8 reasons why start ups fail and how to counter It
This article covers:
- Lack of customer strategy
- No market or competitor research was done prior to starting the business
- Spending too little or too much on marketing
- Mismanagement of cashflow
- Lack of funding
- Failing to adapt to change
- Issues with cofounders or employees that you hire
- Let Instarem for Business simplify your business payments
- Don’t forget, that solutions to counter common business mistakes take time and effort
It’s no secret that start ups have a high failure rate. In fact, as many as 50% of all businesses fail within the first five years. So what’s the reason for this? Why do so many businesses fold up within such a short period of time? While there are many reasons why businesses can and do fail, we’re going to focus on the primary reason in this blog post. Stay tuned!
Lack of customer strategy
Do you know who your customers are?
Are you overly dependent on one big customer to support your revenue?
When starting a business, it’s important to have a plan for acquiring and retaining customers. This is often referred to as your customer strategy. Your customer strategy should include things like who your target market is, what needs or problems your product or service solves for them, and how you plan on reaching them (marketing).
Without a solid customer strategy in place, it will be very difficult to acquire and retain customers, which is essential for any business to survive. So, if you’re thinking about starting a business, make sure you have a well-thought-out strategy! It could mean the difference between success and failure.
No market or competitor research was done prior to starting the business
This is a huge mistake that so many new entrepreneurs make.
They come up with what they think is a great idea, invest time and money into it, and then launch without doing any market or competitor research. As a result, they quickly realize that there’s no real demand for their product or service or that there are already too many businesses offering the same thing.
Even if there is a demand for their product or service, they might end up not delivering due to logistical issues.
Validate and test out your idea by researching your industry, target market, and competitors thoroughly. This will give you a much better chance of success from the get-go.
Alternatively, you can test your product launches on platforms like Kickstarter, Amazon, or eBay to see if there is interest in your products.
All of this information will give you insights into your target market, what they want and need, and how much they’re willing to pay for it. It’ll also give you an idea of the competition and what you need to do to stand out.
Spending too little or too much on marketing
The best product also needs a stage to shine.
This is where marketing comes into play. Marketing is what will generate awareness and interest in your product or service and help you reach your target market.
Simply putting up a website and creating social media accounts will not be enough to attract customers. The reality, it takes a lot more than that to get noticed online and generate leads.
There are a lot of free marketing channels available, such as social media, blogging, and PR. However, sometimes paid advertising is necessary to reach a wider audience.
On the other hand, some businesses go too far in the other direction and spend way too much on marketing in the early stages, blowing through their budget before they’ve even had a chance to start generating revenue.
When it comes to marketing, you need to find a happy medium. Invest what you can afford into activities that will reach your target market and help you achieve your business goals.
Mismanagement of cashflow
This is one of the most common reasons businesses fail. It’s also one of the most avoidable. Cash flow simply refers to the movement of money in and out of your business. To be successful, you need to have more money coming in than going out.
There are several things you can do to improve your cash flow, such as offering discounts for early payment, setting up automatic payments, and invoice factoring.
By staying on top of your cash flow and making it a priority, you can help ensure the success of your business.
Don’t forget to use Instarem to help you save costs when it comes to making your business payments like paying vendors, employee salaries and more. Instarem can help support your finances by providing a simple and efficient way to pay and get paid as well as receive payments in multiple currencies.
Lack of funding
Many businesses fail because they simply don’t have enough money to sustain themselves. This is often due to a lack of planning and foresight when it comes to funding.
Before starting your business, you need to have a clear idea of how much money you’ll need to get off the ground and keep things running until you start generating revenue. Once you have a solid understanding of your financial needs, you can start looking for sources of funding, such as loans, investors, or grants.
Don’t make the mistake of underestimating how much money you’ll need. It’s better to err on the side of caution and have too much than not enough.
Not sure how to find investors, here’s a quick list of organizations that can help you with your needs.
Failing to adapt to change
The world is constantly changing, and businesses need to change with it if they want to stay afloat.
This is especially true in today’s digital age. Technology is evolving at a rapid pace, and businesses need to change with it to stay competitive.
Think about how different things are now than they were even just a decade ago. We do everything online now, from shopping to banking to entertainment.
Move your business online, embrace new technologies, and make changes as needed to stay ahead of the curve.
Set aside a budget for product innovation and marketing research so you can stay on top of trends and changes in your industry. This will help you adapt to change and keep your business relevant.
Use data, rather than guesses to make business decisions. Data will give you a much clearer picture of what’s working and what isn’t.
There are several tools available to help you track and analyse data, such as Google Analytics and Hootsuite Insights. Use this data to make informed decisions about your marketing, product development, and business strategy.
Issues with cofounders or employees that you hire
This can include everything from disagreements about the direction of the company to personality clashes.
It’s important to carefully consider who you want to work with before starting your business. Make sure you’re on the same page when it comes to your business goals and values. It’s also important to have a contract in place that outlines each person’s roles and responsibilities.
If you do end up having problems with a cofounder or employee, don’t be afraid to address them head-on. The sooner you deal with the issue, the better. Ignoring it will only make things worse.
Find a mentor to guide you
One of the best ways to avoid making common mistakes is to find a mentor who can guide you. A mentor is someone who’s been through it all before and can offer advice and support.
Having a mentor can make all the difference, especially in the early stages of your business. They can help you navigate the challenges you’ll face and avoid making costly mistakes.
Look for someone who’s willing to give you honest feedback and answer any questions you have. You can often find mentors through online programs or networking events.
Alternatively, reach out to your local chamber of commerce or small business development center. They may also be able to connect you with a mentor.
Improve your managerial skills by taking courses
The most important thing you can do as a manager is to learn how to communicate effectively. This includes giving clear direction and instructions, being available when employees need you, and providing feedback.
It’s also important to be able to motivate your team and create a positive work environment. Employees who are happy and feel like they’re part of a team are more likely to be productive and stay with your company for the long run.
If you’re not sure where to start, there are plenty of resources available online and in libraries. You can also find management courses at community colleges or universities.
Trying to do everything yourself
Every business owner sees their business as their “baby”.
They try to do everything themselves. They wear too many hats and spread themselves too thin.
As a result, they’re often so busy putting out fires that they don’t have time to focus on growing their business. If this sounds like you, it’s time to delegate some of your tasks.
Start by making a list of everything you need to do in a day. Then, prioritize the tasks and delegate the ones that someone else can handle. This will free up your time so you can focus on the important things.
For example, if you’re spending too much time on social media, hire someone to manage your accounts for you. Or, if you’re struggling to keep up with your website, delegate the task to someone on your team.
Let Instarem for Business simplify your business payments
For startups and young businesses, every step is filled with many uncertainties. But one key thing that does not change is the belief and motivation to survive and the constant need to balance cost and reinvest the profits.
Instarem for Business can help support your finances by providing a simple and efficient way to pay and get paid as well as receive payments in multiple currencies.
If you want to know more about how you can get better rates, faster transfers and more efficient money management, sign up for your free Instarem account today.
Don’t forget, that solutions to counter common business mistakes take time and effort
By following these tips, you can avoid the most common reasons businesses fail and set yourself up for success. Do your research, manage your finances carefully, stay flexible and adaptable, and use data to make decisions. By taking these steps, you’ll be well on your way to achieving your business goals.
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