Why Most Businesses Fail

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One of the biggest reasons most new businesses go under is because they start their businesses incorrectly. They do the wrong things in the wrong order. In this article, I’m going to show you how to do the right things in the right order so that the odds of your business failing go way down.

I have talked a lot about niching and why it’s so important in the Alpha 2.0 business structure, but today I’m going to give you a structure in terms of when to niche and how this is different from the way most business owners structure their businesses when they first get started.

When the typical business owner starts a business, what’s the first thing they do?

My favorite example is the guy who gets fired from his job. He says, “Fuck you, I’m going to be a consultant and start my own business.” Or a guy gets excited about something and decides to start a business involving the thing he’s excited about. What’s the first thing these new entrepreneurs do in cases like these? They try to find the product, service, or information they’re going to sell.

The second thing they do is try to figure out how to sell that thing to whatever market they’re trying to sell to. And usually, because they’re not niching, they try to sell it to everyone—anyone who could possibly use this new thing. They haven’t niched their offering, and they haven’t niched their market. They just come up with something they’re excited about and try to sell it.

There are many reasons this doesn’t work, but one of the biggest reasons is that they’re trying to sell something based on their preferences and not based on the marketplace.

A classic example is when I worked as an IT consultant many years ago. A lot of guys went into business doing this because they loved computers; they enjoyed it so much that they figured they should do that for a living as a self-employed person.

In other words: I’m good at this, so I should sell it. That starts internally. It starts with what the guy wants to sell and then he tries to impose his desire on the marketplace.

Am I saying it’s impossible to make money that way? Of course not. There are some businesses where that has worked very well. But it’s very difficult to say, “I want to sell this, and I’m going to make the marketplace want to buy it.” Again, it’s one of the main reasons new businesses fail.

Probably the biggest reason new businesses fail is that they don’t market enough. I’ve said this many times: The most important function of your business is marketing. But following the structure that I’ve just described is probably the second most common reason businesses fail.

Here’s a much better way to do it when you’re starting a business from scratch: Forget yourself for a moment. Start with the marketplace. Look out into the world and ask, “What do people need? What does the marketplace want? What is the marketplace complaining about?” Find a problem and solve it; find a need and fill it.

Better yet: What does a narrow slice of the marketplace want (and want badly)?

Once you determine what that is, then you come up with what to sell. In other words, most business owners have it backward. Don’t impose a product or service onto the market; find what the marketplace wants and give it to them.

The vast majority of the businesses I’ve started in my life have begun this way. I looked at the marketplace and determined what they wanted and gave them that. Every business I’ve ever started has made money, and all but the first one or two were niched. It works if you put it into practice.

The more you find a narrow niche that has a strong problem or need:

  • the easier it is to find your marketplace
  • the more you can charge
  • the more referral business you’ll get
  • the faster you’ll be seen as an expert
  • the longer customers will stay with you

There are so many advantages to doing it this way instead of trying to convince the marketplace that they need what you want to sell them.

That brings up a common question: Steve Jobs once said that the marketplace doesn’t know what it wants, so you need to give people what they want before they know what they want. That seemed to work out pretty well for him!

Well, here’s the next question: Are you Steve Jobs? Am I? The answer in both cases is no. You are not a marketing supergenius, neither am I, and we likely never will be. So guess what. Normal human beings who are not Steve Jobs or Elon Musk have to, unfortunately, find a narrow segment of the market, find out what they want, and then fulfill that need. Then you’ll make all the money you need, I promise.

Often, when I give business advice like this, someone will pipe up in the comments section talking about what Bill Gates, Elon Musk, or Steve Jobs did in a similar scenario. Unfortunately, we can’t do exactly what they did. We can emulate some of the things they did in our businesses, and of course, I have. But you’re not going to successfully read the market’s mind and try to give them what they want even though they don’t know it yet because again, you’re not them.

One of my mentors, Brian Tracy, once said, “You can become a multimillionaire if you take a boring business and improve it by 10 percent.” It took me a few years to understand what he was saying, but he was right. I don’t know what the statistics are now, but back then, one of the easiest businesses in which to become a multimillionaire was to open a dry cleaning business. Now obviously, that’s not Alpha 2.0 because it’s location dependent, but he promised that if you start your own dry cleaning business and do it 10 to 20 percent better than everyone else, you’ll make a million dollars. And he’s not wrong. In that case, you’re not trying to be some crazy innovator.

That brings up another point: If this is your first business, you don’t want to try to invent something brand new. That is very risky, and that is the opposite of what I’ve just talked about. Instead, you want to start with something that’s very basic—a product, service, or information—that solves a very specific problem to a narrow niche or fulfills a strong need within that niche.

Nothing I’ve ever sold has been super revolutionary. Alpha Male 2.0 is revolutionary, but I didn’t come up with that first and then make you want it. I looked at what men in the world wanted, what they were complaining about, and the problems men have in the modern world, and with that information, I gave them advice in order to offset those problems. I gave them something they needed rather than what I wanted to sell them.

Imagine if I tried that—if I tried to make the world want non-monogamy. I’ve said many times, in terms of this example, that Alpha Male 2.0 is only for five to 10 percent of men. I follow my own advice and I niche. I don’t want to sell this information to every man in the world. That’s fucking dumb, and that’s the opposite of what I’m trying to tell you here.

So when you start your first business, Step 1 has nothing to do with you. It has to be to find a marketplace niche with a problem irrelevant to your skillset and your desires.

Then Step 2 is to look inward, and based on your skillset, what you’re good at, your interests, and/or your curiosity, how can you help alleviate or help solve that problem or need? Inevitably, it’ll be through selling products, services, or information—or a combination of those, if you want to get fancy.

If every prospective business owner started with those steps, the economy would be in much better shape than it is. We’d have capable business owners running businesses that are actually making money instead of saying, “I’m good at this, so you should buy it.”