Dan Martell - The Six Reasons Companies Fail

00:00:00.360 Yeah, so failures suck at the moment. 0.97

00:00:02.240 It hurts. 1.00

00:00:03.240 Nobody likes to look stupid or feel like 0.99

00:00:05.600 people are judging them. 0.99

00:00:06.760 But, I also know this, that everybody forgets

00:00:10.040 your failures once you succeed.

00:00:18.940 Why do companies fail?

00:00:20.260 Like, you may have heard the stats

00:00:22.120 that 50% of companies won't make it

00:00:24.240 to the first five years, or 80% will make it.

00:00:26.380 I mean, it's literally depending on the data

00:00:28.940 and the statistics you look at, it's a little different.

00:00:31.680 But the truth is, from my experience,

00:00:33.540 is that 90% of companies won't even make it to,

00:00:35.780 I think it's even less.

00:00:36.680 It's like 3% will make it to 10 year mark, okay?

00:00:40.220 But regardless of how many make it,

00:00:42.760 I'm gonna share with you guys the number one reasons,

00:00:45.260 the five that literally kill the business.

00:00:48.220 And if you know these, you can avoid them,

00:00:49.860 you're gonna be in a better spot.

00:00:51.220 And I know if you're today in your business

00:00:53.140 worrying about revenues and just feel like,

00:00:55.140 you know what, you're not making the sales

00:00:56.700 to be able to fund the growth of the business,

00:00:58.940 or you're looking at your cash flow statement,

00:01:01.440 are you, because you should be,

00:01:03.080 ask your accountant for a cash flow statement.

00:01:04.620 If you're asking for that and you're looking

00:01:05.940 and you're doing negative operating cash flow every month

00:01:08.320 and you need to fix that,

00:01:10.320 or maybe the people on your team

00:01:11.860 are frustrating the crap out of you

00:01:13.720 and you're just like, why can't you see my vision? 0.97

00:01:17.320 It's probably because you didn't set one, but I digress.

00:01:19.400 If those are frustrating parts of your business,

00:01:21.760 all good things, I'm gonna teach you why,

00:01:23.840 the five reasons a company fails,

00:01:25.600 and if you do this right, you're gonna have staying power.

00:01:28.000 I really believe that if you put the time and energy today,

00:01:31.800 right, and there's this great quote that says something like,

00:01:34.080 if you live a life that other people won't,

00:01:36.640 then you'll be able to lead a life that other people can't.

00:01:39.120 Meaning that you put the time and energy today

00:01:41.480 so that in a few years, as your business grows,

00:01:44.140 you'll be able to live a lifestyle

00:01:45.920 that they could never dream of, and nor could you, right?

00:01:48.580 If you think about it, it doesn't take a whole lot

00:01:51.320 to build that cash flow, build that momentum,

00:01:54.000 to build an asset that in five to 10 years you could sell

00:01:57.740 and live off of the proceeds from that sale.

00:02:00.240 I've been fortunate and blessed

00:02:01.600 to have done that a couple times.

00:02:03.220 And it sounds crazy.

00:02:05.180 I remember the first time

00:02:06.060 that somebody even introduced me to that concept.

00:02:07.940 I was like, I can't even understand

00:02:09.480 how you would go about building something

00:02:11.700 that somebody would buy, right?

00:02:13.140 And I remember the first time I did it,

00:02:14.480 I was sitting on the end,

00:02:16.300 you know, it sounds kind of like douchey,

00:02:18.340 but I was standing on the end of my boat.

00:02:19.960 I was sitting there with my in-laws and my wife

00:02:21.840 and I got a call from my co-founder, Ethan,

00:02:24.480 and he told me the paperwork's signed, everything's done.

00:02:26.860 and it was a magical moment, you know?

00:02:30.260 It was one of those times and places,

00:02:33.800 I'll never forget where I was at

00:02:35.100 and the feelings that I had

00:02:36.100 and just how blessed and lucky I felt

00:02:37.600 to just live this kind of life

00:02:40.500 where that's even a possibility.

00:02:42.500 So I wanna share with you guys the strategies

00:02:44.220 to help you avoid this because,

00:02:46.240 you know, I was talking to my buddy Will not too long ago

00:02:49.220 and he actually made the argument,

00:02:51.180 he wrote this great article on Forbes research,

00:02:53.480 Will Schroeder, Forbes,

00:02:55.460 And it was something like a million dollars,

00:02:57.020 but his argument was, how much money do you really need?

00:03:00.340 You know, and he walks through the economics of like,

00:03:02.440 okay, you want a nice house, you want a nice car,

00:03:04.760 you want all these things, you want to live a lifestyle,

00:03:06.680 you want to eat out at restaurants.

00:03:08.240 I mean, at the end of the day, from a cash flow per month,

00:03:10.880 it's not a lot of money.

00:03:12.580 Some people are like, I want to build a $100 million company.

00:03:14.580 And you could and should.

00:03:15.820 You should set your dreams and vision high.

00:03:17.980 I love that.

00:03:19.280 But when you look at like, literally,

00:03:21.580 how much money it would take to live a lifestyle,

00:03:24.360 Not flying private, that one is a little bit of a bump

00:03:27.100 in the cash flow, but just the other aspects of your life,

00:03:30.540 it doesn't take a whole lot to get going.

00:03:32.300 So it's really about staying power and growth,

00:03:34.940 incremental growth.

00:03:35.880 So just avoid the next five things that I share with you.

00:03:38.600 This is when I've talked to entrepreneurs

00:03:40.500 and I've been fortunate enough to sit down

00:03:42.320 and be able to review companies that have failed.

00:03:44.520 You know, I work in an industry in the software tech industry

00:03:47.140 where a lot of my friends build companies and fail,

00:03:49.220 so I see the aftermath and I'm able to sit down

00:03:51.520 and ask them the questions.

00:03:52.960 And I go through it, and number one thing

00:03:55.100 that kills a company is they can't pay the bills,

00:03:57.740 which sounds so flippant.

00:03:59.200 You're like, duh, Dan, they can't pay the bills.

00:04:01.140 Literally, they run out of money.

00:04:03.300 And the reason I share that with you

00:04:05.240 because most entrepreneurs aren't even paying attention.

00:04:08.500 That's my challenge, is you need to build the metrics,

00:04:12.380 the dashboard, the reporting to give you that number.

00:04:15.820 Are you running out of money?

00:04:17.560 Are you operating at a negative cash flow?

00:04:20.320 And how much cash do you have in the bank

00:04:21.880 to the point of how far can you project

00:04:24.120 when you're gonna run out of money?

00:04:25.480 Do you wait until the month where it's like

00:04:28.080 in four weeks I'm out of money

00:04:29.360 or do you decide six months prior to that point,

00:04:32.360 regardless if you raise money from investors

00:04:34.260 or you're self-funding off of your own positive cash flow,

00:04:37.100 do you wait to make different decisions?

00:04:39.300 And that is, that to me is the opportunity for you,

00:04:42.060 is make sure that you measure the amount of money

00:04:44.360 and kind of like the timeline and horizon

00:04:47.500 that you have to continue building the business.

00:04:48.940 So don't run out of money

00:04:50.500 because that is number one reason people

00:04:52.340 close their businesses, they can't pay the bills.

00:04:53.700 Number two is they offer a product that nobody wants.

00:04:57.680 I mean, it's really that straightforward.

00:04:59.440 They created a service or they're selling a product

00:05:01.720 that nobody wants and I know some of you guys

00:05:03.380 are gonna hurt your feelings because you're like,

00:05:04.980 well, I love this thing I built and why doesn't anybody want it

00:05:08.580 and I just need to change my market.

00:05:10.260 I get this all the time, it's like,

00:05:11.320 Dan, I got this product and I can't figure out

00:05:12.920 who my customer is.

00:05:14.220 No, your problem is that you've built something

00:05:16.460 that nobody wants.

00:05:17.360 You think there's a market for the technology,

00:05:19.360 have a solution in search of a problem.

00:05:21.920 That's not the case.

00:05:23.000 You have a solution that nobody wants.

00:05:25.500 And the faster you can admit to that,

00:05:27.500 and if you have the capital to keep trying another iteration,

00:05:31.040 you'll be able to resolve that problem.

00:05:32.540 So the second reason why companies fail is they offer

00:05:35.880 something or build a product that nobody wants.

00:05:38.340 The third, and this one is 95% of companies are guilty of this,

00:05:43.420 is they fail to attract paying customer

00:05:47.180 in a cost-effective way, okay?

00:05:49.280 Let me unpack that.

00:05:50.880 They don't have a marketing program.

00:05:53.160 They don't understand that if I invest a dollar,

00:05:55.460 that it's gonna generate $1.30 in the next 30 days.

00:05:58.220 They don't know where to invest their time or energy

00:06:00.900 to even get a new customer.

00:06:02.200 A lot of service businesses,

00:06:03.960 they're dependent on the relationships.

00:06:06.400 They don't have a structure, a process, a system

00:06:10.600 to get new customers in a way that's inexpensive.

00:06:14.200 Recently, I was reading the chapter 11 bankruptcy

00:06:17.300 of a company called Nasty Gal, 0.80

00:06:18.940 And when you look at the numbers of capital raise

00:06:22.880 and that brand, their fashion brand, Nasty Gal, 1.00

00:06:26.020 you can see where their revenues tanked in 2014.

00:06:29.420 Prior to that from 2009 to 2014, they were on this uptake.

00:06:34.060 You know what changed there, my gut,

00:06:35.800 is that they stopped spending money on paid acquisition.

00:06:39.560 They got addicted to spending money

00:06:42.400 that wasn't profitable in returning a customer

00:06:45.000 that stuck around, that made them money.

00:06:48.200 And as soon as the venture capital money dried out,

00:06:52.080 boom, revenue's tanked.

00:06:53.640 Like by 20 or 30% in a 12 month period.

00:06:57.180 And that is your opportunity is take the time to build a model,

00:07:01.180 a marketing program that will attract a customer that's

00:07:04.320 willing to pay, a paying customer for all you freemium 0.99

00:07:07.080 folks out there, you crazy people, 0.93

00:07:09.720 that allows you to do that in a cost effective way. 0.97

00:07:13.400 So that's three.

00:07:14.960 Four for me is really to build a winning team.

00:07:18.200 You know, at the end of the day,

00:07:19.460 it doesn't matter what you're selling,

00:07:20.760 what you're offering, it comes down to people.

00:07:22.600 It's business is a people business.

00:07:24.300 The language is financials and business is a people.

00:07:27.340 And if you don't build a winning team,

00:07:29.080 if you don't put the time and the energy

00:07:31.200 to recruit incredible people for your business,

00:07:34.580 then you will struggle to grow

00:07:36.540 because you're gonna hit their Peter Principle,

00:07:38.320 their level of competency, okay?

00:07:40.560 This is a real thing on Wikipedia, the Peter Principle.

00:07:43.220 Essentially, the argument is people get promoted

00:07:45.320 to their point of incompetency.

00:07:47.160 And this is why you can make fun of governments

00:07:49.920 and archaic businesses.

00:07:51.720 But that's what's happening.

00:07:52.900 And you're probably accountable for it too

00:07:54.340 because at the end of the day,

00:07:55.560 you're responsible for the people you hire.

00:07:57.600 And you say, well, I don't have the money

00:07:58.640 to hire great people.

00:07:59.640 No, you're not creative enough.

00:08:00.940 You're not resourceful enough.

00:08:01.940 You didn't present them an opportunity

00:08:04.600 that is exciting enough for those great people

00:08:07.080 because it's never about money.

00:08:08.440 Money is the fourth item on the list of reasons,

00:08:12.180 and there's five that people are gonna join your company.

00:08:14.480 And I go over that in other videos.

00:08:16.780 But to me, your opportunity is to create a winning team.

00:08:19.840 If you don't, suffer the wrath.

00:08:21.980 That is the fourth reason that businesses go out of business

00:08:25.740 because they don't have a winning team.

00:08:27.120 And the fifth is they can't create systems.

00:08:29.540 They don't know how to build a repeatable, scalable system

00:08:34.020 for their business.

00:08:35.180 They actually could have success.

00:08:37.040 They could be doing something that's working

00:08:39.480 and not take the time to actually say,

00:08:40.880 okay, what's step one, two, and three

00:08:42.280 for us to repeat this?

00:08:43.380 You know, recently I was on a call

00:08:44.580 with a client that I coached

00:08:46.520 and I was listening on their team meeting.

00:08:48.300 At the end I said, look,

00:08:49.420 that person on your team that you have

00:08:51.120 that's doing this function,

00:08:53.060 is there a process for how they do that?

00:08:55.040 Because I see that as a bottleneck, okay,

00:08:57.200 as you scale the business.

00:08:58.220 You want to triple the size of the business

00:08:59.420 in the next 12 months?

00:09:00.140 Awesome, I'm going to help you do that.

00:09:01.660 But if you, that role specifically,

00:09:03.860 if you don't start extracting that from that person,

00:09:06.440 right, they're skilled, they're talented,

00:09:07.880 so that you can evaluate it, improve it,

00:09:10.320 and then train three or four other people on it,

00:09:12.400 that is gonna be the reason

00:09:13.320 you don't hit your goals this year.

00:09:15.100 They don't create systems.

00:09:16.260 That is the reason businesses fail.

00:09:18.280 Now, I'm not saying day one.

00:09:19.760 This is the other mistake. 0.88

00:09:20.580 Day one, you sit down and you create this frickin' Bible 0.93

00:09:22.940 because you don't know.

00:09:24.200 Day one, you don't even probably have sales

00:09:25.660 or you have very little sales

00:09:26.800 or you don't even know how what you're doing

00:09:28.120 if it's gonna be the thing you're doing in the future.

00:09:30.300 But usually around the half million to a million mark

00:09:33.320 or year two to three,

00:09:35.620 you should start having 20% of your systems,

00:09:38.580 your programs, documented, repeatable, in a scalable fashion.

00:09:42.880 That is your opportunity.

00:09:44.220 It's the five reasons company fails.

00:09:45.720 Number one, they can't pay their bills.

00:09:47.020 They don't have the money to actually pay the bills,

00:09:49.620 pay the team payroll.

00:09:51.720 Two, they offer a product that nobody wants to buy.

00:09:53.720 There's no customers, they think it's a marketing problem,

00:09:55.640 it's a product problem.

00:09:56.840 Three, they fail to attract paying customers

00:10:00.040 in a profitable way, so they don't have a marketing system.

00:10:02.980 Number four is they don't build a winning team.

00:10:06.440 Number five, I'm gonna share with you the number one.

00:10:08.340 I'm gonna give you a bonus one, but number five

00:10:10.280 is they don't create system. 0.79

00:10:11.640 Now here's the deal.

00:10:13.480 The number one reason, which is number six,

00:10:16.020 but it's the number one overall,

00:10:17.580 the reason that companies fail, okay?

00:10:19.960 And I'm looking at you.

00:10:21.020 If you're watching this video,

00:10:21.920 you probably don't fit in this category,

00:10:23.660 but for your friends, maybe they're watching,

00:10:25.800 maybe you know somebody like this,

00:10:28.020 is they're not willing to learn

00:10:30.320 or they don't have the skill, right?

00:10:33.040 If you don't have the skill, most entrepreneurs

00:10:34.760 get into business they've never done before

00:10:36.460 or they have experience doing the work

00:10:38.040 but not actually running the business, okay?

00:10:40.240 If you don't have the skill or are willing to learn,

00:10:43.480 then you're doomed to fail.

00:10:44.740 You'll always tap out.

00:10:46.080 You won't grow the business and that, to me,

00:10:48.380 is the overall arching, high-level challenge

00:10:51.760 and the reason why, if you say, well, okay,

00:10:53.480 these are all these five reasons companies fail,

00:10:55.420 but the one that's even bigger than that

00:10:56.520 is they weren't willing to learn.

00:10:57.620 They weren't willing to watch this video,

00:10:59.420 this YouTube video and stay to the end

00:11:01.400 to really get the nuggets to say, okay,

00:11:03.240 how do I learn more?

00:11:04.260 How do I understand my industry better, right?

00:11:06.460 Where do I get that source of information?

00:11:08.300 That is the number one opportunity for entrepreneurs is

00:11:11.560 to get that growth mind going on.

00:11:13.660 So as per usual, I want to challenge you guys to live a

00:11:16.240 bigger life and a bigger business and I'll see you next Monday.

00:11:19.240 If you like this video, be sure to subscribe to my channel.

00:11:21.700 I'd also encourage you to join my newsletter where I share

00:11:24.380 invites to exclusive events and other free training programs.

00:11:27.540 And if you're ready to get going and want more content,

00:11:29.680 I've got two playlists queued up for you to keep on going.

00:11:32.820 Have a great day.

00:11:36.460 You

Dan Martell - March 20, 2017

The Six Reasons Companies Fail

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