In the world of entrepreneurship there is room for many mistakesAfter all, how many new businesses survive their first five years of operation? There are even true horror stories for entrepreneurs.
You may think that the most difficult thing is to position yourself, but everyone knows that even more complex than generating brand recognition and positioning is maintaining it.
Do you know these great business failures? Here we present true horror stories for entrepreneurs. Take note so it doesn’t happen to you!
1. SwissAir and its terrible financial strategy
Image: Wikimedia Commons.
There was a time when SwissAir was the national airline of Switzerland and was such a stable company that it was often referred to as “the flying bank”. It was founded in 1931 and was one of the most important international firms in the world for more than 60 years. In the 1990s, the company began to make several money management mistakes and from then on the decline began.
The financial strategy that made them decline was “The Hunter Strategy”, which consisted of buying small airlines around the world instead of focusing on obtaining commercial agreements with the largest ones (a process that they began to implement but failed), which plunged SwissAir into in debt. Why? Because most of the airlines that SwissAir acquired were in trouble precisely because they were unable to compete with better positioned companies.
Finally, SwissAir closed operations in 2002.
2. Pets.com and the money-guzzling marketing
Image: Laura.moncur.org
Pets.com emerged in 1998 as a project through which pet food and accessories could be ordered online. Good idea, right? However, the lack of market research led them to make many uninformed assumptions. For example, they believed that everyone would want to shop online and more importantly, would know how.
With money in the bank and the excitement of entrepreneurship and optimism within, the owners of Pets.com spent extraordinary amounts on communication marketing to build the brand around a sock puppet that represented their pet. What’s more, they opted to pay for a SuperBowl commercial priced at $1.2 million, which was followed by heavy online, print, television and radio advertising.
Brand recognition skyrocketed. The site was a success and people started ordering. A month later, Pets.com went public on the Wall Street Stock Exchange and raised more than $80 million for investment.
What was the fault? The demand was not even remotely close to what they expected. They found that brand recognition did generate interest but not enough desire to buy. The number of people buying was not enough and the orders were small.
Pets.com closed in 2000.
3. John DeLorean and his monstrous illicit dealings
Image: Wikimedia Commons.
This entrepreneur began a brilliant career as an engineer at General Motors and soon founded his own company manufacturing futuristic automobiles.
What caused his downfall? Various crimes such as fraud, tax evasion, embezzlement, among others. His victims were the governments of the United States, Great Britain and Switzerland, as well as various Hollywood stars.
Star of Ford, Chrysler and GM, DeLorean decided to leave corporate life to create his own company. In 1973 he got the financing he needed to found his company ($175 million). He closed in 1982 when his association with drug trafficking was discovered on a recording. He confessed to the FBI that he planned to use the profits from his illicit business to finance his DeLorean Motor Company, which was on the brink of ruin.
So you already know. Never trust yourself! And always pay close attention to every move of your business. Remember that it is always better to thoroughly analyze each situation and try not to take unnecessary risks.