Have you ever wondered why startups fail? Are you thinking starting your own business?
Every month, hundreds of excited entrepreneurs launch their new businesses. But why do so many fail?
The are many common reasons why businesses struggle. It’s critical that business owners recognise what could go wrong to avoid the same outcome.
This article discusses the common reasons why startups fail.
Mistake #1: Inadequate Planning and Preparation
Would you run a marathon with preparing for it? Would an athlete rise to the top without practising? Probably not I hear you say.
Then why do so many business owners start their businesses with little or no planning or practice?
You’ll need to devote some to plan your launch and learn and practice some new skills and knowledge. You’ll need to focus and work smart to get off to a flying start.
Mistake #2: Having a Limited Product Range
You may have a product or service that your customers want or that initially solves their problems. Many entrepreneurs fail to think beyond their first product or first sale.
Customers’ tastes and fashions change. You’re likely to have to broaden your product or service range to keep your customers coming back for more. You’ll need to think of new revenue streams.
Will you offer after sales support? Will you offer a subscription based service?
Mistake #3: Adopting a DIY Approach to Everything
No-one expects an entrepreneur to be good at everything. Successful entrepreneurs, such as Richard Branson, know how to delegate and hire experts when needed.
Businesses often fail because their owners become worn out. They try to do everything and nothing gets done well.
Being a “jack-of-all-trades” will become a very fast route to going out of business.
Complex areas such as accounting, payroll and tax can cause headaches. And even worse, mistakes can be costly and much harder to fix.
Hiring experts to manage these areas will help you focus on your business. There are many virtual bookkeepers and virtual accountants who will manage your accounts much more efficiently than you.
Mistake #4: Ignoring the Financials
You’re likely to have unlimited energy and commitment from the start. Most entrepreneurs do. Successful ones know the value of regular financial reporting.
Whether you like it or not, you’ll have to crunch the numbers. You’ll need to know if you’re making a profit and can pay your bills on time.
You’ll need reliable, accurate information. Many business owners focus on the bank balance and simply ignore the real numbers. Good information should be used to evaluate the past but, equally as important, help plan the future.
Mistake #5: The Hare and the Tortoise
Many entrepreneurs successfully convince their banks to lend them money to kick-start their new business. They buy the latest equipment (rather than lease it); buy top-of-the range office furniture, and fund expensive sales campaigns.
This is often a mistake. They spend what money they have on the wrong things as it makes them feel good. Money becomes tight and funds which should be allocated to generating revenue, such as materials, becomes limited.
Resist what you “want” until you can afford it. Focus on what you “need” to pay for.
If you avoid these mistakes, your chances of success will increase.