Every new business has its own share of ups and downs; for some, it is successful; while the others fail. According to Entrepreneur magazine, 90% of all businesses will be out of work within 18 months after starting up. Despite this depressing fact, many entrepreneurs venture into their own business ideas every year. However, not all of them succeed; most simply fail.
Businesses come and go every day; because of this, there are many lessons to be learned from the failures. The following is a compilation of the ten things common about most startup failures (& what to learn from them). Some of these will be obvious, but it does not hurt reminding oneself of them. Now before we start with our list, it’s important for startups to have a small glimpse on pro rata. This concept can help startups grow faster.
Table of Contents
1) They did not create a need for the product or service they are offering
It is easy to come up with an idea, but it is difficult to sell it because people do not know that they want your product yet. People do not buy products; rather, they need them. The more urgent their need for your product, the more likely they will be to buy it. If you are selling pet food; people who have pets need your product; while those who do not own pets may or may not buy from you.
Create a need for your product and service before setting up shop—if you can. There is an old business saying that goes “Sell ice to Eskimos” which means that one should produce what he or she knows the market needs. Once you have established a need for your product, it would be easier to convince other people about your business.
2) They did not define their target market
Whoever said “One should produce what he knows the market needs” must have had this in mind; if not, then he or she was simply lucky. It is important that you know who your clients are before selling them anything else besides information on your business. This can be done by identifying your niche and finding out how large it is as well as the growth rate of its population. If there is no significant size of population within your niche, then abandoning this venture might be a wiser decision.
3) They did not make an effort to know their target market
Once you have identified your potential customers, the next thing is to know them better. You can do this by making friends with them or at least knowing what they are talking about in social media. Also, it would be beneficial if you can join groups that will enable you to engage with people who share the same concerns as your potential clients. By doing this, you can deliver quality service or product that serves their needs because you are aware of their problems and how your product or service could help solve them.
4) They spent too much on research before starting up their business
It does no good for one to set out asking questions after question without any answers. If you are not sure about anything such as your business model, pricing and so on; it is better to spend time coming up with answers than seek for external input. Once you have identified the needs that your potential clients have, then it would be easier to start a startup that will meet their requirements.
5) They did not spend enough time building and managing their network
While creating and strengthening relationships might seem like too much work; these efforts pay off in the long run especially when you need help from other people such as getting good referrals or finding funds for expansion. Every successful person has a strong group of friends or connections; these friends can make or break one’s career.
6 They underestimated the competition
It doesn’t matter how unique your idea is if the market has already established something similar. There are many great ideas that failed because they were not able to compete with an existing company, which had better logistics and marketing strategies. Sometimes, it would be a good decision to join forces with competing organizations or find out ways of co-existing. It is also advisable if you can tweak your business model in order to offer something different from what other businesses are offering.
7) They did not identify the legal issues
This problem manifests in two forms; first issue–the startup fails to get all its licenses before launching their project; secondly–the business operates without relevant permits despite having them. This mistake usually does more than just limit the growth of one’s business; it could be the beginning of a disaster that would affect future developments. It is therefore wise to find out which permits you need, and then acquire them before starting up your business.
8) They did not have a Plan B
Every entrepreneur knows how important Plan B is yet most of them still do not have one. This problem does not only affect startups but established businesses as well; they lack a backup plan for different kinds of situations such as natural disasters or bankruptcy. A good plan B will include all the possible scenarios that might affect normal business operations as well as what your company needs to function in those conditions. For instance, if you are forced to relocate due to environmental factors affecting your startup’s activities, then having a document detailing the relocation process will save you lots of time.
9) They have no idea how to market their startup
You cannot expect your product or service to sell itself; the burden of marketing should not completely fall on the customer’s shoulders. You can achieve this objective by associating with other companies that will help spread the word about your business, targeting specific markets by advertising in local newspapers/TV channels and joining various events as a way to show people what you are all about. It would also be beneficial if you maintain a blog that shows customers what is happening behind the scenes at your company, which helps create an image of transparency.
10) They didn’t ask for help early enough
One of the mistakes entrepreneurs make when starting out is assuming it is wise to go at it alone. Asking for help when you need it is a much better option than delaying such matters until your business fails or their mistakes will make it harder to seek assistance in the future. For example, if you fail to get investors and run out of cash; then starting up again would be very costly and difficult since you risked all your capital trying to do everything yourself instead of seeking for external help.
Now that we finished discussing common reasons why startups fail, let us talk about some ways on how you can avoid these pitfalls:
1) Always have a plan B
This strategy applies even if you already have an effective plan A; there might be occurrences that interfere with your initial plans such as natural disasters or bankruptcy which disrupt normal business activities. Having a backup plan for different scenarios would save you lots of time and money rather than starting from scratch if your original plans fail to work out.
2) Recognize the competition
It doesn’t matter how unique your idea is if the market has already established something similar. There are many great ideas that failed because they were not able to compete with an existing company, which had better logistics and marketing strategies. Sometimes, it would be a good decision to join forces with competing organizations or find out ways of co-existing. It is also advisable if you can tweak your business model in order to offer something different from what other businesses are offering .
3) Make sure everything is legally before getting started
This problem manifests itself mostly in First World countries where startups fail because they are not legally formed, which makes it difficult to acquire loans or other capital sources. It is also worth noting that if your business fails due to legal issues, then you cannot use this as an excuse before potential investors who come knocking at your door for an opportunity to contribute towards your business’ success.
Conclusion:
There are many common reasons for startup failures and hopefully, you’ve learned how to avoid these pitfalls. Even if your business failed before, there is always a chance of it starting up again as long as the lessons you learn from those experiences are well documented in case you need them at some point.
