The failure of some businesses and the success of some is normally a big mystery to most entrepreneurs. According to research done by Bloomberg, out of ten entrepreneurs who start businesses, 8 of them normally fail within the first 18 months with a whopping 80% crash and burn.
Listed below are some top reasons as to why most if not all companies end up failing within the first few years of their genesis:
Most entrepreneurs, since it may be the first time that they are launching a product they tend to think that it will automatically pick up. They then end up putting all their eggs in one basket which ends up being disastrous. The individuals may end up putting in more money than the amount that is actually being received back as profit. With time, the new company’s resources end up being depleted, leading to failure and finally closure.
2. Lack of planning
When it comes to businesses, planning is everything. From the structure to the job description, every person has a different role to play. The reason as to why lack of proper planning may lead to the failure of most companies is because there are no short term goals nor long term goals that have been put in place in line with one’s vision. Planning should include dates with deadlines that need to be met and constant evaluation as well to see if the business is growing or not. The failure of not planning will end up damaging a business.
3. Relying On Investors, Not Customers
Most if not all entrepreneurs tend to look more at funding and end up ignoring the customer base. The fact that one has funding does not make one successful as the customers are the ones who actually keep one’s business afloat and lack of customers just means failure. For a business to succeed people need to understand that the customer is always the first priority come what may and keeping an eye for customer reviews is the key to either failure or success
4. Bad Partners
When the leadership has issues, the company will not succeed. Reason being that the wrong decisions were made by the leaders. Having spirited debates among the founders is normally fine and to some level is actually healthy but when it becomes a constant thing, one of the partners may end up checking out emotionally and this may kill a team’s morale. If worse comes to worse, one of the partners may decide to walk away from the company due to the constant conflicts and indecisiveness. The lack of collaboration and communication by and among partners is normally like parents who are fighting in the anticipation of a divorce.
5. Copycat Firms
The thing about businesses is that when one launches a product into a market, they may get a wide customer base and this may lead them to have more competitors. Other companies may end up duplicating the same product, branding it with their name and selling it maybe at a lower price than the original and this may affect one’s market base. One then may end up being forced to close shop due to this reason as they can’t compete with a cheaper product which the customers prefer over the original.
6. Premature Scaling
For some entrepreneurs, the belief that expanding is better is always a priority for them, and they tend to believe it will sort out their issue. This is a dangerous way to think as an entrepreneur as premature scaling is actually the number one reason for the failure of companies. One may end up hiring too many people too fast or spending too much on marketing. This is because of lack of proper planning and will definitely lead to failure since the business cannot yet support itself.
At times some critics argue that most founders of businesses tend to waste so much time on an idea that’s probably a mistake just waiting to happen. One may not have done enough testing of the product hence, doesn’t have the general reaction of their market with regard to the product. If individuals only listen before diving head first into the market and actually taking time to do research as well as get council, then failure is inevitable.
At times, most businesses tend to fail due to monotony or inefficiency or circumstances. The lack of a proper structure may affect this aspect of business as one person may end up burning out as the whole business is dependent on them. At times, life happens and circumstances affect people in different ways hence, if one is unavailable to handle a specific issue in the company, the company may end up failing just because the individual(s) are not around.
9. Failure To Join The Digital Revolution
With this time and age technology is at the forefront of everything including the development of businesses. Americans tend to spend most of their lives glued to a computer screen, tablets, and phones but businesses are still not utilizing these opportunities that have been given freely by potential customers.
Social media and also the internet at large is a very powerful tool as it is able to grow one’s brand into a very lucrative one as well as destroy it within a few months. Hence, one needs to understand that the internet is a powerful tool and tends to work both ways.
10. Disgruntled Employees
How one’s employees serve the customers determines how they are treated as well as it determines if the customer will come back or not. Employees are normally like the face of one’s company since they are the first person that the customers meet.
Employees who are not happy with how they are handled at work will never put in extra effort or stay up late in the name of working on a new idea to benefit the company. They would rather just be lazy and go on with life as they lack the proper motivation. On the flip side, employees who have been able to actually own the company’s vision tend to be more transparent and efficient.
In conclusion, a business is never an easy thing to run and its failure is pegged on a number of things. Knowing what landmines one may land on is paramount to your companies’ growth. Knowledge is power.