HOW TO AVOID VENTURE FAILURES CAUSED BY

FACTORS, WHICH ARE UNDER THE CONTROL OF

ENTREPRENEURS

By Davies Henry Lanjesi

May 2005
Meet The Author

DH Lanjesi- OPERATIONS MGR

CONTENTS:
• Introduction
• Research Question
• Study Objectives
• Propositions
• Research Methodology
• Findings & Discussions
• Conclusions
• Questions from the Panel
INTRODUCTION:
• Venture failure rates range from 30 to 80 percent.
• Failure has many definitions- Opposite of success
- Shortfall
- Gap btwn vision & reality
• Failure can loom at any stage of venture life cycle
• Failure is an opportunity for learning
• Prior failures shape future strategies
• Reasons for failure are less widely discussed.
• Failures are sometimes caused by factors which can be
controlled by entrepreneurs
• Success is found on the far side of failure.
• Knowing what can go wrong will minimize risk of failure
Research Questions

• WHY DO BUSINESSES FAIL?

AND
• HOW CAN AN ENTREPRENEUR AVOID BUSINESS
FAILURE?
Study Objectives

• Investigate Underlying causes of venture failure especially

those under the control of an entrepreneur.

• Alert entrepreneurs about causes of venture failure

thereby reducing possibility of their venture failures.
PROPOSITIONS:

Proposition 1: Entrepreneurs can experience

venture failure due to their failure to manage certain
factors under their control.

Proposition 2: Entrepreneurs can avoid venture

failures by managing known causes of venture failure,
which are under their control.
Research Methodology

This is a secondary literature study.Articles on venture failures plus

relevant chapters of several books were reviewed.
Findings and Discussions:
• Only way to totally avoid possibility of failure is never to start a
business.
• Failure can only be understood in relation to people’s goals and
expectations
• Failure rate is higher for small businesses than for large
businesses in USA.
• Underlying causes of failure are similar for different businesses in
USA.
• Businesses will fail unless underlying causes are resolved
• 15,460 business failed in Japan in 1999.
• Both small and larger businesses failed in Japan
• Reasons for failure are less widely discussed.
Findings and Discussions:
• Almost all of the successful entrepreneurs have had significant
failures in their life or business.
• These successful entrepreneurs learn from their failures.
• Owners and managers of small businesses lack expertise or
experience to recognize problems/Failures at an early stage.They
do not even know how to deal with these failures.
• Underlying causes of failures can be controlled by the
entrepreneurs. These causes include:
Inadequate Market orientation, Inadequate knowledge
of operating a business, Lack of Cash, Growing too fast, Poor
interpersonal relationship, Lack of strategic planning, Failure to
innovate, Trying to Go It Alone, Poor communication, Failure
to recognize own strengths and weaknesses,
Findings and Discussions:
•Underlying causes continued:
Failure To Seek And Respond To Criticism, Inability to
build a team, Abundance Mentality,Failure To Build
People’s Strength, Lack of Pro-activity,Inadequate
entrepreneurial spirit
• Thus a total of sixteen (16) factors were identified during this
study.
• These factors resemble very closely with reports in USA on “Big
10 obstacles to the success of small businesses”.
Conclusions:
• Failure is an opportunity for learning.
• Business Success is dependent upon reactions of business failures
• Knowing what can go wrong is essential to avoid business failure
• Success and Failure exist in relation to expectations
• Most causes of failure are under the control of the entrepreneur.
• Entrepreneurs can avoid venture failures by managing known
causes of failures which are under their control.
Now members of the panels may ask some
questions: