Mark Cuban: These Are the Top 4 Reasons Most Small Businesses Fail

The good news? Each is something — if you’re willing to work hard — that you can largely control.

EXPERT OPINION BY JEFF HADEN, CONTRIBUTING EDITOR, INC.@JEFF_HADEN – You can read this article in its entirety HERE on Inc’s website

You may not realize it, but most U.S. businesses are small businesses; SBA statistics show that 99 percent of all businesses are independent companies with fewer than 500 employees. 

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That’s the good news. The bad news? While estimates vary, according to Bureau of Labor Statistics data 20 percent of new businesses fail within two years, 45 percent during the first five years, and 65 percent during the first 10 years. (Only 25 percent make it for 15 years or more.)

Keep in mind that “fail” is a loaded word. I may start one company, see a better opportunity, and shut down the first to launch the second. That’s not a failure; that’s a savvy shift.

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Even so: Why do so many startups fail? Here’s what Mark Cuban had to say during a Wired Q & A last year.

1. Sales.

“No business has ever succeeded without sales,” Cuban says. (Maybe that’s why Cuban says sales skills are what made him wealthy.) “Period. End of story.”

Don’t like sales? Don’t think you’re good at selling? Before you start a business, take a job in sales, even if part-time. You’ll gain confidence and self-assurance, and the skills you gain will serve you well for the rest of your business (and personal) life.

That’s because, in essence, skills are communication skills. Think of selling as explaining the logic and benefits of a decision and everyone — business owner or not — needs sales skills: to convince others that an idea makes sense, to show bosses or investors how a project or business will generate a return, to help employees understand the benefits of a new process, etc.

Gaining sales skills will help you land customers, get financing, bring in investors, and line up distribution deals, especially in the early stages of starting a company, everything involves sales.

Learn to sell.

2. Preparation.

“When you go to start a business,” Cuban says, “have you done all your homework to know about your industry, your competition, your products, the profitability, your customer base, your demographics? You need to know these things.”

That also involves being financially prepared. Cuban doesn’t recommend quitting your full-time job to go all-in. “We hear all of these stories about all of these people who quit their jobs, started a company, and made all of this money,” he says. “What you don’t hear are the stories of the people who quit their jobs, started a company and failed miserably, and are now working at a job they hate.”

Or, as Arnold Schwarzenegger says:

This is why I always say don’t listen to these follow your passion people who tell you to quit your job and jump off the deep end. You need money, and if you quit your job, you’re going to have to make decisions you wouldn’t make otherwise in order to make money. I could say no, but only because I had my bricklaying business and then my real estate business so I wasn’t desperate.

Preserve your power to say no.

When money is tight, horizons shrink — and so do the choices you can make. 

So make sure you’re mentally and financially prepared.

3. Effort.

“It’s not easy starting and running a business,” Cuban says. “It’s hard. If it was easy, everyone would do it.”

That’s why Cuban says success doesn’t come down to money or connections. Success is based on a willingness to outwork and outlearn everyone.

Effort? it’s the great equalizer. You may not be smarter. You may not be as talented. You may not have the same connections, the same background, or the same education. If you’re on the downside of advantage, you may have none of those things.

But you can always, always, always work harder than everyone else.

Effort can not only keep your business in business, it can also be your competitive advantage.

4. Brains.

“You gotta be smart,” Cuban says. “You gotta learn this stuff. You have to be curious in order to be successful at business.”

That’s why Cuban frequently recommends books about artificial intelligence, like Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World. 

That’s why he’s put considerable resources into his AI Bootcamps Program, an organization that teaches artificial intelligence skills at no cost to high school students in low-income communities across the country.

As Cuban says, “If you’re not reading, you’re [screwed], because you’re not expanding your mind. I tell my kids, ‘Somebody who doesn’t read lives one life. Somebody who reads an unlimited number of lives.'”

Seek to constantly learn, and your business may also live, if not an unlimited number, at least a really long life.