Why 95% of Business Fail within 10 Years
Summary
TLDRIn this video, the presenter explores the reasons why 95% of businesses fail to reach their 10-year mark and offers insights on how to join the successful 5%. They emphasize the importance of self-improvement, choosing the right business model, managing customer concentration, ensuring steady cash flow, understanding funding options, constant innovation, mastering direct response marketing, focusing on growth over operations, leveraging personal branding to attract opportunities, maintaining frugality in costs, and investing in growth. The speaker also humorously encourages subscribing to their channel as part of continuous learning.
Takeaways
- 💼 Most businesses don't survive past their 10-year anniversary, with only 5% making it, so improving entrepreneurial skills is crucial.
- 📊 Many business models are inherently more profitable; choosing the right model and constantly tweaking it can significantly increase success.
- 🔍 Avoid customer concentration by ensuring no single customer accounts for more than 10% of your revenue to reduce risk.
- 💰 Managing cash flow is critical; businesses should create ecosystems with regular cash flow and avoid relying solely on large contracts.
- 📚 Knowledge of funding sources, like private equity, venture capital, and alternative lending, is essential for overcoming financial challenges.
- 🚀 Continuous innovation is key to staying competitive; resting on past successes can lead to being overtaken by competitors.
- 🎯 Direct response marketing, focusing on generating immediate action from customers, is vital for driving business growth.
- 🛠 Entrepreneurs should focus on growing their business rather than getting bogged down in day-to-day operations.
- 🌟 Creating an environment where opportunities are pulled towards the business through strong branding and networking is more effective than constantly pushing for them.
- 💸 Being frugal with day-to-day costs allows for generous investment in growth opportunities, contributing to long-term success.
Q & A
What is the harsh reality that the speaker mentions about the survival of businesses?
-The harsh reality mentioned is that most businesses do not survive past their 10-year anniversary, with only 5% making it, indicating that 95% of businesses fail within this timeframe.
According to the speaker, what is the first step towards becoming part of the successful 5% of businesses?
-The first step is to become the best version of yourself, as the better you are, the better your business can be.
Why is it important to revel in difficulties according to the speaker?
-Reveling in difficulties is important because it is through overcoming challenges and learning from failures that one can grow and improve, which is essential for business success.
What is the issue with holding on to a business model that is not performing well?
-Holding on to a poor-performing business model can be detrimental because it may not be set up for profitability, and continuing with it could lead to business failure.
What is the speaker's advice on dealing with a business model that is not generating serious profits?
-The speaker suggests tweaking the business model to improve profitability, such as finding multiple revenue streams and sweating the asset.
What does the speaker mean by 'customer concentration' and why is it a problem?
-Customer concentration refers to having a significant portion of a business's revenue coming from a single customer. It's a problem because it creates a dependency that can lead to business failure if that customer stops doing business with the company.
What is the speaker's rule regarding the percentage of revenue that should come from any one customer?
-The speaker's rule is that no more than 10% of a business's revenue should come from any one customer to mitigate the risk of customer concentration.
Why is cash flow considered the biggest killer of businesses according to the speaker?
-Cash flow is considered the biggest killer of businesses because even profitable companies can fail if they do not have enough cash on hand to meet their immediate financial obligations.
What is the importance of having regular cash flow in a business as mentioned by the speaker?
-Regular cash flow is important because it provides financial stability and allows the business to operate smoothly without relying on large, infrequent payments.
What does the speaker suggest as a solution to improve cash flow in a business?
-The speaker suggests employing an accountant to manage the numbers, which can also make the business more attractive to lenders, thus helping to improve cash flow.
Why is having knowledge of funding important for business owners according to the speaker?
-Having knowledge of funding is important because it allows business owners to access the necessary capital to weather financial storms, seize opportunities, and grow their businesses.
What is the speaker's view on innovation in business?
-The speaker believes that innovation is crucial in business and should not be neglected, even when the business is doing well. Constant innovation helps to stay ahead of the competition and prevent stagnation.
What is the significance of direct response marketing in business success as per the speaker?
-Direct response marketing is significant for business success because it focuses on getting immediate responses from potential customers, which can effectively generate leads, sales, and revenue.
Why should business owners focus on marketing rather than just operating their business?
-Business owners should focus on marketing to bring in customers and create cash flow, which is essential for business growth. Spending too much time on operations can distract from the critical task of revenue generation.
What does the speaker mean by 'pulling for opportunities' instead of 'pushing for opportunities'?
-Pulling for opportunities refers to creating a personal brand and reputation that attracts opportunities naturally, rather than actively seeking them out. This approach is more effective and efficient in the long run.
What is the importance of frugality in business costs and generosity in investments according to the speaker?
-Frugality in business costs helps to maintain a lean operation and generate savings, which can then be invested generously in areas that will grow the business, such as infrastructure, acquisitions, or other investments.
Why does the speaker emphasize the importance of self-improvement for business success?
-The speaker emphasizes self-improvement because successful people are constantly learning and growing. Reading, attending seminars, and seeking knowledge are ways to sharpen one's skills and mindset, which are crucial for business success.
Outlines
😀 Harsh Realities of Business Survival
The video script begins by addressing the stark reality that only 5% of businesses make it past their 10-year mark. The speaker emphasizes the importance of self-improvement for entrepreneurs, suggesting that most fail due to a lack of personal and business excellence. They discuss the need to embrace challenges and let go of unsuccessful ventures, sharing their own diverse business experiences. The speaker also stresses the importance of having a clear vision and plan for success, and the necessity of choosing the right business model to increase the chances of becoming part of the successful 5%.
📈 Business Model Mastery and Customer Concentration
This paragraph delves into the importance of understanding and selecting profitable business models, using online resources for research, and leveraging the speaker's experience to illustrate the point. The speaker warns against the pitfall of customer concentration, where reliance on a single large client can lead to business failure, advocating for diversification to limit any one customer's contribution to no more than 10% of total revenue.
💰 Cash Flow Management and Funding Knowledge
The speaker identifies cash flow as the primary cause of business failure, advising on strategies to ensure consistent cash flow and avoid over-reliance on large contracts or a single customer. They recommend proactive banking relationships and the early seeking of funding to avoid cash flow crises. Additionally, the paragraph highlights the importance of having knowledge about various funding options and the role of an in-house accountant in securing loans and improving financial management.
🚀 Innovation and Marketing for Business Growth
Innovation is presented as a crucial element for sustained business success, with the speaker urging constant improvement even when the business is doing well. They use Steve Jobs and Apple as an example of innovation's impact. The paragraph also introduces the concept of direct response marketing, emphasizing the need for business owners to be effective marketers, capable of attracting and retaining customers with compelling marketing strategies.
🌟 Prioritizing Marketing and Opportunity Pull
The speaker advises business owners to focus on marketing rather than just operations, arguing that successful entrepreneurs are those who can generate revenue and attract customers. They stress the importance of being a 'revenue generator' and delegating operational tasks to others. Additionally, the paragraph discusses the concept of 'pulling' opportunities towards oneself through building a strong personal brand and reputation, rather than 'pushing' for opportunities.
💼 Frugality in Costs and Generosity in Investment
The final paragraph emphasizes the importance of frugality in day-to-day business operations to maintain a lean and efficient operation, while being generous with investments in growth and development. The speaker encourages the cultivation of an investment mindset, where savings from cost reduction are reinvested to fuel business expansion and improvement. They also humorously suggest that subscribing to the speaker's YouTube channel is a habit of successful people, before concluding with the advice to continuously work on self-improvement.
Mindmap
Keywords
💡Entrepreneur
💡Business Model
💡Customer Concentration
💡Cash Flow
💡Funding
💡Innovation
💡Direct Response Marketing
💡Operational Efficiency
💡Personal Brand
💡Frugality
💡Investment
💡Continuous Learning
Highlights
Only 5% of businesses make it past their 10-year anniversary, with 95% failing.
The harsh reality is that most entrepreneurs may not be good enough and need to improve.
Entrepreneurs should revel in difficulties and learn from failures to succeed.
Identifying what you want in life and having a clear plan for your business is crucial for success.
Some business models are naturally more profitable; research and choose wisely.
Tweaking the business model can turn a good business into a great one.
Avoid customer concentration by not relying on a single customer for more than 10% of revenue.
Cash flow is the biggest killer of businesses; ensure regular cash flow to avoid disaster.
Employing an accountant can help manage cash flow and improve borrowing potential.
Knowledge of various funding options is essential for business survival and growth.
Innovation is key; even successful businesses must continue to innovate to stay ahead.
Direct response marketing is vital for attracting customers and generating cash flow.
Focus on marketing and growing the business rather than just operating it.
Create an environment that pulls opportunities towards you instead of pushing for them.
Be frugal on costs to generate savings that can be invested back into the business.
Successful people continually work on self-improvement and personal growth.
Subscribe to the James Sinclair YouTube channel for more insights on growing a business.
Transcripts
most businesses will not make it past
their 10-year anniversary in fact only
5% will so the fact is 95% of businesses
won't make it in this video I want to go
over the 10 reasons why I think that
happens and how you can become the top
5% let's do
it the harsh reality is probably you're
not good enough look the facts are if
only 5% make it their 10year anniversary
most foul you're probably not good
enough as an entrepreneur now that can
change but actually most people don't
seek how to to become they want
convenience well actually you got to
Revel in the difficulties you got to
Revel in the difficulties and all I've
learned through some of the failures in
my career you know I've done a lot of
things I own hotels day Nursery zoos
visitor attractions coffee shops I
manufacture ice cream I've manufactured
products I've imported millions of
pounds of products from around the world
I've employed tens of thousands of
people so I've had a lot of experience
and some things have gone like Gang
Busters and some things haven't gone
well here's a lot of things uh that
people do is they hold on to stuff for
too long in the hope that it's going to
improve but maybe the model isn't good
enough maybe the business isn't good
enough maybe the business is not a
successful business you've just got
something that you're interested in but
the marketplace the marketplace isn't
and so over the next nine points I want
to understand what they are so the first
one is maybe you're not good enough what
have you got to become what do you got
to do to have the things that you want
to have in life maybe you want to have
more money maybe you want to have more
time more freedom but if you don't
actually identify what you want to have
what your business looks like when it's
finished with a clear plan of attack
then I don't think you're going to be
successful you got to work on that stuff
first so first of all you got to become
the best version of you because the
better you are the better the business
is number two really brings me on to
that point in more detail which is
you're building a useless model I've
discovered all of my business escapades
that some business models are just set
up for profitability way more than
others you know you open a restaurant
that's a difficult business model really
hard to make money from but you go and
do some commercial property and rent
that out it's a far more predictable
business model that is got way more data
that shows that it's going to be more
successful and so you want to find good
models and the data out there use this
thing called Google it's got plenty of
research and you can find out what are
the most profitable business models in
fact I've made some videos here on this
YouTube channel I put some links in the
video description or maybe above my head
where you can go and find out what are
the best business models it really does
start with the business model after
you've worked on yourself so you become
a brilliant business owner maybe you
learn accountancy maybe you learn how to
really understand numbers and then you
choose the right opportunities and the
right opportunities are the best
possible business model now if You' got
a business model right now that's doing
okay okay but it's not going like Gang
Busters not generating serious profits
maybe you can tweak the business model
and that's something that I've learned
in my career hey let me give you an
example I opened a Leisure business so a
zoo an indoor play center a family
entertainment center a bowling alley and
you're looking at it and going this is
generating some cash it's making a
profit it's making an ebit Dar which is
earnings before interest tax
depreciation amortization it's servicing
the loans it's quite a good business but
we don't want a good business what's the
difference between good and great well
it's actually tweaking the business
model so how can you get multiple
revenue streams and sweat the asset so
that business becomes really profitable
so what I did was I go right I've got a
Leisure business I'm going to build a
child care business on my leisure
business thus giving me loads more
predictable revenue streams because
Child Care is very predictable but I'm
already paying the rent I'm already
paying the rates and I've got a big load
of customers that are coming to me that
I can Market to to come to my child care
business and sweating the assets is what
good entrepreneurs and business owners
do you start doing that stuff improving
the models tweaking the models looking
for a better answer to get better
results you're going to get in the top
5% gang number three big one here gang
customer concentration now I've done
lots of podcasts nearly 400 episodes of
my podcast where I've interviewed and
helped business owners try and grow
their business if you're interested in
the podcast there's a second YouTube
channel but Link in the video
description for that as well customer
concentration is one of the biggest
things that causes businesses to go bust
now what is customer concentration well
it's one big customer that drives in an
horrific amount of Revenue into the
business and I have a rule that no more
than 10% of your Revenue should come
from any one customer I can't tell you
especially in construction in FM
companies that's facility management
companies but in supplying companies
you've got this one big customer that
gives you most of your profit most of
your revenue and you all build your
business around them and then they go
actually we're going Bust or we don't
want to buy from you anymore and no
matter how much you think your
relationship is good with them nothing
is forever and so if you've got one big
customer your job is to dilute them as
fast as possible so they don't become
more than 10% of your Revenue really
really important I see more businesses
go bus from that one than anything else
number four cash flow cash flow cash
flow is the biggest killer of businesses
I've got that podcast and I've helped
Ono one I've done consultancy I mean my
business businesses managing cash flow
is the biggest stress there's some
things that you can do make sure you
haven't got customer concentration make
sure that you don't have all your
customers on credit make sure you create
an ecosystem where you're getting a
little bit of money even every single
day so you've got regular cash flow if
you're waiting for big contracts to be
paid then that can be disastrous I know
lots of businesses that can make two
three four five million pounds worth of
profit profit but they're not getting
paid they haven't got their bills being
paid they're getting extended payment
terms all the time and that's it the
business goes bust and so you've got to
find ways of improving cash flow if
you're borrowing money and you think
you're going to need funding in six
months time go to the bank six months
ahead of time get all your ducks in a
row then you've got a far better chance
of getting the money what banks hate
doing is lending to businesses when
they're having cash flow pinches they
love lending to businesses that say in
six months we're going to have a cash
flow pinch because of x y and Zed we
would like you to support us now we're
telling you 6 months ahead of the time
so one of the best ways that you can
remove cash flow problems in your
business is employ an accountant as soon
as you can get that person inhouse that
knows your numbers inside and out banks
will absolutely love it it'd be much
easier to borrow money and thus removing
lots of the cash flow problems and
they'll be helpful to you you know as
the mafia have a consiliary you will
have a consiliary within your
organization to help you that really
understand the numbers and don't forget
that little phrase a little bit of money
from a lot of people a lot of the time
now I've got well over a million
individual customers that come through
my doors each and every single year to
all my businesses so every single day we
have some cash flow here at the bank now
also in another one of my businesses
I've got a customer right now that owes
me
£750,000 now that's not extended payment
terms they've just bought a lot from me
that was my only business i' literally
be not sleeping now I can weather that
storm because I've got those million of
little customers giving me cash each and
every single day so create an ecosystem
that allows you to have regular cash
flow lots of business owners just rely
on those one big ticket sales to keep
them going those one big customer so
create an ecosystem of regular cash flow
and your sleep at night a lot better
number five is no knowledge of funding
it is horrific how many entrepreneurs
and business owners come to me and go
James help me I need to raise some
funding and I actually think about
raising money from private Equity or
Venture capitals or Angel Investors more
than going to the many many resources
for business owners to be able to borrow
cash into their business and this is
another reason why I say employing an
accountant inhouse in your business as
fast as possible is one of the ways that
you're going to be able to P that off to
them to them to go and do all the
funding and raise cash for you there's
peer-to-peer lending there's alternative
lending there's private investor lending
there's Bank lending there's more Banks
than ever before there's lease Finance
now we've got access to loads of those
people we borrow from lots of different
banks lots of different Avenues you've
got to knowledge up on this you've got a
knowledge up on this you've got to
become really good at being a person
that can raise Capital if you haven't
got that knowledge of funding you
haven't got that knowledge of funding
then I think this will be very difficult
for you to weather some storms and get
through some of those challenges and
there will always be challenges that
guys you I got a business we're doing
tens of millions of Revenue each and
every single year 1 1200 staff things go
really well well but every now and then
we have some tight points some problems
and then I have to go and fix it and
because of my knowledge of funding I can
go and get it or maybe an opportunity
comes up maybe an opportunity comes up
but I can go and seize really quickly
and I don't want to use all my own cash
I know how to raise the funding and I've
put a lot of time into reading the books
meeting people networking with people to
be able to be someone that can raise
capital and cash very quickly and even
medium to longterm and what I think a
lot of people do is just go to their
regular advisors for this stuff very
similar to actually accountants and
solicitors let's put this in the same
bracket if you're getting the same set
of results with your accountant and your
solicitor and they're your most trusted
advisers have you ever thought about
knocking on the door of another
accountant just to see if they've got a
better point of view do you not think
that is what the top 5% of individuals
are doing yes they've got multiple
accountants they talk to multiple
solicitors multiple Banks multiple
investors to get things over the line
that puts them in the top 5% number six
is innovate or evaporate because the
marketplace is always innovating and
here's the thing when people have got a
good business and things are going very
well they start to rest on their Laurels
well no no no Captain that's when you
must start innovating even more let's
look at Steve Jobs arguably one of the
last 50 years best in uh innovators you
know he took Apple to Heights that most
entrepreneurs can't even begin to
imagine because because he was an
innovator he kept on making brilliant
products now before him Sony were the
technology innovators they were just
brilliant but then they got lazy they
rested on their Laurels and apple
overtook them you want to make sure that
doesn't happen in your business now I'm
not saying that Sony is not still an
amazing profitable company of course it
is but Apple outdid them so you want to
make sure that you're constantly
innovating even when things are good
because that Marketplace is always
trying to innov and they're always going
to out innovate you so make sure you
stay at the top of your game you know if
you carried on making fax machines you'd
be bust that's the that's the point I'm
trying to hammer home you must innovate
all the time number seven this is
something that I don't think you'll hear
on many YouTube videos when we're
talking around these subjects and that's
direct response marketing if you want to
be successful in business you've got to
be a marketeer of your thing over an
operator of your thing I come across
many many entrepreneurs and business
owners and the
ones that are the most super successful
are the ones that know how to get
customers create cash flow they spend
more time bringing in cash flow into
their business and that's my big message
but it's not just understanding the
marketing that cocacola would do it's
direct response marketing the power of
good copy headlines getting people to
call to action understanding how you're
going to get people's attention keep
their interest know how to get them to
make a decision to buy from you and then
to action on those decisions straight
away so you've got to learn how to be a
direct response marketing I wrote a book
called getting customers I suggest you
go and get a copy of that I've made
loads of videos here on the YouTube
channel about how to do really good
marketing that works to do it frugally
by the way to do it frugally so that you
can do it with as little money as
possible look my view is if you're doing
marketing for especially a location
small business you should be building a
business and doing your marketing like
you're running for local government the
stuff they do they do leaflets through
the door they pick up the phone um they
Network they write articles in
newspapers they do uh content marketing
they beg people for their votes and
that's what you need to do in those
early days get customers become a direct
response marketeer go and check out the
videos I made on the channel about that
number eight focusing on operating your
business over marketing your business
now most business owners that I come
across spend 80% of their time in their
business operating their business
they're doing the fat returns they're
doing payroll they're opening their
business up closing their business up
they're doing all the P all the time
Vampire tasks get rid of it get rid of
it as fast as you possibly can so that
you're in a position where you're
spending 80% of your time growing your
business bringing in customers signing
up contracts a revenue generator you're
the salesman of the business you're the
sales person that is making everything
happen you're out there seeking
opportunities and if you're stuck in the
operations role how are you going to be
doing that and you're the best person to
do it you've got to be the Mover shakeer
you've got to be doing the impossible
tasks not the possible tasks and I think
a lot of business owners like doing the
day-to-day stuff because they feel like
they've achieved some stuff they feel
that they can say oh I've been so busy
today doing the vat return and dealing
with the staff and getting all those
deliveries out you won't catch me doing
any of that stuff because it's
counterproductive for the people that I
employ I need to go out there and be the
revenue generator of the business doing
the impossible tasks not the possible
tasks employ people to do all the
possible stuff the technician roles so
that you're out there creating future
opportunities for your team and yourself
and you'll be the top five% my friends
number nine is changing the outset of
your environment so that you're pulling
for opportunities not pushing for
opportunities this is the big thing
right it's the big secret that I've
discovered about high level high
performance people they pull everything
towards them they're like a magnet
bringing in all these opportunities into
their ecosystem into their life most
people are pushing for those
opportunities how does that happen well
you've got to build a personal brand
you've got to be someone that someone
wants to deal with have you ever heard
the phrase if you want something done
ask a busy person well that's because
that person's effective
subconsciously that that you know that
that busy person can get stuff done so
they just pulling more opportunities
towards them you think oh I'm a leader
of a country and I want to get some
satellites into space H sick oh hello
Elon Musk can you help me here you know
whilst you're also building Twitter or X
whatever he called whilst you're also
doing Tesla while you're also doing
starlink and SpaceX you know he's a busy
person that will have so many
opportunities every single day that he
can be picky and choosing he pulls
rather than pushes and that really is a
mindset thing it's a habit that gets you
into that position how can you do that
write a book be a thought leader get on
YouTube go on podcasts win awards for
your business get good customers because
that's a signal that people can trust
your business because you're servicing
other good customers oh my God this is a
big thing I've discovered in my life you
get one big brand leader all the other
brand leaders want to deal with you
because they trust that you're dealing
with that person so you going to get the
mindset and the philosophy that we're
going to pull opportunities towards us
rather than push for opportunities
number 10 is Be Frugal on costs so you
can be generous on investment you want
to have an element of frugality around
you on the day-to-day running of a
business businesses as they generate
Revenue as they become more profitable
they absorb fat and your job is to be a
color of the fat in your business you
want to be a lean mean operating machine
frugality must be a culture in your
business make sure that you're driving
the price down you want to make sure
that you're not overspending on labor
that you're not overspending on costs
but not to the detriment that it causes
you a problem with investment so we want
to be so Frugal on cost so we generate
massive cash flow Savings in our
frugality on costs so that we can go and
invest that money because what do all
wealthy people do what do all successful
people do they invest they invest in
themselves they invest in books they
invest in capital infrastructure they
invest in Investments they have an
investment mindset but you want to be
frugal on the day-to-day Runnings so
yeah go and buy that commercial property
that you operate out of go and buy that
next business grow by acquisition no
just grow by organic and the way you do
that is You Can Be Frugal on your
day-to-day cost you can be generous on
the big costs on investments the 11th
thing which is my last point is all
successful people subscribe to the James
Sinclair YouTube channel so make sure
you subscribe to the channel I'm jesting
a little bit there I do want you to
subscribe to my channel and read and
what all my stuff but actually that's
something else that successful people do
is they sharpen their s if you read the
book Seven Habits of Highly Effective
People you know chapter 7 is sharpen
your sore it means work on yourself
become the person that can deal with
stuff you've got to go to the seminars
you got to read the books great leaders
are great readers there's a there's a
little phrase that I I used to love you
know poor people have big TVs and rich
people have big libraries and
it's not just rich in terms of wealth
but it's rich in terms of philosophy and
outlook on life you've got to sharpen
your saw you've got to become the best
version of you reading listening
watching to the right stuff going to
seminars can all really help so
subscribe to the channel and I'll see
you in the next video to grow your
business
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