9 Reasons Why Most Businesses Fail In the First Year
Unfortunately, around 50% of new businesses fail. Luckily enough, we are able to learn from the mistakes of others in order to not follow in their footsteps by studying what went wrong.
Learning from these mistakes can increase your chances of being a successful new business.
Here are 9 reasons why most businesses fail within the first year and how you can avoid them.
1. Business Failure can Start with a Weak Business Plan
A solid, strong business plan is the foundation of any business. Incorporate these things into your business plan in order to cover everything necessary.
- Put together a list of goals that are realistic to achieving within set timeframes.
- Outline strategies to combat any possible problems that could arise in the future.
- Consider the costs that will need to be inputted into the company to start up and remain running efficiently.
The idea is to make sure that you have a full understanding of what your business will require before diving deep into something you aren’t ready for. These circumstances are what breaks many new startups.
2. Understand Your Market
One quick way to ensure your business’s quick demise is to start the business up in a market that isn’t optimal for success. This mistake will cause your business to fail before you have even started.
Do a lot of research into the area of business that you are starting and the area it is involved in. You don’t want to start a coffee shop on a road with 12 other coffee shops. This would cause too much competition and not a lot of room for profit or success.
Make sure your venture is satisfying a demand and that it’s needed at that particular time and in that area. If any one of these components is not right, it could mean disaster for your idea.
3. Plan for Enough Financing
A common mistake for new businesses is to not plan for enough financing to get started.
Plan for more than likely need your own capital and possibly a sizable loan. You want to have enough money in order to run your business at its full potential for profit and not just to get by.
It’s not a great strategy to try stretching a little bit of money because this won’t help turn a profit. Being realistic from the start will help make sure that you have enough money to not need to ask for another loan in the future to save your business.
4. Marketing is Key to a Profitable Business
Marketing is often overlooked when starting a business. Unfortunately, just because you create a business it doesn’t mean people will come flocking to purchase your goods or services.
Investing in a good marketing manager to increase your visibility both online and in person can help get new customers in your door. That’s half the battle right there. The other half is having a product that is worth them sticking around for.
Never underestimate the ability of a well-made website and social media presence. Starting your marketing by optimizing these avenues means that when potential customers are looking for your business they can find it and be impressed.
That’s the power of a first impression.
5. Provide Value and Meaning
Your business needs to solve a problem people are having and therefore, provide value to their daily life.
Being unique might seem pointless because it feels as if you are being too specific and niche, however, tapping into a niche market that is looking for what you can provide is the way to do well as a startup.
This is a way to differentiate yourself from thousands of competitors. Take control of what value you can provide your customers.
6. A Good Business Thriving with Leadership
This might sound all too obvious, but when the leadership isn’t strong there’s no way a business can be.
Founder dysfunction is a quick way to self-sabotage any potential your business may have. Make sure that all the key leaders are on the same page when it comes to business strategy and the goals of the company.
Having these people in harmony will create an understanding environment for everyone else who is involved in the company.
As a founder, spend quality time with your company and don’t lose sight of why you started this venture in the first place.
7. Have Good Intentions from the Beginning
People will start companies for the wrong reasons like to try to get rich quick. With any startup, money doesn’t just roll in the second you open your doors so it’s good to drop that wish now.
Being passionate about your business is 100% necessary for success. If you are passionate about your idea, you can’t expect anyone else to be.
Starting and running a business from the ground up requires all of your attention and effort because if you don’t put the work in no one else will.
Customers want to do business with someone who cares about what they are selling so make sure this idea is something you are willing to get behind and put your everything into. You should see that passion met with excitement for your business.
8. Location, Location, Location
As you have probably heard a million times before, location is everything when dealing with a physical business.
Choosing a location for your business that is an area of high foot-traffic or near other business that will help attract customers is extremely important.
A fantastic location will probably cost a pretty penny depending on what area you live in, so it’s important to plan out how much money you are willing to spend to get that traffic.
This can make or break you so do your research before you put down roots to ensure your best chance at success.
9. Bad Management is Bad for Everyone
The success of a new business rests highly on the expertise that comes with anyone who has a management role. If it’s the first time everyone on your staff has done something, it will be a long and tough road ahead for your business.
Make sure there are people you trust to lead your company well in all facets of your business including finances. Without well-executed finances, there isn’t anything for the rest of the business to work on.
It’s All About What You Are Willing to Put In
Potential business failure can be avoided by putting a lot of thought into the business before starting up. Success is found in thoughtful planning.
Opstart is a resource for businesses who have legal questions about operations.
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