According to Collins and Moore (1970), an entrepreneur can be termed as a person of high integrity and who possesses a unique character that is available within a minute fraction of the entire population. However, Landier and Augustin (2005) defines and entrepreneur as one who organizes, manages, and assumes the risks of a business or an enterprise.
Peter (1985) states that the word entrepreneur originated from a French word entrepreneur which meaning to undertake. In a business context, this word means to start a business. Entrepreneurship in the business context therefore is the practice of starting new organization or businesses generally in response to identified opportunities. According to Collins and Moore (1970), entrepreneurship is a difficult undertaking because previous researches have indicated that most of new businesses fail.
CAUSES OF FAILURE
1. Poor Management
According to Lumpkin and Dess (1996) the main cause of business failures is caused by poor management. New businesses do not have managerial skills and often lack the expertise needed to make a new business succeed. Also, it is important to note that most businesses do not do not have enough capital to hire skilled people to run their businesses. This leads to a business disaster and in most situations, a breakdown of the business.
It is therefore imperative that for an entrepreneur to succeed in his venture, Landier and Augustin (2005) state that the entrepreneur must portray good leadership skills and ensure that he creates a work climate that encourages productivity as well as innovation. He must also be skilled when it comes to hiring competent people, managerial trainings and workshops and empowering workers. The entrepreneur must also make logic strategic plans and be able to make the business vision, goals and objectives a reality. As Peter (1985) adds, he must be fully prepared to confront change and cope with change and make transitions without affecting the business.
According to Landier and Augustin (2005), the business environment is dynamic. This environment is in constant change in terms of technology, consumer preferences and product pricing. If the business itself does not change or adapt amicably to change even as its environment is changing, it is doomed to fail. To prevent failure caused by change, the entrepreneur is therefore required to recognize emerging opportunities and be flexible enough to adapt to the rapidly changing times. The business should also obtain new technologies and try all possibilities to adapt to the modern business factors such as globalization.
3. Time mismanagement
According to Hebert and Link (1988), the output of any business is determined in terms of its production capacity over a given period of time. Thus, time is an important aspect for business success. However, many entrepreneurs starting new business ventures normally fail to realize this. Some of them cannot keep business schedules thus loose a lot of investment opportunities and lead their businesses to failure. According to Campbell et al. (2002), businesses fail within the first year because the owner could not handle on work time. It is therefore important that good entrepreneurs learn to keep time and emphasize upon their workers the aspect of keeping time.
4. Lack of Experience
As Chukwuma Asala states, most of the setbacks, hurdles and failures that are encountered as the business progresses could have been alleviated or avoided had the entrepreneur had enough previous experience before. Lack of previous sufficient experience therefore proves costly for a starting business and may lead to business failure.
However, this problem can be solved with the help of a business mentor who can help in identifying the potential pitfalls as well as confirm the certain setbacks that a the business will likely to face ahead and how the said setbacks can be avoided or prevented at the present. A mentor will also help the business prepare adequately for those setbacks that cannot be prevented thus increasing the chances of the success of your business (Landier and Augustin 2005).
5. Lack of Proper Goals
Entrepreneurs more often than not fail to establish clear cut goals and set attainable objectives. They may also default in creating the proper business plans tailored to achieve those goals and objectives especially prior to the commencement of the business activities. When failure to develop a complete business plan before the launching the business is exhibited, there is a likely hood that the started venture will not perform. This is because there will be no goals to be achieved since there were no goals that were laid down in the first place. It is therefore important to note that the presence of a goal creates a purpose and a direction in the venture (Landier and Augustin 2005).
Bird, (1992) adds that if goals are set, they act as the road map which the business will follow and set the direction towards which the business will run. He also adds that new entrepreneurs will tend to focus much on the details as to how the goals will be achieved. However, his advice is that new businesses should be only concerned with the goal making process of their short term goals, medium term goals, and long term goals. Casson (2003) adds to this by saying that a written goal is infinitely more likely to be achieved than a verbal goal and thus it is important to keep the goals into writing and often review them.
6. Fear of failure
According to Casson (2003) failure and entrepreneurship go alongside each other. Many entrepreneurs deny the fact that business failure is a possibility. Some are not even fully aware of this possibility and deny talking about it because they are terrified by it. When an entrepreneur fears failure, there is no need for him to start a business. As Hebert and Link (1988) state, risk taking is termed as taking chances, making mistakes, trying new tactics and learning how to maneuver through the rising challenges. He adds that the entrepreneurs who have been successful like Henry Ford of the Ford Foundation and Richard Branson of Virgin Atlantic airlines risked to invest where many feared and as a result reaped the fruits of success. An entrepreneur should thus be willing to take risks and admit the possibility of the failure of the business.
7. Lack of Marketing
Most new businesses simply don’t have large marketing budgets. However, that’s no excuse for not marketing. Because if you’re not getting your name out there, someone else will…only it will be their name, not yours (Landier and Augustin 2005).
According to Peter (1985), marketing is an area that is often neglected by upcoming businesses. Social networking and aggressive marketing is important during the business introduction phase to enable awareness creation in the vast and competitive market. Businesses that do not market themselves through the various marketing channels are prone to fail than those that do. This is because consumers will not have knowledge of your services unless you make it available to them and give them the reasons as to why they should prefer your business over the already existing ones.
Casson (2003) says that it is thus good to join networking groups, chambers of commerce, or industry organizations and attend both the social and official events where you are sure to meet new people and sell to them your business. You should also have a business card and talk always to people about your business. Other methods that can be useful during marketing can be e-mail, direct mail, a website and public relations.