opposite tack, and read up on what people have been doing wrong? Here are some guaranteed "oops" moves that will leave you filing for bankruptcy. Avoiding these doesn't guarantee success, but to paraphrase Thomas Edison, it will give you ten ways not to succeed (he has a number of quotes about the value of stick-to-it-iveness, if you're interested).

Overestimating sales, by a lot. 

You assume you're going to sell 1,000 of something, even though Wal-Mart sells it cheaper, because yours are local and cool. Or you assume that you will have a certain number of clients or subscribers. Either way, you're wrong – and you're out of business. Good entrepreneurs assume they will operate at a loss for at least a quarter.

Underestimating costs, by a lot. 

You assume that accounting for rent, utilities, overhead, insurance, taxes, supplies, and advertising means you've covered it all. Think you're right? You're wrong.

Assuming that you are a snowflake. 

You aren't unique. If your business venture belongs to a category marked by failure, you will probably be marked by failure. Don't get into the game without something real to offer. MicroSolutions Enterprises' CEO Yoel Wazana saw a need for cheaper printing and imaging products, and made that happen. Sara Blakely, of Spanx, Inc, saw a need for a discreet slimming garment for women. Neither of them would have succeeded had they opened a Sno-Cone retailer in Alaska. 

Ignoring location. 

This is particularly true of retailers – who often make the mistake of ignoring the neighborhood and nearby businesses – but it works for web-based companies, as well. In the real world, locating your upscale clothing boutique in a parking lot with a pawn shop, a coin-operated laundry, and a dollar store is a bad move, no matter how cheap the rent. The same is true of buying ad space on a high-traffic website that isn't visited by your target demographic. The numbers game should be about quality, not quantity.