It’s no secret that a lot of entrepreneurs fail at their business ventures. In fact, studies have reported a 90% failure rate of startups in which 50% see their defeat within the first five years.
To an aspiring business owner, these numbers can be terrifying. And you will feel much apprehension regarding your decision to start a business.
However, if we poll former startup owners, we tend to find similar reasons for their setbacks. There are common mistakes that occur over and over again. And having an understanding of these top mistakes is the best way to avoid them and increase your chances of having a profitable endeavour.
Here, let’s take a look at the 10 reasons why small businesses fail.
1. Lack of Business Plan
If you have ever been incharge of a big event, you would know that executing the affair required careful planning. There is no way the event would have been successful without a strategic plan. Well, your business requires a similar approach.
When initiating a startup, your business plan works as your strategy. It details everything about your business, from the specific niche and marketing plan to finance and staff details. Without a proper plan in place, you will not have the motive to take your business forward.
Draft a business plan in the planning stage of your business to boost the chances of its success. Curate it carefully and make sure it’s based on accurate and realistic projections.
2. Insufficient Customer Interest
Even the best of the business ideas will fail if there is a lack of interest in the market for what you are planning to sell. Of course, there is no way you can predict economic changes or natural disasters that can create havoc in the commercial industry. But before you launch your business, it is necessary to establish whether your preferred niche has a market big enough to be profitable.
It is also a good idea to determine a diversified customer base for your business to help it stay afloat in all seasons. For example, let’s suppose you are running a cafe that relies heavily on student traffic throughout the school year. But how will you manage the circumstances during the summer season when schools are closed?
Consider each aspect of your customer’s habit thoroughly and then determine whether the business will be lucrative in the long run.
3. Poor Inventory Management
Did you know that problems with inventory ranks among one of the major reasons for small business failure? Yes, if you are unable to properly manage your supplies, there is a less chance your business will achieve the success you desire.
Another mistake that many merchants make is hosting a large amount of inventory with the intention of selling it for profit. However, if you don’t manage to sell it as forecasted, the products can lose value. The inventory in hand will also tie up your capital and remain something that is not contributing to your return on investment.
When you launch your business, make sure to keep track of your best-selling items to avoid inventory shortage. Invest in a reliable inventory management software or POS (point of sale) system to keep track of your inventory and provide detailed reports to help you identify sale patterns.
4. Insufficient Capital
Another common mistake that budding entrepreneurs make is the underestimation of operating funds. If you are a new business owner heading on to your first venture, you probably don’t understand cash flow adequately. As a result, you will probably miscalculate the amount needed to start the business and keep it afloat.
There is also a good chance that you will have unrealistic expectations of incoming revenues.
When starting a business, always remember that most startups take a year or two to get going. This means that when you are calculating finances, you will have to know not only the cost of starting a business – but also the cost of staying in the business until sales eventually start to pick up.
To remedy their financial situation, most business owners choose to outsource the department to professional financial advisors. The experienced individual helps keep track of the finances and also gives solid advice on how to maintain the cash flow. Additionally, delegating the task to a professional is the best way to off load some burden from the shoulder of the entrepreneur.
5. Grow Too Fast
Many times business owners confuse success and rapidly start expanding their business. However, overexpansion is a mistake and relying on slow and steady growth is optimal in today’s economic condition.
Of course, you do not want to limit your growth so, once you reach a solid customer base, start planning your expansion based on the customer’s demands. For example, consider if you are able to fill in the customer’s needs in a timely manner. If not, then you probably need to invest in more employees or resources to help you fill the gap.
Carefully review your business goals and the current requirements. Undertake the expansion carefully after thorough research to avoid losing money and efforts in return.
6. No Digital Presence
In today’s era, having a digital presence is absolutely necessary to survive. Period. If you don’t have a website and social media following, there is a good chance that many prospective customers will remain unfamiliar with your business.
Make your online appearance visible by first creating a professional and well-designed website. The website should include complete information about your product/service and how consumers can avail them in the easiest manner. If you are serving local customers, make sure to include your business address, phone number, and hours of operation. It should also be listed on Google My Business so it will show up when interested shoppers search for what you sell (for example, pizza delivery near me).
Similar to a website, you need to have social media profiles on leading channels to ensure the customer is able to find you when they are actively searching. If you don’t, there is a good probability that you will lose out to competing businesses that have profiles on social media sites.
7. Not Taking Help
Most small business owners tend to believe that they know it all and are the ‘jack of all trades.’ This is why they try to undertake each and every task related to the business singlehandedly.
However, just like any individual, an entrepreneur is also armed with unique strengths and weaknesses. They may be good at one thing but lack expertise in the other.
This is where delegation comes in! Whether you outsource some of the tasks to other shoulders or invest in high-tech tools and resources – subcontracting the work is necessary to cut down the responsibilities.
At the end of the day, consistency remains to be the key to desired business success. If you want to see victory with your business venture, you will have to remain committed to the goal for the long-term as it will take time for the business to fully thrive. You have to grind on as strong determination is the quality that every successful entrepreneur possesses.
So, take it day by day and follow the above guidelines to avoid making common business mistakes. At the end of the day, you will be surprised to see how your little steps build the foundation of your success. Good luck!