Why do projects fail? Featured

9:58am EDT June 1, 2012
Why do projects fail?

Launching a new venture is probably one of the most thrilling moments for any entrepreneur. It’s a birth that often brings forth a long-standing dream for the founders and is steeped in joy, pride and egotism. However, for many new captains of industry, the dream vanishes like smoke shortly thereafter. In fact, just half of all businesses survive the first five years, and only one-third survive 10 years, according to U.S. Small Business Administration statistics. Thus, it’s worth investigating why projects fail.

In a large majority of cases, the business owners failed to raise sufficient capital to fund the labor, marketing, taxes, insurance, legal expenses, bookkeeping, supplies and costs of goods for the business. Oftentimes, they underestimated expenses and overestimated how quickly revenues would increase. In other cases, they knowingly entered the market with insufficient cash because of limited credit and savings.

Other failures are caused by an implosion from within. Specifically, the founding partners reach a point at which they disagree on how to build the business and then fail to come to a consensus that leaves all parties feeling invested in the project. Or the business develops naturally in a way that calls for the founding partners to take on roles they don't want to assume. In either scenario, the remaining partners must buy out the exiting partners in order to stay in business or fold up shop.

In the worst collapses, the venture was just poorly conceived. The founders developed a business concept based mostly on their own personal experiences or anecdotal evidence. They failed to conduct or acquire scientific research on whether there was sufficient demand for their proposed products or services. They made a cursory study of the competition. Or they made assumptions about what drives potential customers to buy when designing marketing campaigns, rather than collecting data that revealed true trends in buyer motivations.

In these cases, the founders could have mitigated their chances of failure with some thoughtful planning before the shingle was hung. Would-be entrepreneurs should clearly write out their vision with detailed specifications and the cash that will be needed to complete it. They should plan contingencies for overcoming potential obstacles.

They also should identify the strengths and weaknesses in any potential management team and seek out individuals who can fill the holes. For instance, a visionary leader who prefers to focus on the big picture will usually need someone on board who loves the details in order to ensure the project is thoroughly vetted and structured.

Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.