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Old April 20, 2009, 10:58 PM
Dien Rice Dien Rice is offline
Onwards and upwards!
Join Date: Aug 2006
Posts: 2,685
Default Three reasons why businesses fail...

Originally Posted by Bill View Post
"Ideas are a dime a dozen. The money is in the execution.
Need proof? For Seth Godin's Alternative MBA program, this week the nine of us came up with 111 business ideas each. But ideas are only valuable when someone (like you) makes something happen.
What follows are our 999 business ideas, free for the taking."
Of course, it's true that execution counts for a lot, but it's a long way from being the whole story.

Some people say there are 3 sources of business risk. If you know these, it will help you have a better chance at succeeding in business.

The three big business risks are...

1. Demand Risk

If there's no demand for the product or service, of course the business will fail - no matter how great the execution is.

That is probably why a "hamster burial kit" business would probably not work. There probably isn't much demand for the product - no matter how brilliantly the business idea is executed.

2. Competition Risk

This just means there's too much competition. When there's too much competition, it makes it harder to succeed - since there are more people trying to put you out of business (and grab your customers for themselves)!

For example, let's say you make surfboards. If you sell your surfboards on a crowded surf-crazy beach, with nobody else selling surfboards near by - you could do well.

On the other hand, if you sell surfboards on the beach, and 200 other surfboard makers are doing the same thing - your chance of succeeding financially by selling surfboards is reduced. It's not impossible - but it's harder to do.

3. Execution Risk

This covers things like working inefficiently, poor marketing, or not having the capability for making or delivering the product or service, within a reasonable cost.

So, I would say good business ideas are valuable - though they are not the whole story. A good business idea may address "demand", and may address some parts of "execution" (for example, how to market the product). However, you have to be aware of all three "risks" in order to succeed! To say it is only "execution" ignores the other two risks.

Best wishes,


P.S. As you may know, I'm in the "business" of finding successful business ideas. Anyone can "make up" business ideas that don't work. What I do which is different is to find business ideas that are already working - and share those, and how to put them together. What works in one area has a good chance of working elsewhere too. So far, I've never found a successful "hamster burial kit" seller - so that's not something I would ever write about!
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