Nobody starts a business with the intent of failing, though looking at the statistics on startup failures you would think that was the case. If (as stated in The Guardian) 3 out of every 4 new businesses are doomed to failure, perhaps more should be made aware of the major reasons behind these failures. This article will highlight the areas that contribute most to the ultimate failure of most business startups.
No Business Plan
There are an amazing number of new business ventures that start with no business plan but simply with an idea. Now that may work if you then take the idea to others to analyze and build upon but seldom works in the real world. This is the kind of venture where people use their own capital to fund a small enterprise from their homes. However, they are still a failure and waste people’s money. If the project had been bigger and needed funding, a bank or investor would have wanted to see a business plan; and that would have highlighted the lack of thought and detail that is so common in this kind of startup.
Not Enough Funding
According to Fortune magazine, this is the second most popular reason that businesses fail. Costing your business is vital when starting a business, but it is not simply startup costs that need to be considered. Keeping a business going will take the money while profits start to grow, and if you cannot sustain yourself and any staff during the first year, the chances are that you will fail. No business should be started without the capital to guarantee costs will be covered for at least 12 months, as relying on immediate profits to keep a business afloat is an unsound strategy.
No Market
Before starting a business a study of the market place needs to take place, but this is often overlooked as a businessman gets carried away with his own vision while ignoring the realities of business. Too often there is not even a market for the product or service, or the market is too competitive without specialization. Some businesses find that their particular service is unsuitable for a location, while others discover that their product is too expensive for the location. Every business needs to consider the market place and if there is a market for them.
Lack of Marketing Strategy
Without marketing, strategy business is relying on word of mouth the sustain itself, and that is a strategy that is too often doomed to failure. Employing a professional marketing company at the outset (and costing for it) will help spread the word of your business further afield and help increase potential customers. A website is now a vital part of any marketing strategy and mon-go.com is the type of company that will guarantee that your business has maximum possible visibility on the internet. Without customers your business will fail; no matter how great your product or service is.
Staff Level
There may be a tendency for a startup business to employ as few staff as possible to reduce overheads, but this is sometimes detrimental to the business. With too few staff, the employees can become overworked leading to dissatisfaction and often shoddy work. This, in turn, can lead to a bad reputation and loss of customers. On the other hand, too many employees can lead to wasted money being spent on wages and loss of profits. Staff levels are difficult to judge perfectly (especially for seasonal businesses), and the best companies rely on a core of highly trained staff who can slot into a variety of roles within the company, while the possibility of using workers of a more temporary nature to cover periods of high demand negates the necessity to have too many staff throughout the year.
There are many reasons that businesses fail, but these are some of the most often quoted by failed ventures; and are certainly ones to plan against on your business startup.
