Bloody Truth- Why Hot Entrepreneurs Start to Fail

Three, five maybe fifteen years ago, you were a hot entrepreneur in the consumer, fashion or tech space. You were the cool startup, the one getting tons of attention, calls from VCs and interview requests. You were growing rapidly and could do no wrong. Things have started to slide. Now the fresh-faced startups are getting all the press.

There are real leadership reasons, I see them every day. They are painful and bloody revelations. Do you have the courage to read on?

Here are the 12 biggies:

1. Numbers don’t lie. There are reasons for your slide or stagnant sales. When sales dip there is always a reason. You can blame the economy, the weather or currency fluctuations, but there are always other painful reasons that leaders often don’t want to face.

2. You surrounded yourself with friends in key leadership roles. When people start companies they often surround themselves with friends, relatives and available people who will take a lesser salary to work with other friends. You often chose talent on price not quality. These early managers aren’t necessarily the ones to lead a company through growth or tougher times. It is also very hard for entrepreneurs to hold them accountable for poor performance. This is one of the most damaging of the biggies.

3. You aren’t focused on the priorities. Many companies start to lose focus on the core business or model that created their success. Lululemon lost sight of their “fashion driven” model, while edgier competitors sprouted up.

Sales lagged as Lululemon lost sight of their "fashion driven" model.

Sales lagged as Lululemon lost sight of their “fashion driven” model.

4. You have no strategic business plan. Entrepreneurs get distracted by personal or rewarding side projects, instead of the mundane day-to-day. Your employees see this and lose focus as well.

5. You are frequently absent. Human nature hasn’t changed for thousands of years. When the boss is away, the mice will play. You are more interested in your trip to France, building a new house, or just losing daily discipline. Your tardiness or absenteeism is taking a toll on momentum.

6. You isolate yourself. You have started to believe your own self-importance. You surround yourself with gatekeepers who thrill in protecting you from information. You hide your email address and cell number, like state secrets. Your ear is “no longer on the ground” and have created your own reality. You stop communicating and are now the Emperor With No Clothes.

7. You tolerate bad behavior. You want everyone to like you so you never set any standards for office discipline. You allow lateness, texting in meetings, inappropriate behavior and outright fighting. Does Dov Charney at American Apparel come to mind?  You fill the office with perks like beer on Fridays, games and free food; but hesitate to set a tone that everyone’s time is money and the business is why everyone is here, in the first place.

8. You micro-manage. You feel your input and decision-making are critical in every area. You never heard one of your own ideas you didn’t love. This takes accountability from the players, slows down the business and demoralizes everyone. Are you deciding on the brand of coffee for the kitchen?

9. You lose the pulse of the market. When you started you were front and center with customers and on top of the competition. You now live in your bubble and rely on second-hand input from subordinates.

10. You build a team with no diversity. You took the easy out and hired friends from your alma mater. In fact, you thought only guys from your alma mater were worth hiring; or perhaps you hired all young hipsters, MBAs or like-minded WASPS. Congratulations, you have created a one-dimensional organization lacking creativity and divergent ideas.

11. You protect the high-performing sociopath in the office. This cancer in the company is allowed to wreak havoc on the organization, because they have big talent in some area. Their wide-reaching influence demoralizes everyone and has a serious impact on sales.

12. You have no succession plan. In fact, you have surrounded yourself with weak players. You prefer to have control and if you get hit by a bus the company’s going down the tube.

Great leadership takes continued humility, the willingness to listen, change and make hard decisions. Innovative new products come from strong motivated teams. Success of the company starts from the leadership at the top.

Dix&Pond is the blog of Dix & Pond Consulting Creative and strategic consulting for retail, wholesale apparel, footwear, consumer products and analysts. Follow me to get the latest posts

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