Why do entrepreneurs fail?

A research found that entrepreneurs tend to believe they are in a promising line of business. The research asked them to assess their own venture and found that 81% of entrepreneurs rated their success rate at 70% or more. 33% of entrepreneurs said that their chance of failing was ZERO. But statistics show that the chances of an entrepreneur being successful is only 30%.

This information is not counter-intuitive. It makes sense. You will never find someone who ventured into a project on their own to underestimate their own success. And this is a good thing. Optimism and overestimating success chances encourages persistence in the face of obstacles. But optimism and persistence comes at a cost.

Psychologists have confirmed most people convince themselves that they are superior to others on most desirable traits. In the market, this has significant consequences.

When we are passionate, emotive, persistent and highly overestimate ourselves, we fall risk to delusional optimism rather than weighing of gains, losses, probabilities or statistics. We overestimate benefits and underestimate costs.

You overcome this by having a cut-loss limit. This limit will help us return to objectivity.

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