It’s often said that more than half of new businesses fail during the first year. According to some statistics, and quite frankly I’d like to be on the positive side of things, this isn’t necessarily true. These figures state that only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. However, not all of these businesses need to fail. With the right planning, funding and flexibility, businesses have a better chance of succeeding. We’ll go through some of the biggest mistakes that start-ups can make and figure out how to improve your chances of success.
Reason #1: Not Investigating the Market
So you’ve always wanted to open a business, and you finally have the means to do so, but your desire to open the doors you’ve missed the fact that you’re in a down or fluctuating market and the area where you want to work is already saturated with the same type of businesses, making it very difficult to break in. This is a mistake that will cause you to fail from the beginning. You have to find an opening or unmet need within a market and then fill it rather than try and force your product or service in. It’s a lot easier to satisfy a need rather than create one and convince people that they want to spend money on it. Simple.
Reason #2: Business Plan Problems
A solid and realistic business plan is the basis of a successful business. In the plan, you will outline realistic goals for your business, how your business can meet those goals and possible problems and solutions. The plan will figure out if there’s a need for the business through research and surveys; it will figure out the costs and inputs needed for the business; and it will outline strategies and time lines that should be implemented and met. It’s NOT just something written to please your bank manager, it’s a road map to success if done properly.
Reason #3: Too Little Financing
If you have started a company and things aren’t working out, you’ve got little capital and a struggling business; you’re really not in a good position to ask for another loan. Be realistic at the beginning, and start with enough money that will last you to the point where you’re business is up and running, and cash is actually flowing in. Trying to stretch your finances at the beginning may mean that your business never gets off the ground, and you’ll still have a lot of cash to repay.
Reason #4: Bad Location, Internet Presence and Marketing
A bad location is self-explanatory if your business relies on location for foot traffic. Just as dangerous, however, is internet presence. These days, your location on the internet and your social media presence can be just as important as your company’s physical presence in a shopping district. Online presence will let people know that they can give you their business, so if the need is already there, the availability and visibility of your business is the next important step. But be careful of businesses that ‘promise the world and deliver bugger all’. It will take you back to Reason#3 otherwise in the pursuit of page 1 on a Google search.
Reason #5: Rigidity
Once you’ve done the planning, established your business and gained a customer base, don’t get complacent.
“Success breads complacency. Complacency breeds failure. Only the paranoid survive.” Andy Grove.
The need that you’re fulfilling may not always be there, monitor the market and know when you may need to alter your business plan. Being on top of key trends will allow you lots of time to adjust your strategy so that you can remain successful. You must only look at the music industry, Blockbuster video, Woolworths, BHS and others to know that successful industries can undergo huge changes.
Reason #6: Expanding Too Fast
Now that your business is established and successful, it’s time to expand, but you must treat the expansion like you’re starting all over again. If you’re expanding the reach of your business, make sure that you understand the areas and markets into which you’ll now be reaching. If you’re expanding the scope and focus of your business, make sure you understand your new products, service and intended consumer as much as you do with your current successful business. When a business expands too fast and doesn’t take the same care with research, strategy and planning, the financial drain of the failing business(es) can sink the whole enterprise.
Until next time,
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