Business Owners Whose Startups Failed Reveal What They Did Wrong

Anyone that's brave enough to leave the large, corporate world America's built and start their own business is deserving of praise. It's not easy to step away from a guaranteed safety net provided by a large corporation and think, "I can offer something customers are willing to buy!" Sometimes, you're successful. And other times....you're these people.

Reddit user, u/nintendo_shill, wanted to know about what people who failed at their own businesses learned when they asked:

People who failed at launching a business or startup, what did you do wrong?

Hired friends.

Didn't do that this time around. Worked out.

All_Seeing_Fries

Entered an over saturated market with zero business, marketing or sales experience.

In hindsight, my chosen niche wasn't specific enough. I've had a follow up idea from the experience I had, but I have zero intention of actually executing it.

EthicMeta

Yep. Self-funded and thought I was being "responsible" by not getting investors. I was profitable (just barely) after 14 months, but was looking at the next several years of ups and downs and was killing my relationship with my husband and my health. If I'd had another $50K we probably could have survived.

Starting another venture as we speak but am looking for an investor and putting a small salary in for myself right up front.

alegria122

A friend was a legendary home brewer in my area and decided to start his own commercial brewery after he retired. Apparently commercial brewing is a totally different animal than home brewing, and his recipes that were amazing in 5-10 gallon batches now tasted like crap when they are brewed on a larger scale. He doesn't know the business very well either, so he's failing to get the right connections and contracts to get his beer out there.

He's not out of business just yet, but he's privately confided to me that he can only keep the doors open for another month or two. It's a shame because he put a good chunk of his nest egg into the business.

urgehal666

Convinced myself that quitting my job and becoming a one-man band IT technician was a great idea.

Except I live in the middle nowhere and there was already excessive competition.

In reality, it was an excuse, I needed to quit working at my current job and grieve the death of my father. But at the time I couldn't accept that I was not mentally well and couldn't work, I had pressure to keep working from my employer as well so lied to them and myself. I spent a month "running my business" before deciding I'd develop a drug habit; was about one month away from being homeless before sorting my sh-t. So my "business" was actually just an excuse to go away and grieve. This was 3 years ago doing amazing now, no drug habit and just got hired as a dev ops engineer =)

Gaunts

I mushroomed. I started an online business in my bedroom which grew to be the largest of its kind in the country, went from one laptop in my bedroom to over a million sales in 3 years and shipped globally. 6 years later I was answering emails one after the other for at least 10-12 hours a day, had 9 full time employees. At the ripe old age of 21 I got ambitious and expanded, took over warehousing, launched 3 sister brands under the same umbrella and by 25 I was burnt out, mentally and physically and had lost that spark. You can always keep pushing but when that spark fades it is the hardest thing in the world to reignite. 5 years later and Im trying to rekindle it for round 2 but next time I know how to do it.

con101smd

I started an independent engineering consultant firm that was made up of only me. Turns out I spent so much time trying to get old customers to pay me, that I didn't spend enough time looking for new customers.

Side note: I will never ever sign a contract with an "Art Collective" ever again. They agreed to pay me a flat rate ($5000) to automate a project they were building that involved some motors spinning some disks or something. The job took me maybe 4 hours not counting the travel (but hey they agreed to a flat rate). They never sold the piece and never paid me, even though my contract had no language tying my compensation to project success.

Anyway they dissolved the "Collective" and reopened it under a new name... and I never got my money. Repeat that story about 4 more times and I went back to working for someone else.

Optimized_Orangutan

I got the wrong investor....my dad.

My dad was the kind of parent who couldn't trust me, and unfortunately still thinks he's a fellow kid who totally understands today's tech scene when he's.......well. Let's just say his idea of a great app is to load everything with ads, create 50 unnecessary additional steps to force everyone to see what our app can do, and oh...the 80s silver, blue & yellow gradient effect everywhere.

eraser_dust

I was too naive. As an engineer, I just wanted to build a product for the customer and then hope that it would sell itself and I would be on my Merry way. So I built dispatching software for a local truck company. After I finish building it out, I do some research and there are at least 10 other competitors with better fetaures and have been around longer.

Then I try cold calling other truck companies in the hopes of selling my software to them. Lo and behold, they were already using a competitor's software to power their operations. I also had to price myself lower in order to try to be a compelling offering. So now, here I am with 1 customer getting paid $150 a month.

In essence, I f-cked up in not doing enough research, not coming up with a more unique product, trying to be 5% better that competitors, not being able to get help on the sales end, and much more. The only thing I did well was to build good software.

Now, I wake up everyday depressed, not knowing what the right next step is, running out of money and time. The hardest part is the loneliness of it all. I miss having a team.

bouldurer

Accountant here:

See plenty of people coming in to make a go of a small business. Over the years, here's the biggest failures I see repeatedly:

1. Franchises. There are zero franchises designed to get YOU rich. They're designed to get the franchise COMPANY rich. Someone figured out years ago they can skip the equipment headaches, issues with remodeling, employee hiring/liability/benefits, etc. by selling it off to some poor sap. The poor sap then is forced to act as the location manager because they've typically sunk a large amount of retirement money/money borrowed from family into it and they simply cannot walk away.
2. Selling stuff in a retail storefront. Unless you have a slam-dunk super-awesome super unique product not available in wal-mart or on Amazon, you're gonna have a hard time. Consumers are highly price conscious and will happily shop elsewhere if they can get it 10% cheaper or buy it when they purchase groceries. Piggybacking on the retail....
3. Do some math before jumping into it. Say I want to open a muffin shop, and I sell muffins for $3 and they cost me $1 to make, so $2 profit a muffin. Yay! Now, my rent is $2,000 a month and other fixed costs are another $1,000 a month, so I need to sell enough muffins to make $3,000 in profit, so that's 1,500 muffins. It I'm open 30 days a month, that's 50 muffins a day, which isn't bad. But, say I need to hire two employees to help out, because I don't want to work 120 hours a week. You're in a big city, so you need to pay a decent wage of $15/hr for 160 hours a month each, so that's another (2 X 160 X 15) = $4,800 in wages, so that's ANOTHER 2,400 muffins to sell with your $2 profit, so now you're needing to sell 3,900 muffins a month. AND THAT'S JUST TO BREAK EVEN. How much is your time worth? And how many more muffins would you need to sell to cover the debt you incurred to get the business started? Say you gave up a job making $4,000 a month - that's ANOTHER 2,000 muffins to sell to just get you to your old salary. So now you're up to 5,900 muffins, and if you're open 30 days a month, it's around 200 muffins a day, and if you're open 12 hours a day, that's 17 muffins an hour. You think that's going to happen? Better be sure. And better be sure you know what expenses you're going to have, because running a small business in an exercise in frustration as you get nickel-and-dimed to death.

Edit:

4) GET EVERYTHING IN WRITING. Renting property? Get a signed, written lease. Going in with a friend/partner? Get a written agreement, AND get written down the work/profit expectations. Hiring a contractor? Get a written agreement in place. Employee? Get a signed employment agreement, AND take the time to have a written policy manual.

Edit #2:

5) Spend a few bucks and meet with a lawyer/accountant BEFORE you open the doors. Yeah, it will set you back a bit. HOWEVER, it will save you TONS of headaches down the road. Lawyer will help with #4 above. Accountant will help with what/how to keep records, tax laws, payroll, etc. Side note: If you don't know how to do payroll, just pay someone to do it. You screw up payroll, the IRS/state agencies will crash down on you like a ton of bricks. You owe the IRS $10k in income taxes? It's surprising how long they let you slide before they really give a sh-t. You owe the IRS $10k in PAYROLL taxes? They're on your a-- like a rat on a Cheeto.

Abbithedog

H/T: Reddit