According to Bureau of Labor Statistics, about 50,000 more companies went out of business in 2010 than started. There are many factors that can attribute to the failure of a startup and we sat down to digest what we see as the top five.
5. Fear of Failure
This would normally be an unlikely or forgotten about reason for business failure; however, it is an important one. One widely known symptom of fear is procrastination. Procrastination is definitely not a quality wanted in an entrepreneur since we are often considered “go getters.” If your company starts going through a rough patch, you may automatically break down and unconsciously begin to sabotage your own potential for success. Fear of failure can also hold you back from growing your business when you have achieved only mediocre success. In the minds of those who fear failure, “a little success is better than a little failure”. It is amazing that those with a fear of failing even start businesses, but surely it happens.
4. Poor Support
Who is really supporting you in your business endeavors? Have you ever spoken to someone about your business and they seemed more excited than you did…or didn’t seem as excited as you thought they would? Have you decided to grab some random unemployed family members or friends and hired them for your business? Having the right support model is crucial for not only your physical business, but your mental state of mind. Bringing friends and family into your business that do not have the same passion for your business as you is far too often a killer of successful a startup. Not all people support you the same way even though they may be your friends. It is great to have trusted friends; however, a trusted business mentor who has worked in your industry may serve as a better springboard for ideas and may provide the right type of support you need to see your business through to success.
In most cases, you need money to make money. It is common sense to most; however, the amount of money may not be. Some new business owners are immediately compelled to purchase new computers, furniture, business software, etc. Spending a lot of money early in the start-up process can hurt you when you have not been able to determine how your company is going to grow. Sometimes it is necessary to buy new things but there are a lot of free resources and used equipment out there that will help you get your company started without creating high overhead.
2. Losing Focus
The excitement of wanting to do everything and the vision of making big money often cause a a loss of focus after the business has started. You’ve just made your first big deal and now you’re ready to jump into hiring tons of employees and opening a brick and mortar store right away. Taking big steps too early can lead to unnecessary spending. It’s great to plan for big business. Planning is essential in building a foundation and putting the vision of the business on paper. Putting it on paper is what makes it work. Thinking about it is great but having something in writing can help you make your vision a reality. Real words and real numbers make a big difference for you as an entrepreneur, business partners/supports, employees, and even loan consultants. Understand that at some point you may need to hire employees, consultants, accountants, etc., however many businesses often do this too early in the phase of their company. If employees are necessary in the beginning, explore how many you need to optimize your business while keep your costs down.
1. Lack of Knowledge
Lack of knowledge is by far the primary place where a many business owners fall by the wayside. You may know how to cook really well, but do you know how to manage a restaurant? There has to be a basic understanding of all areas of business, especially understanding of your target market, or you will ultimately have gaps in the way that your business runs. Not understanding all aspects of business – sales, accounting, HR, small business law, etc. – can hinder your ability to grow your company to its full potential. You do not have to be a subject matter expert, because where you fall short, you should have someone around that knows is. What you do need is the knowledge to speak the language.
Understanding your competition and what sets you apart from that competition is also a major aspect of knowledge that you need to gain. Even if you do not have competitors, learn what to do when competitors join your market (because at some point they will). Knowledge truly is power when it comes to building and maintaining a business. Learn all that you can so that you can expert in your craft.