There is a myth that more than 60% of new businesses fail in the first year. According to the U.S. Bureau of Labor Statistics (BLS), this is not necessarily correct. Data shows that about 20% of new businesses fail within the first two years of operation, 45% in the first five years, and 65% in the first 10 years. Here we are going to identify the root Causes of Business Failure.
Exclusively 25% of new businesses make it 15 years and more. These numbers haven’t changed much over time and have remained relatively constant since the 1990s. While the odds are better than popular belief, many businesses worldwide are closing each year.
When we know the causes of business failure, that will come to our sentinel notice. Then we will be more careful in every phase of the business journey. This time I will discuss some of the biggest mistakes startups can make and determine how to improve your chances of success.
1. Tendency to Avoid Market Investigation
It is essential to investigate the specific market of your products or services. Your market analysis has to be based on accurate information, means facts, not on infatuation. When you know your market size and customer volume, then make your own marketing strategy. But most of our entrepreneurs are not enough devoted to investigating the market.
This is a mistake that will cause failure from the beginning. You need to find an opening or unmet need in a market and then fill it instead of trying your product or service. It’s much easier to meet demand and convince people to spend money on it than to create one.
2. Business Planning Crisis
A precise and realistic business plan is the foundation of a successful business. In the plan, you will outline achievable goals for your business, how your business can meet those goals, and potential problems and solutions. Next, the plan will determine whether the business needs it through research and surveys. Finally, it outlines the costs and inputs required by the business and outline the strategies and timelines that must be implemented and met.
Once you have a plan, you need to follow it carefully. If you start doubling your expenses or changing your strategy, you are condemned to failure. Stick to it until you find out that your business plan is entirely wrong. If its proven wrong, it’s best to find out what’s wrong with it, fix it, and follow a new plan instead of changing the way you do business based on quick feedback. The more mistakes you make, the more expensive your business will be and the greater the risk of failure, and finally, you cannot afford it.
3. Narrow Financing
If you are starting a business and things are not working out, have low capital, and have a struggling business, you are not in an excellent position to apply for another loan. However, if you are realistic in the beginning, you can plan to start with enough money as long as your business is up and running and money is really flowing.
In the beginning, trying to grow your finances may mean that your business will never get off the ground, and you will still have plenty of cash to repay, never relying on narrow financing.
4. Hiring Wrong People
The most successful business owners and entrepreneurs know how to surround themselves with people more intelligent than themselves. If you decide to extend your business, you’ll need a strong team to help you do great things. The only way to do this is by recruiting and hiring the best people.
5. Wrong Location, Internet Issue, and Marketing
If your business relies on the location for foot traffic, the wrong location is self-evident. Equally dangerous is poor internet presence. These days, your location on the Internet and your social media prowess can be just as important as your company’s physical location in the shopping district. An online presence will let people know they can offer you their business, so if the need is already there, the availability and visibility of your business is the next important step.
It is similar to marketing. You must not only make sure that marketing reaches the people, but it also reaches the right people. So make sure the type of marketing matches the kind of audience you want to reach. For example, large billboards may not be the way for an internet company; just as online advertising may not be the way to go for a heavy construction business. If the need is already established, make sure you are reaching an audience that needs your product or service.
6. Staying Rigid
When you’ve accepted a plan, built your business, and built a customer base, don’t be arrogant. You may not always get what you need. Instead, survey the market and know when you might need to change your business plan. Staying on top of the significant trends will give you enough time to adjust your strategy to be successful.
Don’t stick to your plan, be flexible and gain adaptability. Follow trending demands and patterns. Never hesitate to embrace new technology or other stuff.
7. Rapid Expansion
Presently that your business is established and successful, it’s time to grow, but you need to treat expansion like building a resume. If you are expanding the reach of your business, make sure you understand the areas and markets you are reaching now. If you are extending the dimensions and focus of your business, be sure to understand your new products, services, and target consumers as much as you do with your existing successful business.
Be careful; when a business expands too rapidly, and equal care is not ensured with research, strategy, and planning, the financial gutter of the failing business can crush the entire company.
Even though the company’s failure rate is about 20% in the first two years, that doesn’t mean you should fail. On the contrary, through research, planning, and flexibility, you can avoid many traps of starting a new business and be part of the 25% who do so for 15 years or beyond, even more than we assumed.
About The Author:
Mirza Rakib Hasan Shovon
Co-founder & CEO
Business & Creative Head
International Corporate Association of Professionals (InCAP)
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