I decided to write about this topic weeks ago, but I’ve been contemplating whether to write it or not. I’m currently working on a startup with a friend, and we’ve been researching on how our company can make it through the first trial period.
Hence this post.
Many people decide to run a new business, but after the first year, they run out of money and run it into the ground. This failure usually occur in the first year of the business.
Seventy percent of the time, failure comes as a result of the lack of experience and discipline of the owner, other times, it’s due to certain factors.
Here we will look at 10 reasons why startup business fail in their first year.
1. No Market Need: Starting a business without checking whether there is a market need for the product or service you provide is a big mistake. Once they get an idea, many people assume that there’s a need for what they want to do and without proper research, they dive into it and begin production.
Market research is the first and most important step in starting a business. Potential clients will help you build your business structure. They will be able to tell you how to design your business to suit their needs.
2. Poor Product/Service: The worst mistake you can ever make as an entrepreneur is to produce inferior goods or render second hand services. You can never gain the trust of clients once they find out that your business is inferior.
3. No Customer Satisfaction: Many businesses, once they have started, fail to focus on their customers but instead focus more on the product they have. Others tend to focus more on getting new clients and there’s no structure for retaining customers.
4. Poor Marketing Strategies: It’s kind of a waste of time to be in business and no one knows what you sell. No marketing=no clients, while no clients=no cash flow which then results into business closure.
As much as you focus on clients and products, you should also focus on getting your business to the market. Put marketing strategies in place, measure the ones that work and the ones that do not. Finally, if any marketing strategy is not bringing in sales, tweak it or change it completely.
5. No Cash Flow: Cash flow is very vital for any business to succeed. Without cash, your business will grind to a halt. Many times, lack of cash may be due to low production, marketing or sales problems, or mismanagement of funds. Whatever the case may be, don’t let your business get to that point.
6. Competition: I’ve heard of many businesses that close down simply because they got out-competed. For every business, it’s imperative to put systems and strategies in place. Always think ahead of competitors, this is why USP is important. Your USP is what will distinguish your business from the rest when it gets really competitive.
7. Pricing/Cost: Some startup companies find it hard to meet the current expenditures like paying staff salaries or covering other expenses. Usually because they’re spending more than they earn. I advise every startup business to cut cost to the bearest minimum.
Reduce staff to you alone or two of you, yes you can work as a manager, accountant and marketer in the first phase, you’ll eventually make money to hire more people.
8. Wrong Team: Now about hiring people, the people you hire to work for you are your greatest assets. They determine whether your customers will come back or not. Pay attention to the kind of people you hire, don’t let the wrong people put you out of business.