Everybody would like to dream big and own their own corporation; however, it is not news to people that a lot of businesses fail in their first year. In fact, about 5 out of ten of startup businesses are doomed to not last after four years into their respective industries.
The website statisticsbrain.com mentioned incompetence as the leading cause of a business failure. Why is that? Here are the reasons that will cause any startup to be not competent enough to expand, and then eventually fail.
Some call it emotional pricing, or putting a price on a product or service based on initial judgment, without putting enough effort on market research. While a business owner can be an expert on a how a product works, insufficient or overpricing is definitely among the pitfalls of many businesses. How can this be avoided? Prices should be planned according to market research, existing capital, and other resources. If you cannot do the pricing on your own, hire someone else to do it.
Hiring the Wrong People
Let’s face it – when you consider putting up a business, you initially dream of a nice family setup that will involve everyone who does not have a job among your family or friends. While this might paint a great family picture, businesses are far from being endearing. Hiring people according to who are close to you, and not according to the needed skill-set, spells trouble in the end. Keep in mind that when you hire people, do it according to their resume.
Not Enough Funding
A lot of budding business owners put out whatever money they have in their pockets or meager bank accounts and hope that capital will grow from meager seed money. If you were in the medical field, a medical assistant salary may not be sufficient to reach startup funds for a new business. While there is a possibility that that seed money can grow a money tree, that possibility varies from one business story to another. If the empire that you are planning to build rests on getting supplies and entails a lot of labor, consider other sources for your funding.
Wrong Reasons for Starting
When you start a business, it is very important to think about your reasons on why you do not want to have a 9 to 5 desk job and get regular income. Consider why are you willing to take the risk of putting up a business. A lot of people who dived into this risk without thinking of what will make them swim right after they take the plunge found their business drowning in the sea of the unmotivated. Remember that your reasons will say a lot about how you are willing to invest your money and dedicate long hours of doing your product and thinking about how to move forward.
The Unfortunate Location
Unless you are doing an online business, location will mean a lot to your shop. If you are building a brick-and-mortar establishment, you must not expect that people are willing to go to a remote area. However, there are a lot of starting business owners that fall for low rent, which makes them forget about the value of strategic location.
No Business Plan
Simply put, any business that does not have a business plan is absurd. A business plan tells everything that the management and the employees need to know – how much money expected to be made, how much time needed to get back the capital, how many people should work at a given time, and more. Without an effective business plan, any enterprise is a ship without a sail, floating without aim until it decides to fail and sink on its own. If you’re planning to have your own business, do not start without it.
Underestimating the Competition
Pride, as they say, is a deadly sin. True enough, pride caused a lot of business deaths, thanks to the habit of undermining the opponents in the industry. No matter how good a product or service is, it is not entirely impossible that its creator is the only one thinking of that product, as is the case with Ploughcroft. Any entrepreneur that is foolhardy enough to think that he is the only store open to dish up his goods will neglect looking at ways to find his own niche. To prevent this, entrepreneurs must constantly look at competition trends in his given industry and continuously innovate. At the same time, it is very important to know who the players are in the industry, and if needed, know how to deal with the competition by making some friends.
Not Believing in Delegation
Some entrepreneurs think they got it all. The deadly combination of skill and capital leads them to think that they have all the avenues to create everything that is good for their business. Big mistake – this lack of willingness to delegate work entails a lot of resources and time thinking of executive things to be done wasted.
If you are a businessperson, it is not your job to do the logo, marketing plan, and human resources activities at the same time. It will not mean that you are not knowledgeable in these things, but there are other people you ought to hire, because they make better judgment. At the same time, delegation splits up the work, making it more efficient and less costly to do. You can just imagine that logo being done in two days or less, instead of you spending an entire week poring over what you think is art.
A lot of businesses fail because they do not know how to sell their products to the people that are willing to buy them. There is nothing wrong with the product altogether – it is just because people do not know that it is out there. Or even if they do, they find it not appealing because of the entire packaging or advertisement. Thanks to technology, this can easily be done through efficient online marketing, search engine optimization, social media, and the like. You can still try out the tri-media (newspapers, TV, and radio). Study your market and advertising trends before you start with any advertisement and know how people can respond to you positively.
Thanks to Greg Hasselman for this post. His website can be found at www.tutoringhelp.org and he can be emailed at firstname.lastname@example.org.