Nobody launches a new business expecting it to fail, but the fact is the majority of small businesses don’t last more than a couple of years. In fact, according to Bloomberg, a whopping 8 out of 10 startup businesses will close their doors after just 18 months. So, how can you protect yourself from becoming a part of these alarming statistics? You can start by understanding 5 of the most common reasons many businesses go under so you can avoid making the same mistakes.
Inadequate funding. Regardless of the type of business you’re starting, chances are you’re going to need some help in the finance department. Many small businesses fail because they lack adequate funding to keep themselves afloat. It takes time to turn a profit, so you have to plan wisely for how you will manage to get through the lean weeks, months or years until you can ship off on your own. Not sure where to start? Check out these tips on applying for business loans.
Not understanding your customer. The most amazing product or service is worth absolutely nothing if you’re not getting it in front of the right people. To be successful as a startup, you must have a clear understanding of who you are trying to reach and what the best avenues are to reach them. Otherwise you’ll be wasting precious time and resources for naught.
Failing to set yourself apart. Every business has competition, and if you’re new to the game, you’ve got an uphill battle. To avoid crashing and burning, you simply must find a way to differentiate yourself from the others and demonstrate the unique value proposition you bring to the table. Show your prospects why your product/service/offering is better than the rest and why they should switch to you.
Lack of a plan. If you had all the time and money in the world, you could waste weeks, months and years trying every tactic known to man to get more customers, but chances are you don’t have unlimited resources. What you need is a clear cut business plan with real, actionable goals, and a strategy that will get you the most brand recognition in the least amount of time for the lowest cost possible.
Wearing too many hats. You may envision yourself as Super Entrepreneur, but in reality you’re just another human being trying to be in 20 places at once while keeping your head above water. Even if your startup is running on a shoe-string budget, at some point you are going to have to get a little help to avoid burning yourself out. Consider outsourcing some of your everyday tasks, such as bookkeeping, to take some of the burden off and allow you to focus on other important business matters.
Of course, there are dozens and even hundreds of other reasons startup businesses can’t stay afloat, but these are five of the most common – and the easiest to overcome provided you’re aware of them ahead of time. By planning properly and knowing what to avoid, you’ll have a much better chance of beating the odds and realizing future success for your business.