Posted by Melissa Haddad on November 01 2019
Let’s face it, you didn’t start your own business because you wanted to fail. But maybe you did start it for some of the wrong reasons. And maybe some of those wrong reasons caused you to overlook some key preparatory steps before launching your business or product. Statistically, the odds are against you before you even start – by some estimates, 80% of new businesses will fail – so you don’t want to elevate the chances of failure because of something you should or should not have done.
Forbes online magazine, in its 5 Reasons 8 out of 10 Businesses Fail, 10 Reasons Why Entrepreneurs Fail and Why Entrepreneurs Fail; Top 10 Causes of Small Business Failure articles list some similar themes. These include lack of planning/poor or unprofitable business model; not really being in touch with customers need/lacking soft skills; and running out of money or not having the right kinds of funding. These sentiments seem to be echoed throughout other articles and statistics about why businesses fail as well. It can be daunting – who wants to start something that seems predestined to fail?
Don’t lose heart! If you have a passion for what you do or create, have the drive, patience and a positive attitude, and invest in all the necessary planning beforehand, there’s a good chance that your business can become a raving success!
Let’s examine a few of the top reasons new businesses fail, and how you can prepare your self to either overcome them or mitigate their impact on your business.
- Starting your Business for All the Wrong Reasons: As noted by Business Know-how, wanting to be your own boss, make lots of money and/or spend more time with your family are NOT reasons to start a business. They are benefits that come after you’ve done a lot of hard work. So, what are some of the right reasons? Ask yourself:
- Do I have the passion for and belief in the service or product that I will provide, and feel it will serve a real need in the market?
- Have I got the drive and determination not to quit at the first sign of adversity, as well as the patience and positive attitude to see myself through the quiet or low-ebb times?
- Am I a continuous learner? Not only learning from my successes and failures but also what new directions the markets that affect my business may be heading towards?
If you answered Yes to the above, congratulations, you may be on to something successful!
- Lack of Planning: You absolutely, unequivocally, need a business plan! Lacking short-term and long-term plans, market analysis, potential problem and solution scenarios, and budgeting that includes cash flow, capital equipment costs and sales vs. expense forecasting will lead to disaster. What you can do is:
- Create a thorough business plan – using free templates – that includes very detailed ‘to do’ and checklists, with deadlines.
- Research how others in your industry do business – including the unsuccessful ones, to know what pitfalls you should avoid.
- Know your value proposition. Others may offer similar products or services, so what makes you unique? Be clear about what you offer and what value it is to the customer/client.
- Running out of Money: When many people read this, they will wonder about pre-planning. However, even with planning, the steady outflow of cash for things such as buying URLs, website hosting, business cards, printing and so on can quickly eat away reserves. It’s now recommended to double any start-up cost estimates, in order to be safe. What else can you do?
- Get paid. Preferably in advance, or with a significant deposit for services or product. Offer incentives for early payment.
- Use professional accounting software, pay for accounting services or hire a tax advisor.
- Plan for emergencies! Contingency funds in reserve or having a line-of-credit or securing a loan.
- Tap into your local resources for special funding for small businesses or entrepreneurs.
- Consider alternate financing to grow your business, such as an Investor’s Circle or Angel Investors.
- Having the Right People: It may seem like a good cost-saving plan, but you cannot do all things well yourself. Therefore, you need to have the right team of people working with or for you. Some things to consider:
- Acquiring the skills to fill the gaps for those tasks or aspects of the business that you are not good at. Not good with social media? Work with someone who is, which will enhance your marketing and bring in more business.
- Securing people that share your vision and are as passionate about your business as you are. You want to work with people who will support and promote your business or product.
- Not sure you can afford to hire the expertise you need? Consider outsourcing or a business-to-business skills exchange.
Building your own business is huge undertaking! Learn from the mistakes; your own as well as those of other business owners or entrepreneurs. Plan and prepare for the worst but always believe in your success. Be ready to adapt and change with market or customer demands. And, most importantly, surround yourself with trustworthy, knowledgeable people who will be your support network, your team of ‘raving fans’ and subject matter experts!
This month’s blog was written Shelly Monaghan, CHRL of Efficient Business Solutions and Monaghan e-Office
Shelly is the owner of her own successful Human Resources and Administrative services business, Monaghan e-Office and also provides Human Resources expertise and Virtual Administrative services for Efficient Business Solutions.
For even more tips, see the Success Harbor article “Why some Businesses Fail while others Succeed”