It is said that over 50 per cent of businesses fail within 5 years of incorporation. Many of these businesses begin and end in murkiness. Some of them start with the verve of a cannonball, only to close down with equal fanfare. Even good ideas will slowly die ignominious deaths regardless of how marketable they were a couple of years back. Some ideas are awful, so based on the views of what the market really want, that they fail fast. Below are some of the business ideas that could not survive.
Netflix service decided to divide its streaming and DVD services into two deals. Netflix remained a streaming service and the DVDs would be delivered through a separate account. The price for both services sky rocketed. The justification went that the company delivered thousands of free movies at once for 1/5 the price of consumer’s average cable bill. They believed that a small increase should not bother anyone. Except they overlooked the first rule of the business: do not increase prices without offering additional services.
Incorporated in 1999, this online UK retailer closed down with $135 million in venture capital and launched in some of the major European nations. They spent their venture capital in less than eighteen months, which is more than $250,000 per day. The funds ran out even before sales caught up, and the company went into bankruptcy.
Kibu.com was incorporated in 2000, but it became yet another prey of the dot com bust. Thousands of promising businesses backed by thousands of dollars burned in the virtual firestorm. In less than one and a half months, the whole company tanked. They made the very same mistake other dotcoms made. They targeted a minute, fickle, hard-to-capture market, and expected infinitesimal advertising revenue to lead to the returns on investments their backers expected.
In 2008, after 13 years in business, Indymac, the largest financial institution in Los Angeles closed its doors. IndyMac was launched in 1995. Its purpose was to offer a means of collateralizing loans that were too high in value for Freddie Mac and Fannie Mae to service. At the time of its closure, IndyMac held over $30 billion in assets, making it the 4th largest financial institution failure in history.
Sharper image was founded in 1997 as the catalog selling watches. It eventually blossomed into a high-end electronics store. As other branded, high-tech products took over its traditional market share. The company decided to get into advert business with the Ionic Breeze and Oreck vacuum. Unluckily, Ionic Breeze didn’t purify the air as it claimed it did. After losing a court case against Consumer Reports for the negative reviews, a testing company released its findings that the Ionic breeze produced trace levels of ozone. The store went bankrupt in 2008.
There are many businesses that have done very well. We all understand that failure is part of the business cycle. Bad business ideas will not be accepted by the market, and good business ideas will blossom and lead to a more affluent and efficient economy.
Mark is a passionate business blogger and works as a broker for businesses for sale in Perth.