One Reason Why Companies Fail

I was thinking about this the other day, as I was chatting to a friend about my experiences as an entrepreneur and investing in early-stage companies.

I mentioned to him that one of the reasons companies fail (and I have also gone through my share of failures) is that we do not reset starting assumptions against the market realities. Let me explain.

We start off with some ideas, and assumptions about the market. Once we take the product out into the market, we get feedback – about customers’ expectations and market size. It is at that time that we need to think about some course alteration – in case there is a mismatch. Many times, we don’t do that – working under the principle that our efforts will accelerate the market’s response towards our product. That rarely happens. What follows is disappointment.

It is never easy changing one’s assumptions quickly, especially when one has been thinking about them for a long time. But they should be exactly that – just starting assumptions.