Being an entrepreneur is more than a title; it’s a way of life. While you are motivated by financial gain, the main thrill of being an entrepreneur is the chase; the ability to make your product or services a success through the tough times and the good.
When you have a young business that you are fighting to establish, you will be aware of just how hard it is. You have many balls to juggle – some are made of rubber and will bounce back without impacting the health of the business, but there are others made of glass, that if dropped can cause terminal damage to your business. It’s highly stressful, but the rewards are high.
This article explores how you can protect your business from the top 3 reasons for startup failure. Smallbiztrends.com conducted research that shows how tough those first five years of trading are for startups– only 56% enjoy their fifth birthday.
No market for the product or services – 42%
No amount of passion and flair can carry a business through if there is no market need for the product or services that it offers. Before you even start thinking about financing a business, its logo, and the brand, you need to invest time in researching that there are consumers for your offerings.
It can be easy to get caught up with the excitement of starting a new venture, but to miss out on critical research is a mistake your business may not survive. Market research is not a luxury, it’s a necessity.
The more focused your market research is, the more valuable it will be in the future. Be creative with your market research and concentrate on collating data that will give you the best information. Research comparable businesses – similar structure and similar geography, but don’t limit your research solely to established businesses. See what other startups are doing; competitor analysis is a great way to gain a deep understanding of the industry that you are entering.
Market research helps you to avoid Startup Failure:
- Identify market trends
- Develop pricing strategies
- Identify consumer needs and pain points
- Fuel product development
Cashflow – 29%
It seems so basic, doesn’t it, but cash flow is the second most common cause of startup failure. Many people starting out in business do not gauge their business’s success by the profit that they are making, but by the revenue. This is a false economy. Revenue does not equal profit, and if you have lapsed on your accounting failed to keep up to date with the total amount of outstanding invoices, you can find yourself in deep financial water.
Your business accounts are not glamorous. They are not fun to do. They do not require your personality and drive, but they are the one thing that makes your business stop in its tracks.
To avoid cash flow problems, you must know your financial position – not just when you have a monthly or quarterly meeting with accountants, you need to know the figures down to the last cent every single Friday evening when you shut for the weekend. You cannot afford to let your finances be out of control.
You need to have a contingency plan in place in the event of business disasters. For example, if anything happened to your hardware, could your business survive? Ideally your business should be cloud-based, but you still need computers to work from – they are how you run your business. There are buy now pay later options that could get you out of the mess, but the ideal solution is to know where you are at with your finances.
Not the right team – 23%
You spend most of your waking hours at work, which is why who you work with is almost as important as what you do. Your employees are your greatest assets; they represent your business and are the driving force behind its success – or lack of it.
However, 23% of entrepreneurs cited that their startup failure was because they hadn’t got the right team behind them. If you start a business, it is your responsibility to source the best-skilled candidates for your business.
The buck stops with you.
So, how do you employ the best people for your business?
- Know what skills you need
- Have a recruitment strategy – it keeps you on track and gives you direction
- Review credentials
- Hire the right personality
- Be transparent and honest
- Hire for potential – skills can be learned
- Trust your instincts
You are also responsible for developing a business culture that motivates and inspires your colleagues to work to the best of their abilities. A toxic work culture destroys confidence in the workplace – for both employees and customers alike.
Although you are trying to do a hundred and ten things at once, you must be present to identify when issues and problem behaviors are developing. Work cliques, gossip, favoritism, and unbalanced workloads can be detrimental to your business’s health.
Employees need to feel valued in the workplace, but also respected. Listen to your employees, acknowledge their input, and reward for good work well done. No matter the size of your business, you need to have a manual for employees to refer to.
The manual should give information about the business rules – how bullying will not be tolerated and the procedures that can be followed in the event of a grievance. This gives a strong message of support to your workers – you will not tolerate bad behavior and there are policies in place to protect those who are suffering.
Businesses startup and fail every single day, it’s a fact of life. The key to survival is to keep your eye on the ball, don’t run before you walk and choose wisely the people you are going to bring on board. You cannot make your business a success on your own. You need to be able to rely on others to help you reach your goal – your employees, your customers, your friends and family. It’s a tough journey, but with the right preparation, you will make it a success.