Every businessperson starts their business with success in mind. However, running a business is quite a challenging task that those who go on this route understand well. Nearly 50% of all the companies in the US fail in five years of operation according to a Statistic Brain study. Almost 70% end up in failure in a decade. When you start your business, everything is in your hands.
You can’t blame the economy for your failures. Not to mention, the study did not say all 100% of the companies fail. So, the ones succeeding must be doing something right.
Of course, it is in your best interest to learn from the mishaps of others. To help you turn your startup into an established business, you must avoid these five mistakes.
Top 5 Reasons Why Startups Fail
1. No Market Research
The most important thing for any startup is to come up with a solution to a problem. If there is no problem, you can’t sell a solution. In addition to that, you have to know your target audience before launching your product/service. You have several ways to do that today – technology to the rescue. From Google Analytics to targeted advertising campaigns on Facebook, there is a lot of help for you to learn about your audience.
Even when you know your audience, you must have a plan to target them convincingly. You must sell your product and make profits to keep going. If you have a niche market, you must price your product accordingly. You can’t benefit from a lot of sales in a niche market. However, you can profit from a significant profit margin on every sale.
When startups don’t factor in market research before launching, they fail.
2. Mishandling of Funding
There is a lot that can go wrong when it comes to funding and pooling in the capital to launch your business. First, you have to decide what type of funding will be best for you. Venture capitalists are not your only options today. Crowdfunding is one of the most suitable options for funding a business without giving up a lot of equity.
Secondly, you want to “invest” your funds in your business not “spend” them. It is best that you choose to invest your funds in campaigns that can yield a return too. For example, if acquiring new loans can help you reduce your customer acquisition costs significantly, you should go for it. However, taking loans only to buy an attractive office location or new furniture is not advisable.
3. Onboarding a Weak Team
The team you have with you has an impact on everything, from funding to the performance of your business. First, the investors pay a lot of attention to the potential of your team when you ask them to invest in you. A weak team will never convince an investor to take the risk of funding your business.
Secondly, the performance of your team depends on how much they share the vision. If you have people with you just because they can perform certain tasks, it’s not a team at all. The people who work with you must share your vision.
4. Marketing Without Data
This factor has a link to the first one i.e. doing research on your market. When you research the market and narrow down to your target audience, it is not just for your product. It is also for marketing purposes. You want your marketing to be personalized for those whose problem you wish to solve.
In addition to that, you must know which marketing methods are working for you and which ones aren’t. You can’t keep on spending on banner ads if they are not yielding any good results for you. If social media marketing is producing better results, you must refine it to make it even better.
Google revealed recently that 56% of the advertisements from companies don’t even reach their target audiences.
5. Having Unhappy Employees
One of the gravest mistakes you can make as a business is having unhappy employees onboard. You must never take this risk and do all that’s in your access to keep your employees happy. Many things can act as the cause of your employees’ unhappiness.
Look at the way companies train the new hires, for example. Sometimes, the job is not as difficult as the training material can make it sound. Additionally, improper training makes employees nervous when they are finally on the floor.
The training issues are easily resolvable with today’s software technology. For example, you could deploy a knowledge sharing platform where free flow of information from every concerned employee makes training tremendously easy for new hires.
Once new employees understand their role well, they can adjust easily into the new culture.
Concluding Thoughts
So, if you are considering starting a business or are already a startup, make sure to avoid these mistakes. You can talk about perseverance all you want but failing once in launching a business does not leave much gas in your tank to launch it again. You can save hundreds of thousands of dollars of your investments by learning from others’ mistakes. Last but not least, never launch your business in a hurry and just for the sake of it.
