Why Many Start-Ups Fail and What You Can Do To Avoid It
Launching a start-up business can be an unpredictable game. Whilst of course many succeed, the sad truth is that a number of them are not so fortunate and fail. The reasons behind these failures are numerous. It can be anything from external factors such as the economy, to a drying up of the market, as well as reasons related to failures within the business itself. So let’s take a look at some of the reasons why many start-ups fail and what you can do to avoid following the same path.
Why do so many start-up businesses fail?
Whether it’s over in the beginning stages of the business or further down the line after a brief period of success, failure is quite common amongst start-ups. This is partly down to how easy it actually is to set up a business, thanks to kickstarter campaigns and other such ventures making it all the more possible for people to set up a new venture.
5 common reasons for start-up failures include:
- Setting up a business for the wrong reasons
It’s great that you are passionate about something, you want to work for yourself or you want to make some money. However, these reasons aren’t always valid or enough for setting up a new business. There will be a lot of hard work required on your part, long hours, sleepless nights and a lot of financial sacrifice. Many people just aren’t prepared for the all-consuming nature of a start-up, and this can sadly lead to its failure.
- Lack of Experience
You may have never had to manage yourself before, let alone others and a budget. Without key management experience, you could drown. You may want to think about embarking on some management courses, partnering with an experienced other or waiting until you’ve developed these skills before you try to set out on your own. An incompetent leader could easily be a business’ downfall.
- Unorganised, Insufficient Planning
It is vital that you have a plan beyond the initial set up of the business, both strategic and financial. If necessary, have your plans checked over by an impartial individual who can ensure that you have covered all bases and have a viable business plan to make it through. This will also be essential for any financial aid you seek.
- Location and Market
Location is an important consideration when setting up a business. If you’re going to be online only, then you’ll need to check out your competitors and ensure that you’re targeting the right location and target audience. Location is key if your plan is to have a physical location so it needs to be chosen carefully. There’s no point setting up an independent coffee chain on a street which already features a Starbucks, two Costa Coffees and a Café Nero! Do your research carefully and thoroughly and make sure that you establish your business where there is a real need and gap in the market for it.
- No Online Presence
In this day and age, you would be considered crazy not to have a website or some form of online presence for your business. People need to be able to find you easily and you need to be visible. If you can’t offer or promote your services online, you’re losing out on a huge chunk of the market, and could lose out to competitors who are already online.
Avoiding Failure
We’ve outlined some of the ways in which you can avoid your start up ending in failure, but there are also some other factors you should bear in mind, such as;
- Research
You can never do too much research as you need to know your market inside out. Take the time to study your potential customers, competitors, risks etc. and everything else in order to make sure you’re as prepared as possible.
- Create Interest in Your Company
Take the time to build up your company awareness and brand, whether through using PR, marketing, communication or more. Social media is a free, useful tool in which you can generate buzz about your business before it launches, so make the most of it and don’t be scared to shout about it!
- Do your sums
Finance is extremely important for a start-up. Ensure your business plan includes realistic financials and projections. Plan your budget carefully and ensure you have all the financing you will need, covering every eventuality, including for periods where you may not be making any money. Any successes will be a bonus.
- Play to your strengths, admit weaknesses
If you have strong creative ideas, but lack leadership – seek out those who do. If you need to hire individuals to assist you, whether it’s on a part-time or freelance Virtual Assistant basis, then it’s much better than figuring out everything as you go along, right?
Yes start-ups can be scary business, but also rewarding when they pay off. Plan as well as you can, and take advantage of the experiences of all who have come before you, in order to stand the best chance of succeeding. So good luck!
Picture courtesy of Louise Robinson
