On the surface, most failures in business can be attributed to a lack of market-fit, or simply running out of cash. But dig deeper and you will uncover the fault lines. In today’s business climate where as many as 75% of businesses fail, it is imperative that the underlying reasons for failure are understood and carefully avoided.
#1 Poor Culture
“If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.”
– Antoine de Saint-Exupéry
In simple terms, notable investor Brad Feld explains the quote well, “You can’t motivate people; you can only create a context in which people are motivated.” The context that Brad is referring to is a company’s culture.
What is culture?
Culture is the shared beliefs, values and practices. A company’s culture governs how employees and management interact and function both within and outside the context of business transactions. Often, culture develops organically over time and is implied rather than expressly defined. Every organisation has a unique culture – so why not let it be one helps you attract the best talent, amplifies their abilities, and lets them create their best work?
In today’s world where there’s a quick solution to everything, culture is probably the most underrated aspect of a business or any organisation. A strong company culture is the basis of a successful environment.
A culture of success does not just happen. Where do we start? What do we DO?
1) Start by collectively establishing a set of company values …or ‘culture code’.
The earlier you set a culture of success, the better. A set of culture codes made up of shared values will guide your employees through what is expected of them, and what they can expect from you. When you have fewer than 10 employees, culture is easily and organically-adopted once established. Between 20 to 50 employees, you still have direct control and impact on the organisation. However, start now and don’t wait till you grow bigger – it will become more difficult for you to direct influence on individuals in the organisation.
2) “Family therapy”
Have a “family therapy” session to collectively build your company culture code.
During “family therapy”, give employees 15 minutes of alone time. In the 15 minutes, they should envision and write down the values that would guide the company that they want to work in. Sharing these notes at the start allows everyone, introverts and extroverts, to voice their opinion.
3) Stick to your values
Culture codes need not be unique or witty. However, they should be a guiding precedence for how individuals and teams behave, communicate, and grow. These range from age old business values such as trust, communication, positive and having an open mindset, to the newer startup values such as hustle and innovation or creativity. It is important to keep in mind that culture is still inherently implied. It is in the following through of these expressed values, that employees will be secure in their priorities and work environment. Even the most resilient person will wilt if the situation is unpredictable.
Enable your employees and encourage them to look beyond short-term, tactical projects to the bigger picture. Show them how what they do each day affects the company and its clients.
Cultivating a strong and resilient culture from the start is key.
#2 Legal Challenges
Legal issues are often one of the last things that comes across a Founder’s mind… if it ever at all! Some entrepreneurs seem to believe that the ill-fitted online templates are sufficient and they simply would not be as unlucky to encounter legal issues.
Displaying logos of your satisfied clients and products – have you protected yourself from the risk of trademark infringement? Starting a business with friends – does your Shareholders’ Agreement clearly state the roles, responsibility and equity of each individual?
Resellers such as marketplaces or e-commerce websites are taking on considerable risk as they could unknowingly be infringing upon Intellectual Property (IP) rights. Without an indemnity from the owner of the designs they sell, owners of the design’s IP are in a position to sue marketplaces of counterfeits.
Related reading: What you didn’t know about IP protection
Most notably, Alibaba has been accused of promoting the sale of counterfeit products. The lawsuit has been issued from Gucci, Balenciaga, Yves Saint Laurent as well as other brands owned by Kering. Although Alibaba has no control over what vendors sell, that does not shield Alibaba from legal liability as marketplaces are responsible for their vendors. Alibaba has since spent more than USD$160.7 million in year 2013 and 2014 alone, battling IP infringement.
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Contacts and agreements clearly state and map out every possible scenario, saving you the headache when things do go wrong. However, business practices vary even within the industry. How can you then rely on a one-size-fits-all template to protect your business reliably? Save yourself and your business before you make more legal blunders – take a free legal health check, complimentary of Dragon Law. After all, prevention is better than the cure.
Most companies fail. It’s an unsettling fact for bright-eyed entrepreneurs, but old news to startup veterans. The statistics are disheartening no matter how you define failure. If failure is defined as declaring a projection and then falling short of meeting it, then the failure rate is a whopping 90 to 95%. The learning mindset is crucial. Take steps to be on your way to becoming the other 5% today.
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