10 Reasons Your First Business Could Fail
Table of Interests
It’s a sad fact of business that many startups fail. Statistics show that upwards of 90% of startups fail within ten years, with many likely failing beyond that or even before their first year as well. There are a number of reasons for this, and they’re not all tied to your skill as an entrepreneur. Luck, bad decision-making, and unfortunate circumstances all potentially play a part in a startup failing, but there are things you can do to mitigate the damage. Here are 10 reasons your first business might fail, and what you can do about that.
1. Lack of money
Why does this cause a business to fail?
A lack of ongoing funding is one of the principal reasons for a startup to fail. Sometimes, investors get spooked by certain business decisions, or lacklustre performance causes investors or loan providers to reconsider their investment.
What can you do about it?
If your business doesn’t have money, then naturally, you’ll need to find a way to increase cash flow. You can do this by reaching out to other investors or even injecting personal funds; taking out £1000 loans can even save a business under certain circumstances.
2. Lack of expertise
Why does this cause a business to fail?
If you don’t know enough about your industry, then there are many ways in which that could cause your business to fail. Customers could see through your lack of experience, for example, or you could make a mistake a more experienced entrepreneur wouldn’t have made.
What can you do about it?
To head off a lack of expertise at the pass, make sure you know as much about your industry as you can. Always be on the lookout for opportunities to learn something new about your business.
3. Lack of resources
Why does this cause a business to fail?
Sometimes, businesses fail because they simply don’t have the resources to continue operating. This could be a lack of manpower, for example, or it could take the form of a lack of good networking allies.
What can you do about it?
When your business has grown enough to accommodate staff hires, make sure that you’re hiring as many people as you can to fill gaps and perform tasks that you’re not capable of doing yourself.
4. No core demographic
Why does this cause a business to fail?
If you don’t identify your startup’s core demographic, then you could find yourself pitching your product to people who simply don’t want to buy it. This, naturally, will result in a loss of business.
What can you do about it?
Undertake extensive demographic research both before you start your business and while you’re running it. This will help you to determine exactly who wants your product and who you should be selling it to.
5. Wrong staff
Why does this cause a business to fail?
Sometimes, a startup fails due to lack of resources. At other times, the business will fail not because you don’t have enough people, but because the people working for you aren’t right for your operation.
What can you do about it?
You need to be discerning in your hiring process if you want to avoid this issue. Talkextensively to potential hires and ask them about their background. Your business is worth the extra effort this will take.
6. Bad business plan
Why does this cause a business to fail?
This should be fairly self-explanatory. If you don’t have a good business plan, then your basic business model is flawed from the start, and it’s only natural that your operation is going to fail.
What can you do about it?
Try to write your business plan to be as bulletproof as possible from the start. Obviously, it’s never going to be absolutely perfect, so you should keep revising and changing it according to lessons you learn as you go.
7. Lack of market need
Why does this cause a business to fail?
If there’s no market need for the product or service you’re offering, then it stands to reason your business won’t perform very well. Even if you think what you’re offering is of high quality, if it’s not needed, it won’t sell.
What can you do about it?
If this happens to your business, it might be time for a complete about-face in the way that you operate. Think about other areas in which your business could potentially serve customers rather than sticking to old ideas.
8. Low-quality product
Why does this cause a business to fail?
All too often, even when businesses identify a strong market need for their core product, the actual product itself isn’t high quality. Obviously, this matters, because word of mouth and online reviews will relay that fact to other potential customers.
What can you do about it?
The obvious answer here is to improve the quality of your product. This could take brutal honesty; you may have to admit to yourself that a product or service you love simply isn’t good enough in order to change it.
9. Legal troubles
Why does this cause a business to fail?
All too often, startups get themselves into legal troubles that they can’t surmount. This could be conflicts with other businesses, copyright issues, or any other legal problem that puts paid to a business.
What can you do about it?
If you’re going it alone, then you’ll need to read up comprehensively on any legal issues that might challenge you as you run your business. Otherwise, we’d recommend hiring dedicated legal personnel to help you.
10. Burnout
Why does this cause a business to fail?
Sometimes, your startup might fail because you simply lose the passion or drive you had for running it in the first place. This can be a surprisingly common problem, and afflicts more startup owners than you might think.
What can you do about it?
If you feel yourself becoming burnt out, then make sure you’re taking regular business breaks so that you don’t overwork yourself. If, however, you’re already burnt out, then the best thing you can do is step away from your business for an extended period of time to recharge.
Leave a Reply