7 Reasons Why Most Startup Business Fail
While successful startups capture most of the attention in the business world, most startup businesses actually end up failing. The reasons why the startup business fail is actually surprising when you realize that many of these mistakes can be easily avoided. Many entrepreneurs live in a vacuum and while that can be a good thing, they often lose track of the bigger picture.
To help you keep your head above the water, here are the seven common reasons that you need to know about:
1. Starting a Business for the Wrong Reason
Obviously, money is the main motivator for anyone that gets involved in a startup business. However, the allure of money can often obstruct the more important things. You can easily fall into the trap of cutting corners in your products, not doing enough to serve your customers, and getting too comfortable when you have some success. It’s also important to have passion about your business and stay focused on delivering value to the marketplace.
2. Poor Management
Poor management of businesses often causes them to crash and burn out of the blue. All aspects of the business must be managed properly in order for it to grow from the employees, production, communication, product/service fulfillment, to the budget. Poor management often results from poor leadership or not having the right people in the important roles.
3. Insufficient Capital
Not having enough capital to grow the business is what often ends up killing businesses. It can make businesses rely on limited revenue streams and take away the resources to tap into new revenue streams to grow. Sometimes the problem is that the debts incurred from launching the business eats away at the revenue and not enough capital is there to see the business through. As existing revenue streams die out, new ones have not been created to keep the business afloat. Insufficient capital can often be a consequence of poor financial management, so proper budgeting and cash flow management is essential.
4. Business Location
For businesses that are storefronts, location can often make or break them. It’s vital that a business has a location that receives high traffic, is easily accessible, and nearby other businesses. Not being able to reach your target audience and being isolated will spell doom for any storefront. It’s often better to pay more to get the right location than paying less to get a cheap location.
5. Lack of Planning
Having a clear business plan is obviously an essential part of succeeding with a startup business. While most entrepreneurs probably have a plan, it’s often not specific enough. Your business plan should include details about how revenue will be generated, predict any possible problems/obstacles, the existing competition, financial management, Marketing Strategy, and hiring/managing employees. There’s no such thing as being too prudent about your business.
One common that business owners make when they taste some success, is overexpansion. Once they see the potential of the business, they invest heavy resources or even get loans to expand and grow as fast as possible. This can often backfire as unforeseen events, miscalculated judgments, and cash flow issues can hurt business owners. It’s better to build a strong foundation and branch out once you see that the demand warrants expansion.
7. No Website
At this day and age, it’s vital that you have a website that allows prospects and customers to learn more about your business and make a purchase over the Internet. And with more people going online to shop, it’s important to also incorporate digital marketing into your overall marketing strategy. It’s not enough to have a website either. You need to invest in website development to build a site that engages your audience. Proper website development will ensure that your design will give you credibility, make it easy for your visitors to navigate the site, and allow for a seamless mobile browsing experience.
Launching a startup business is incredibly difficult. That’s why it’s vital that you understand the reasons why most startups fail. You need to have a good idea of how to set yourself up for success and become aware of the common mistakes to stay ahead of the game. With the right plan and strategy, you’ll be able to build a solid foundation and scale to whatever heights you desire.