Unfortunately, many of the businesses started by entrepreneurs fail. These failures are caused by numerous reasons and the entrepreneur will learn a valuable lesson. The problem is these failures are expensive, mentally and emotionally draining and can crush the spirit of the entrepreneur. There are common denominators for many of the failures that can be avoided.
The Importance of the Market
One of the main reasons your business will fail is because there is no market for your service or product. Your product must be compelling, address a specific issue or need and be able to survive any competition in the current market. There is a tremendous difference between a product that is nice to have and a product that is needed. You must conduct sufficient research to ensure there is a large enough niche in the market to support your service or product to be successful.
Your timing is just as important as the need. You may have the perfect product but if the market is not ready your launch will fail. An excellent example is a furniture manufacturer that has discovered an exceptional way to use a new type of wood. If the process to prepare the wood is not sufficient to meet the demand, the company will not be able to purchase enough wood to fill their orders.
Same goes with the customer service as well. per say, if the competitors are using convenient payment means, as card payments, and you don’t follow the trend, customers might get diverted to the convenience of buying. Setup your online payments service by professionals to have a secure system.
The Business Model
One of the biggest issues you will experience as a new entrepreneur is your belief acquiring customers is easy. You may think you simply need to design an exceptional website, learn how to accept online payments and offer your service or product. This may bring in a few customers but it will not be enough to sustain your business. Test your website, apps with various testing methods like A/B testing to learn about customer behaviour. Attracting and retaining customers is the key to any successful business.
This involves SEO or search engine optimization, excellent website content, search engine rankings and advertising using numerous different sources such as social media, online promotions, print and media. The simple facts are your customers must be aware of your business and have a reason to make a purchase. This means you will require time to build your brand and earn the trust and loyalty of your customers.
It is imperative the profits of your business outweigh the cost of acquiring new customers. Additional expenses such as product development and operational costs must be considered.
The Management Team
One of the areas you may have difficulty in is your management. Your management team must be strong, have a good strategy and validate any ideas before and during development. Poor management teams are detrimental to your business and can result in failure. Your product must be built correctly and available for consumers on the date promised. Your market execution must be planned well and correctly implemented to ensure efficient and smooth results.
The members of your team must be able to work well together. It is critical each member has exceptional skills and cover every area of your business, you must trust you team and establish excellent communication. If your team does not communicate their ideas, ensure all steps are executed on schedule and take their responsibilities seriously it will be a set up for failure.
The Cash Flow
One of the most common reasons an entrepreneur fails is they do not have enough cash. It is critical you have an approximation of how much cash your business will require until you begin making a steady profit. If your cash flow is not sufficient your business will fail. You must ensure your financing is adequate prior to proceed with your startup.
If you begin to run low on cash despite your best efforts, you can use any milestones your company has reached to raise additional capital. If your investors believe your business is on track and will achieve success, they will provide additional financing.
The Acceleration Factor
One of your most important jobs is the regulation of the speed of your company’s growth. During the initial development of your business, your business model is still being defined. This means your business must grow slowly so you can conserve your cash reserves. You need to wait to hire people for marketing and sales until your business can provide enough services or products to meet the needs of the market. If you rush the process it can easily lead to frustration and failure.
Once your business model has been established, you need to focus on growing your business as much as your finances will allow. You must have established a profit greater than what it costs to acquire new customers before you proceed. It can be extremely difficult to know when your business has reached this point. It is hard to release the cash you have been going to extreme efforts to hold back. If you invest in growth too soon you may run out of cash. If you wait too long your business can stagnate. Make certain you are ready to expand then begin hiring new sales people and investing in marketing each month.
Potential Problems with the Product
Your product must meet the needs of the market or your business will fail. Sometimes revisions are necessary for the product to ensure it fits the current market. If your product is too far off base you will need to completely change your original concept. This type of situation often results from a team that did not validate their product ideas with the target market prior to, during and after the development phase. Making certain your team is doing their job well is the best possible way to avoid this situation.
The Final Result
Starting a new company takes a lot of hard work, a good strategy, patience, knowledge and an appropriate amount of cash. Numerous entrepreneurs have established successful businesses. It is important to think ahead, constantly monitor the company and surround yourself with an efficient and knowledgeable team.