Failure is a part of being an entrepreneur. People try new business ideas and experiment with different strategies. Sometimes plans pan out, leading to a successful business that can stand the test of time. Other plans fail, and the startup fizzles out within a year of launch. According to statistics, one in five new businesses is unable to survive a year.
The Small Business Association says that around 30% of businesses fail within two years. While these statistics may seem discouraging, don’t let them bring you down. Here are some common reasons why some businesses don't make it very long:
Little Demand for the Product
A product is only successful if there's some legitimate demand for it, and the market conditions are suitable. According to a recent survey, around 42% of startups fail simply because there just isn’t enough demand in the market. When you come up with an idea, it is important to spend some time thinking about whether it fills a vacuum.
For example, when Uber was launched, people were frustrated by taxis denying rides or overcharging. There was a market opportunity, which provided a fruitful environment for companies like Uber and Lyft. That’s why these apps became such a notable success.
Think about how a product might impact your target market, conduct comprehensive market research, and surveys. The data will help you determine whether a product idea is worth your time or investment.
Less Integrated Team
Startups typically don’t function like traditional, more established companies. They usually have smaller teams and limited resources, which means every team member wears many hats. Unfortunately, some people have a difficult time taking on a variety of roles. CEOs may stay in one lane, only focused on leading their company. CMOs may consider marketing their responsibility but they may not contribute anywhere else.
Startups have a more organic environment that requires a lot more collaboration. It's common for CEOs to get their hands dirty on basic tasks just to get the job done. CMOs sometimes take over customer care or human resources as well. A successful startup is an excellent example of how collaboration can yield beneficial results.
Burning Through Resources Quickly
New businesses have limited resources, even if they manage to get significant funding early on. Unless a business venture generates substantial, self-sustaining income, it is vulnerable to failure. Many startups fail because they burn through these initial funds quickly, often because they hire more staff than they need.
New companies must be conservative in their spending, making sure they invest every penny wisely. Sometimes ventures expand a little too rapidly, which spreads the resources thin. Make sure you have a solid foundation, a robust and streamlined team, and reasonable revenue before you focus on expanding. Let a business settle by getting its roots deep in the market first. That’s how business entities stick around for years and even decades or more.
You need money to start a business. Begin looking for financial aid even before starting a business. Make sure you have a pool that will last until you have a steady cashflow. Cut corners and save wherever you can at first as stretching every dollar can help a business last longer.
If a venture can get through financially challenging times in the early months, it has a better chance of surviving.
Bad Location and Internet Presence
Location and internet presence are some of the most influential aspects of most businesses. A shop located in the wrong place isn't going to attract a lot of traffic. Companies must conduct a thorough location analysis to find a suitable location. They also need a robust online presence with well-developed websites, online reputations, and social media accounts, since a negative online reputation can break a business entirely.
These are some of the most common problems that challenge new businesses. It’s advisable to create strategies to avoid them and stay wary of falling into common traps. This can help improve your chances of success, especially in the early months of starting a business.
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