The Definitive Guide to Business

Mark Cuban says this is the No. 1 reason people fail in business 

Launching your own business can seem glamorous if you focus on success stories like Google or Airbnb. But the truth is that 20 percent of small businesses fail in their first year, and 50 percent fail by their fifth year.

So what separates the successful founders from the flops? According to Dallas Mavericks owner and “Shark Tank” investor Mark Cuban, it all boils down to work ethic.

Cuban tells the entrepreneur-focused YouTube channel Valuetainment that the No. 1 reason people fail is “lack of brains [and] lack of effort.”

“They don’t do the work,” he says.

When launching a business, explains Cuban, you're guaranteed to face heavy competition and people who know the industry just as well as you do, if not better. It’s your job, he says, to educate yourself and out-learn your competitors.

“If you walk into a competitive environment and they still know more about the business than you do and more about your customers, you’re going to lose,” says the billionaire.

This is something most people fail to take into consideration when going the entrepreneurial route, notes Cuban. "They don’t do the work. They don’t learn more about their industry,” he says. “So you’ve got to put in the effort to know more about your industry than anybody else."

Cuban has long attributed his success to hard work. Shortly after college, the entrepreneur lived in a tiny apartment with five roommates and slept on the floor as he built MicroSolutions, a computer hardware and software integration company. He also made sure that he was up-to-date on technological trends.

“I was relentless in learning new tech as it came out. If it had anything to do with the PC or networking industry I was on top of it,” he told Entrepreneur in 2012.

Cuban would buy manuals, read books and magazines and attend industry conferences to educate himself and get his name out there. His hard work eventually paid off, and in 1990 Cuban sold MicroSolutions for $6 million.

Now worth $3.7 billion, according to Forbes, the entrepreneur says that when it comes to success, the amount of effort you put in trumps all other factors, including passion, money and connections.

He shares the frame of mind that has helped him repeatedly come out on top in his business ventures: “If you’re competing with me you, you better know what you’re doing. Otherwise, I’m going to kick your a--,” Cuban tells Valuetainment. “You’re not going to outwork me.”

Disclaimer: CNBC owns the exclusive off-network cable rights to "Shark Tank."

Like this story? Subscribe to CNBC Make It on YouTube!

Don't miss: Mark Cuban says top employees share this trait