If you’re thinking of starting your own business, or have recently created a small company, you’ve likely spent a lot of time thinking about failure. Maybe you’ve heard that 9 out of 10 businesses fail and feel like you’ll become just another statistic. However, the rate for failed startups is not as bad as you think.
There are several common reasons why startups don’t get off the ground, and many of them are avoidable. Try to avoid these mistakes and you’ll already be well on your way to success.
How Many Startups Fail and Why
There’s a lot of hearsay floating around about how many startups fail. However, the data shows that it’s not as bad as everyone says. The failure rate hasn’t gotten above 60% in the past 17 years.
There are several reasons why many startups go under and can’t continue maintaining the idea they were founded on. The most common reasons startups fail are a lack of market research, lack of a business plan, and an inability to delegate work.
Lack of Market Research
Probably one of the biggest reasons startups go under is that they didn’t do any market research before starting up. Business ideas only work well if there is a demand for that idea.
Cursory market research shouldn’t cost you anything, so you should be able to vet your idea before investing a single cent in it.
Basic Supply and Demand
One of the fundamental aspects of economics is supply and demand. Before you can make money, you have to have enough demand for the product or service you want to sell. Do people want what you are selling? If no one will buy it, there’s no point to making it.
You’ll also want to take a look at the current market. Does anyone else have the same idea as you? Will they take business away? Is there something unique you can offer? Are they able to meet current demand? Depending on how you answer these questions, your idea may or may not be viable. Successful small businesses find something that people are demanding
Lack of a Business Plan
Many failed startups jump straight into making their idea real before setting up a business plan. This can cause a number of problems that eventually lead to the business going under.
Running a business requires a lot of discipline, and not everyone has what it takes to keep up with business demands. You need to have a plan for how to keep up with day-to-day work, as well as be able to plan for the long term. You’ll also need to set up protocols for managing inventory, assets, and other items your company relies on to make a profit.
Short-Term Planning — Tracking Your Assets
You need to know how much money you have coming in and going out every day. Keeping a detailed financial record will help you cut wasteful spending and make the most out of the money you have.
On a short-term level, you also need to know where your tools are located, who is using them, and what they are being used for. This immediate asset tracking will help you and your team use your time efficiently.
Being able to manage day-to-day tasks is only part of what you need to do for your company. If you can’t meet long-term milestones and goals, you won’t be in business for long.
Identify where you need to be in six months, one year, and five years in order to keep your business viable. Once you’ve got some numbers or other measurable goals, make some plans as to how you will get there.
Tracking fixed assets isn’t something that will require a lot of time from you. However, if you don’t make a plan to track things like real estate, intellectual property, and office equipment, it can end up costing you big time.
Inability to Delegate
Small business owners tend to be incredibly passionate about their startup. But sometimes, this passion can come back to bite them.
If you aren’t able to allow other people to take over some of your business tasks, you’ll only be able to get so far. You only have so much time in a day and can’t do everything your business requires of you.
Micromanagement will actually hurt your business far more than it will help. When you try to do everything yourself, you’ll lose sight of the big picture milestones you need to meet to keep doing business and you’ll become just another one of those failed startups.
Learning to hire a team you trust is crucial to your startup’s success. Not only will your team take some work off your plate, but they’ll also add more to your company than you could do on your own.
Small business success happens when you are able to manage your assets, plan for the future, delegate effectively, and identify a product or service that is in demand. There are dozens of aspects involved in managing your business effectively, but as long as you keep these things in mind and can stay disciplined enough to work at them, you’re well on your way to success.
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