30 Ways to die in a business

What is a failure to start a business? Failure is failing; it is a failure to be a great company, but to be mediocre is to fail; the expected goal and the reality are very different, but also failure; These are generalized failures.

Those who do venture must study failure. Investment in the initial stage of the project, may be in the second eight, investment into long-term projects, may be five to five, the relatively mature investment in the company before the IPO, may be seven to three. The failure of the entrepreneur is more, the failure rate of the entrepreneur is very high, so the research failure is very important.

I use some examples from five levels to illustrate what causes failure. The first is the entrepreneurial spirit and moral level, the second is the enterprise development Strategy level, the third is the corporate governance structure level;

The spiritual and moral aspects of entrepreneurship

Lack of ideal every successful entrepreneur, give me the first feeling is the ideal. On the contrary, we have failed to invest in enterprises, the main reason for failure is the lack of ideals and sentiment, the money to the supremacy of the status.

We originally invested in a company to do AIDS medicine research, is expected to be a star enterprise. If the enterprise still exists, it must be in the first batch of the gem listed company lineup. But it went bankrupt and the boss was in jail. And why? In the process of doing business, he used the platform, he wanted to earn more money. If an entrepreneur sees money as the most important thing, it will fail sooner or later, because he may do something he shouldn't do for money.

Therefore, small business diligent enough, do business to spell wisdom, if you want to big business, must rely on virtue, that is to have ideals.

Only to adapt to the wind and the lack of determination and perseverance we have invested in a business to do new biological drugs. In the past ten years, it has not a penny income. But it persevered. In the United States, the same drug, sold 7.8 billion dollars last year, and we do this medicine, the price can be cheaper than half. This success is a great success, but if there is no unyielding spirit, the company will not be able to go on.

We invest in another enterprise, when the router industry flourished as a router, did not do too successfully, turned to network security. I didn't do it for a while. Now it's turning to system integration-an industry that may not be doing much in China. If the entrepreneur insists on being a router, I think the company is at least not in the right position.

Too dependent on the past experience, the conservative refusal to change the product to upgrade, the model to innovate, management also need to innovate. On any one hand, reliance on past experience can lead to failure. We have invested in a resource industry enterprise, the conditions are very good. But it is clinging to tradition, not to develop innovative products, there is no pioneering and innovative mode. Before the financial crisis, the traditional products can contribute 50 million ~6 million yuan per year profit, after the financial crisis only 5 million, in a half-dead state.

We invest in a photoelectric enterprise in Dongguan, formerly made of steel structure, after turning to high technology, is now LED Lighting Asia's boss, it has more than 3000 kilometers of streetlights. You innovate, you do a new product, do not worry about the past products, this is the environmental changes brought to the enterprise changes.

Beats, lack of pragmatism some entrepreneurs are not down-to-earth, but opportunistic. For example, by the flicker, by the flicker can become a moment, unable to become a lifetime. I hope that one thing will be successful soon. Pie in the sky maybe once, there won't be a second time. Enterprises lack of pragmatism, today do not fail, tomorrow will also fail.

Listing for the listing, both harmful to their own enterprises listed, should be the process, not by simple packaging. For the listing of clever cooking, margin or net profit suddenly rise. For the listing to Rob Paul, the demolition can be, but if the environment changes, it may be demolished west wall to repair the east wall is not enough. There are also companies blindly expanding to go public, the results can not adapt to market needs, or no team to operate the expansion of assets after the failure.

The strategic level of enterprise development

It is not clear that long-term strategic entrepreneurship can not only know what to do today, do not know what to do tomorrow. Long-term development strategies are in a state of chaos, and you can't give your employees direction.

We invest in solar energy, Crystal Division, the company to do a single crystal, in the industry in two or three current status, quickly met the financial crisis. Faced with the financial crisis, the enterprise seriously analyzed the industry situation, made a strategic adjustment, from the original crystal expansion to the battery, and then extended to the batteries, 2010 in the NYSE issued shares listed, the previous period and a very high price issue. Crystal Division 2010 years ago the three quarter to achieve a net profit of 514 million, of which the third quarter to achieve 259 million, the chain growth of 43.6%, year-on-year increase of up to 1865%, the enterprise has entered the ranks of the first-class solar enterprises.

Enterprises into the Taurus business, the cash flow is very good, we must consider transformation and upgrading. If Taurus does not transform and does not make strategic adjustments, it may someday turn into a lean dog.

Strategy only in shallow circles, lack of the courage and ability to explore the deep law some enterprises are only in the past experience to find a way out, only in the surface resources, the result of the enterprise did not grow up. Be sure to jump out, through innovative ways to enable enterprises to achieve development.

It is a double-edged sword to dare not expand or expand in disorder. For the entrepreneur, first, can not do feet-not to expand. Second, it cannot piantingpianxin the minds of capital-makers and expand when it should not. To follow their own development rules to do. Expansion is less than worry, but excessive expansion, compared to the worse, just like an idiom "too much."

A business entrepreneur in Lanzhou believes that there is no need to expand to meet market needs. After a few years, can not meet the market demand, so want to expand, but suddenly found that the first money is not enough, the second competitor has a big help. This is "less than worry."

Another business, there would have been the right time to go public. But he thought that after the big scale can sell the better price, then bought the United States the entire production line, the result this production line from the establishment that day has not a penny profit, the enterprise now has closed down. If he does not blindly expand, after the listing has more money, and then see what should be done to expand, may have been successful. This is "overkill".

Expansion should be gradual. We have invested in an industrial kitchen, and the first kitchen has not yet been run, and it expands to be a second kitchen. The first operation of the kitchen is very necessary to find good and bad places in the operation, and then build a second kitchen according to the actual operation. The result has not been able to expand the second kitchen, the capital chain is broken.

We now invest in a chain of catering projects, entrepreneurs will come to Shenzhen to acquire 15 outlets. I said to him, do not buy 15 at a draught, the limit can not exceed 3. As a result he tried 3 points, Shenzhen 2, Dongguan 1, have failed, because the product is not suitable for this place distribution. Therefore, if you do not know how to do business, we must first try, and then gradually advance.

Problems of capital operation strategy Many entrepreneurs lack the ability to judge capital operations and Piantingpianxin financial advisers. But if an enterprise has a plan for capital operations, it is not easy for an entrepreneur to understand it first and fully understand it. It is very important to keep accumulating.

After the general understanding, but also to do hear. Just listening to the advice given by a financial advisor may be a violation of corporate interests. Because financial advisers have expertise. For example, my specialty is to do the U.S. listing, if I recommend another place for you, my job is gone.

The strategy of financial leverage does not use financial leverage, there is no reasonable debt, then you are not a good entrepreneur. However, if the debt is too high, liquidity risk increased, under normal circumstances, high debt can withstand, a change in the economic environment, especially the financial crisis, will not hold up.

Enterprise mutual security to harm themselves, and lost the conditions of rescue. We have invested in a company that is the boss of a subdivision industry, and is simply expanding and borrowing money enough. Borrowing to get someone to vouch for, with another business mutual protection, the result of expansion itself failed. There was a chance to save, but the object of mutual protection failed, there is no way to save. Therefore, mutual security is a way to harm oneself, do not to reduce financial costs and engage in mutual protection.

The level of corporate governance structure

The implementation of family-style management, lack of supervision of supporting decision-making system many startups are family business, many are pop. My point is that if an enterprise wants to succeed, it must turn off the pop. Family business want to succeed, must moderate decision-making sunshine. What problems do family businesses have? The first is the lack of responsibility of employees. The second is that when it comes to difficulties, it is difficult for employees to be in the same boat. The third is the inability to brainstorm.

The proportion of core entrepreneurial personnel holding less than 30% of the core entrepreneurial personnel, the success rate is low (except for state-owned enterprises, state-owned enterprises to employees 10% or 15% of the shares is very good, because the basis is different). We have invested in such enterprises, the industry is very good, the level of the enterprise is very high, but from the company out of the people, has created a group of great companies, and this enterprise is declining. The reason is that the backbone does not have shares. There are some companies rely on the wind to support the company, the major shareholder is a venture capital institutions, entrepreneurial team holding a small proportion of the success rate is also low. Entrepreneurs have fewer backbone shares, the mentality and methods of doing things are different.

In addition, the boss does not change, the team often become undesirable. In the face of difficulties, should let the team to stock rather than change a team, change a product, this approach success rate is not high.

Incentive and constraint mismatch

Incentive is not in place, equals not incentive. The cost of 100 yuan is only 60 yuan, equal to white flowers. I have always advocated that it is not possible to give the team a high salary and good treatment, it should give him shares. Constraints are also very important. What is the purpose of the constraint? is to let people "have zeixin without accuser". Zeixin, but accuser can be regulated by system.

The intelligence structure of the entrepreneurial team is too single, and the style is too coincident. If the knowledge structure is not complete, it is a kind of specialty person, it is very easy to go wrong. Some people are suitable for technology, some people are good at management, some people are good at doing business, introverts are suitable for scientific research, extroverts are suitable for business management-should make such analysis and judgment, so that people reasonable collocation. Talent structure of a good enterprise, the success rate is very high, the talent structure of enterprises, low success rate, or success is small success.

The actual control of people's energy is too dispersed many entrepreneurs at the same time do a lot of things, rather than focus on doing something. What if you're not focused as a boss? First, your CEO must have a stake in the company, too little; second, you should have charisma, and your charisma is important in front of your staff. If the personality is not attractive enough, the likelihood of failure is greater.

Technical aspects of the product

Inadequate protection of intellectual property rights

The protection of intellectual property has great influence on the profitability of enterprises. China also relies on intellectual property as the main revenue of enterprises, more cases, because the protection of intellectual property is relatively good, enterprises to obtain a better development environment. If there are major flaws in intellectual property, do not do such projects.

Technical barriers and low market thresholds

The threshold includes two: technical barriers and market thresholds. The threshold level cannot be distinguished by simplicity and complexity. Some businesses do things that look simple, but the barriers are high. Because the market position is also the threshold-Sina, Ctrip is quite simple, but the market position is high, has the scale, such enterprise threshold is very high.

Strong alternative

As entrepreneurs, the analysis of alternative trends is very important. There are three alternatives: the first is revolutionary, such as LCD (liquid crystal) instead of CRT; the second is diverse, such as movies and TV dramas, where movies have won a mess in the past, and then the movie is back, and the third is the difference, like the long-term co-prosperity of the online shopping approach.

There's a ceiling.

Some professional software companies, the market occupies almost after the down, and to plan another professional software. Should start planning time, must plan several products, the struggle space cannot be too narrow. If someone thinks you have a ceiling, you won't be interested. You want to private placement is very difficult, or listed stock prices can not go up, this is caused by the ceiling.

Single Market

Before Chinese enterprises can export is a good enterprise, now to both export and can be sold to the domestic market is good. Both markets dare to sell, it shows that the domestic and foreign sales have mastered the law. One big question about the single market is that economic cycles and macro-environmental changes can lead to survival difficulties.

Greater reliance on resources and environment

Entrepreneurship or investment, in the direction of reducing consumption, the likelihood of success is even greater. For existing enterprises, there are two countermeasures: first, to gradually reduce the dependence on resources and the environment, and secondly to improve the ability to cope with environmental change. In the financial crisis there is a phenomenon: the demand is reduced, but the limited demand will be particularly concentrated, which will lead to a better individual enterprises.

We nurture the listed Oriental sunrise and do solar energy. 2007 profit is 20 million yuan, 2008 solar industry Big Shuffle, the eastern rising profit to 80 million yuan. 2009 profit reached 135 million yuan, 2010 1 ~ September performance of 150 million yuan. Why does it continue to grow? Because of the ability to digest the environment.

No differentiated competitive advantage

The standard of products and technology is different. The product and Technology Market Foundation should be firm, markets must have an approval degree. So I think, entrepreneurial to strive to do even a small segment of the market's first second, do not do behind. In addition, the management of products and technology to above. The core is cost control, cost control is good, you may not earn money when others earn money, when others earn a lot of money.

Business strategy and business model level

Bubble stage trendy business or investment, do not in the industry in the late or vertex entry, otherwise the next 3-5 years are difficult survival period.

We used to invest in a company that was the highest point of profit, because the industry came to a climax. Choose to invest in the industry's ramp up phase. At the end of 2006, we invested in a lithium-ion battery cathode material enterprise with less than 3 million profit. In others dare not to vote when we cast, the result of rapid growth of enterprises, 2009-year profit has reached 40 million yuan, listed, we earned nearly 50 times times.

Industry chain too long to do one thing, consider how long your chain is. We have invested a lot of chip design companies, and later found that the short end of the enterprise has been successful, and to the terminal long enterprise, the situation is not very good, this is called "chain too long easy to break."

We have also invested in TV shopping companies. TV Shopping company is very good abroad, but not a great company appeared in China. Subdivided, because there are too many links to be fixed. First of all, to have channel resources, maybe the city signed the city can not sign down. Second, it is not easy to choose a good product. Third, the concept of the shopper is also very important. China is a lack of integrity of the country, we do not believe that the television shopping, affect the marketing effect. Finally, there are problems with the distribution of business interests, it is very complicated. Because there are too many links, a certain point out of the problem can not.

The restriction point too wide too many face the same reason, if do a thing need to cover a lot of "official seal", this matter is very difficult. Products are the same, if you do the product supporting links too much, it will be very difficult.

Timely or icing on the cake this is a question of demand analysis. Each project, you can consider this: it is timely or icing on the cake? Better than icing on the cake. For example, there are two kinds of mobile phone payments: One can integrate a credit card on a SIM card, and payment can be made with a mobile phone. Another model is to move electronic payments through the desktop to the phone. The former pattern is timely, the latter one is icing on the cake. The same two projects, the timely should be a priority option, if it is "icing on the cake" type of project, it must be high hit.

One big step ahead is to lose money and wait three years to do one small step ahead, not one big step ahead. One big step ahead of the country to do.

Ignoring the clutter of new projects the accurate judgment of the project highlights is half the success. Like Tencent. Ten years ago, Tencent looking for us to invest, we do not understand, or the messy beauty did not see understand, did not vote. If we were to invest 5 million yuan, the current market value should be $40 billion. Therefore, we cannot ignore the messy beauty of innovative projects. Entrepreneurship or investment, the project highlights of the judgment is very important.

When the grocery store dispensers each enterprise should be specialized, if already specialized, must subdivide the domain to do fine. We have also done such a project, the business itself is specialized, but it does not make a specialization of a subdivision of the field to do fine, but every one to do, and finally it failed.

Reliance on a single customer and market is also scary, and sometimes entrepreneurs feel comfortable to rely on a single reliance on a particular market because the market offers a high profit and a particular market may be less profitable.

But we should look at this problem from a longer time, because the market environment is constantly changing. In addition, when doing capital operation, if you have multiple markets, the investor's imagination Space is big, the valuation is high. Therefore, no matter from the management point of view, or from the investment point of view, should try to avoid a single dependence.

[This digest is Haitao at the second Tsinghua University Chinese entrepreneur Training camp and is authorized by the organizer and author. ] Haitao, chairman of Shenzhen Venture Capital Association, Shenzhen Innovation Investment Group Co., Ltd.

This article is reproduced under the authorization of the China-Europe Business Review and is reproduced without permission, and the Sino-European Business Review will retain legal retrospective rights.

Source: http://www.ceconline.com/strategy/ma/8800060447/03/