Starting a business is exciting but it also comes with high risks. 20% of startup businesses fail in their first year and around 60% fail within their first three years.
However, we don’t want to scare you with these statistics or put you off from starting your own business! We want to help you understand the main reasons why so many new businesses fail and how you can make sure yours doesn’t!
Not having enough funding
Running out of money is the number one reason businesses fail. Many new entrepreneurs misjudge how much money they need in the beginning. If you spend more than you budgeted and don’t make a profit straight away, you might not be able to afford your business essentials such as rent or supplies. This can really quickly lead to debt or having to close your business.
To understand how much money you need to start and run your business before making income, you need to have a business plan in place. As part of a business plan, you need to prepare financial predictions. These predictions will help you see how much you’ll spend on running costs and how much money you’ll make. Once you have those numbers, you can start thinking of ways to fund your business and how much money you actually need. From using your personal savings or getting a startup loan to finding investors – we have created a list of options for you! Click here to learn more.
Poor market knowledge
You might have a big dream to open a beauty salon but if the area you want to work at is already saturated with beauty salons, it might be too difficult to break in. And if you want to open a restaurant, you need to make sure there’s demand for the type of food you’re going to offer.
That’s why before you start a business, you need to do in-depth market research. This will let you understand if your business has the potential to succeed.
The first thing you need to identify is your target market. Understanding who needs products or services you offer will help you come up with appropriate marketing and sales techniques. This will let you give your customer what they want instead of what you think they want.
Another thing is competition. Once you identify your competitors and things like their prices, marketing strategies and strengths and weaknesses, you can then come up with your unique selling point and even learn from the mistakes without making them yourself!
Remember, your business needs to satisfy your customers’ existing needs. Don’t try to create a new need and convince people to spend money on it.
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Bad marketing and online presence
Even if you have a product or service that can change peoples’ lives, no one will find out about it if you don’t market it. If you can’t reach your potential customers, you won’t make any sales. And if you don’t make any sales… your business will fail.
To avoid that, you need to prepare a detailed marketing plan. The best place to start is by writing your business plan and analysing your competitors. This will give you information such as your target audience, your unique selling point and how your competitors do their marketing.
Knowing your target audience lets you know how to reach your potential customers. Where do they spend their free time? What social media platform do they use? Maybe traditional advertising would work better? It will also help you understand what type of content they’re looking for. Remember, when it comes to marketing, you can’t always talk about how amazing you are and constantly try to sell. You need to build trust by providing educational or entertaining content.
When you analyse your competitors’ marketing, it will give you a better idea of what works, what you should avoid and how you can stand out from them with your marketing materials.
When it comes to online presence, it’s as important as the message you’re trying to communicate. No matter how trustworthy your content is and how amazing your product or service is, if someone looks at your website and it’s not professional, they’ll likely turn around and choose one of your competitors instead.
Make sure your branding is consistent across your website and social media. Use the same colours, fonts and keep things simple. Adding every possible element to your website will not only make it look unprofessional but will also make it load slower. And these days no one wants to wait for a website to load!
Not being able to adapt
Things don’t always go as planned. While you can prepare for most things, some challenges come unexpectedly. A great example is a pandemic. Since the beginning of the pandemic, many businesses have had to close down as they couldn’t adapt to the situation. To be more precise, between 2020 and 2021, almost 400,000 businesses failed.
This only shows how important it is to have a plan that would help your business survive when something unexpected happens. Things like new industry trends, economic issues or changes in your personal life such as illness aren’t something you can control. But you can definitely prepare for it! Think of all the things that can potentially happen inside or outside your business that would affect you and create a recovery plan.
Businesses fail when expanding too fast
If you start a business and it’s successful from day one, you might think that expanding your business is the next great thing to do. However, adding a new product, service or even a new target audience can be risky. The fact that your original ideas worked out doesn’t mean that the new ones will do too.
When you decide to expand your business, you need to put in as much work as you did when starting it. For every new addition to the business, you need to do market research, make a financial plan and create a marketing strategy.
If you’re thinking about adding a new product or service to your business, why don’t you check out our Going For Growth course?! It’s a three-day course that focuses on developing and launching a new route to market and maximising your marketing. Find out more about it here and fill in the form below to start learning!
