Let’s be honest, the business world is one of the toughest worlds. This is the world where dog eats dog.
Also, everyone knows that 8-9 out of 10 businesses fail within the first 5 years. The same cycle repeats every five years; the businesses that survived the “first wave” may be knocked down by the “second wave”.
But why do new businesses fail?
In this article, I will list some reasons why new businesses fail and what can be done to avoid these mistakes.
1. Poor Planning
This is one of the biggest reasons why many businesses fail. To ensure your business survives and thrives, you need to be aware of both short-term and long-term objectives for your business. This would also include financing, marketing, legal, and other types of goals.
If you fail to plan, then this can cause huge damage to your business, and perhaps additional problems. I’m not trying to scare you here, but just trying to give you some heads up.
As I said earlier, when you start or grow your business, you should be aware of your short-term and long-term goals.
Think about where you see your business in 1 year, 2 years, 5 years, etc.; these are long-term objectives. Then come up with the short-term objectives that can help you reach these long-term goals. These short-term goals can be anything, depending on your business or your current situation.
Also, create a business plan. This is the tool that you can edit anytime, depending on the stage your business is at. You can put down information about your competition, marketing strategy, customer service strategy, financing, recruitment, legal, and other aspects of your business.
2. No Competition Analysis
Poor or lack of competition analysis is another factor that can harm, if not destroy your business. It is hard to do anything to control the economy or the markets, hence regardless of the niche or market sector you build your business in, be ready for competition. If you don’t know your competitors, well, good luck then.
First, you should create a spreadsheet, either on Excel, Numbers, or Google Docs, and create columns such as name of your competitors, website, and attributes, such as content, marketing, customer service/engagement, etc.
For each of these attributes you can give rating (5-point or 10- point scale; it’s up to you) on each of these attributes. Then compare all these attributes with what you have so far. That is give yourself a rating as well, but it has to be a fair one; don’t exaggerate it.
You can also look up your competitors online (by the way, this part is essential for online businesses). Look for competitors that make it to the first 2-3 pages in search engines and have a look at what they have using the same process as described above.
3. Not Learning from Failures
Everybody knows that failures are part of the learning process as well as business ventures. A vast majority of businesses were built through trial and error. However, it gets worse if entrepreneurs fail to learn from their failures. They either don’t know the cause of their error, or they are too stubborn, hence the same errors or failures reoccur, and this won’t do any good for their business.
If something goes down south, one of the things that you can do is to sit down and analyze what went wrong and what is the source of failure.
This may not an easy process (but don’t give up), because it will require a lot of patience, good analytical skills and strong attention to detail.
Another thing I can recommend is to keep the track of the problems that happened with your business. Once you’ve identified what caused your business to fail or not bring the results you expected, record it somewhere for later reference, so you can avoid repeating this mistake.
4. No Focus
There are businesses that have lack of focus. Usually, if it’s a product business, entrepreneurs are trying to stuff countless features in it in hope that people will like it and buy it, or they may choose a niche that may be too broad. But unfortunately, it leads to an opposite effect.
If you are just starting a business, choose one aspect or a function that you want your business to have, and then build on that.
For example, Google started out as a search engine; online search was the focus of Google. Once it established itself as a decent search engine, then it could focus on expansion and creation of other features or functions, such as Google Earth, GMail, Google AdWords, etc.
5. Ignoring Customer Needs
Everybody knows that customers are the essential component of every business; no customers, no profit. Once you get your first customers, you must be able to maintain them, so you can get more customers. Ignoring their needs or their concerns would be a huge mistake.
It is even worse, if you ignore or delete negative reviews, hoping that nobody will notice any flaws in your business. This is a very dishonest approach and it will only damage your business and reputation, once it comes back at you.
Customers form a very important component of your business and your job is to help them solve their problem. You should be there for them. Your clients want to feel special.
When it comes to reviews, take some time to respond to them, whether it’s a positive or a negative review. This will show that you care about your customers, and they will love you for it.
If you run into a negative review, don’t treat it as an offense. I know, it may be hard for some people, but the good in this “bad” is the information about the areas that need improvement.
One recommendation I can give is to record any negative feedback that your clients or visitors may leave, and based on this feedback you will figure out the areas where improvement is needed. If you work on these areas, your customers will love you for this.
You can come back to them and leave them a notice that you’ve dealt with the issue that they’ve mentioned in their review or feedback. This will only be beneficial for both parties; you and your client. Your client will feel that they are special, and as a result you may get a chance to get a reference.
Burnout is one of the big hurdles that entrepreneurs face. They have to wear many hats at the same time; try to juggle accounting, management, marketing, legal, and may other duties.
As a result, all this headache stresses them out to the point that they can’t handle it anymore. They are becoming so close to abandoning their venture.
To avoid such a fate, there are a few solutions that you can consider, if you feel you start reaching this burnout phase.
Don’t try to work every single day of the week, and every week of the month. Even though it can help you grow your business, you will need some break as well.
You can go for a walk or a bike ride to relax and gather your thoughts together as well as let the stress out. You can also spend time with your family or your loved ones.
If your business is quite mature and gives you decent profit, you should consider outsourcing some duties or processes within your business. You should outsource the duties that you either hate or have little to no knowledge or experience in.
You can hire freelancers, contractors or employees to take care of this work for you, while you can focus on the work that you deem important.
These were some reasons why many businesses fail. Of course, this is not the full list, and there are plenty of other reasons for business failures.
If you have any questions or feedback, just feel free to leave them in the comment section below. I’ll be happy to help you out 🙂