Top 6 Reasons New Businesses Fail

AAA

It's often said that more than half of new businesses fail during the first year. According to the Small Business Association (SBA), this isn't necessarily true. The SBA states that only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. The SBA goes on to state that only 25% make it to 15 years or more. However, not all of these businesses need to fail. With the right planning, funding and flexibility, businesses have a better chance of succeeding. We'll go through some of the biggest mistakes that start-ups can make and figure out how to improve your chances of success.

Reason #1: Not Investigating the Market

So you've always wanted to open a real estate agency, and you finally have the means to do so, but your desire to open the agency blinds you to the fact that we're in a down housing market and the area where you want to work is already saturated with agencies, making it very difficult to break in. This is a mistake that will cause you to fail from the beginning. You have to find an opening or unmet need within a market and then fill it rather than try and force your product or service in. It's a lot easier to satisfy a need rather than create one and convince people that they want to spend money on it.

Reason #2: Business Plan Problems

A solid and realistic business plan is the basis of a successful business. In the plan, you will outline realistic goals for your business, how your business can meet those goals and possible problems and solutions. The plan will figure out if there's a need for the business through research and surveys; it will figure out the costs and inputs needed for the business; and it will outline strategies and time lines that should be implemented and met.

Reason #3: Too Little Financing

If you have started a company and things aren't working out, you've got little capital and a struggling business; you're really not in a good position to ask for another loan. Be realistic at the beginning, and start with enough money that will last you to the point where you're business is up and running, and cash is actually flowing in. Trying to stretch your finances at the beginning may mean that your business never gets off the ground, and you'll still have a lot of cash to repay.

Reason #4: Bad Location, Internet Presence and Marketing

A bad location is self-explanatory if your business relies on location for foot traffic. Just as dangerous, however, is internet presence. These days, your location on the internet and your social media presence can be just as important as your company's physical presence in a shopping district. Online presence will let people know that they can give you their business, so if the need is already there, the availability and visibility of your business is the next important step.

Reason #5: Rigidity

Once you've done the planning, established your business and gained a customer base, don't get complacent. The need that you're fulfilling may not always be there, monitor the market and know when you may need to alter your business plan. Being on top of key trends will allow you lots of time to adjust your strategy so that you can remain successful. One must only look at the music industry or Blockbuster video to know that successful industries can undergo huge changes.

Reason #6: Expanding Too Fast

Now that your business is established and successful, it's time to expand, but you must treat the expansion like you're starting all over again. If you're expanding the reach of your business, make sure that you understand the areas and markets into which you'll now be reaching. If you're expanding the scope and focus of your business, make sure you understand your new products, service and intended consumer as much as you do with your current successful business. When a business expands too fast and doesn't take the same care with research, strategy and planning, the financial drain of the failing business(es) can sink the whole enterprise.

Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

Related Articles
  1. Entrepreneurship

    The 5 Skills Every Entrepreneur Needs

    Understand what an entrepreneur is and the type of risk an entrepreneur faces. Learn about the five skills necessary to become a successful entrepreneur.
  2. Entrepreneurship

    5 Bad Habits Every Entrepreneur Should Avoid

    Learn how to avoid specific bad habits that plague entrepreneurs, such as failure to plan, bad associations and not keeping a good work-life balance.
  3. Entrepreneurship

    5 Good Habits Every Entrepreneur Needs

    Understand who an entrepreneur is and what an entrepreneur does. Learn about the 5 good habits that every entrepreneur should have.
  4. Term

    How Entrepreneurs Benefit the Economy

    Why are entrepreneurs important for the economy?
  5. Entrepreneurship

    8 Tips For Starting Your Own Business

    Do you have what it takes to be a top entrepreneur? Learn tips on what to do to make it happen.
  6. Entrepreneurship

    5 Steps to Become an Entrepreneur

    Understand what it takes to become an entrepreneur, and learn about five steps that can help someone become an entrepreneur and build a successful business.
  7. Professionals

    RIAs: How to Talk to High-Net-Worth Entrepreneurs

    RIAs need to think of themselves as entrepreneurs if they want to be able to attract entrepreneurs as clients.
  8. Investing Basics

    Entrepreneur Vs. Small Business Owner, Defined

    An entrepreneur is different from a small business owner, and requires a different temperament.
  9. Entrepreneurship

    10 Habits Every Entrepreneur Should Have

    Discover 10 habits common to successful entrepreneurs that you can emulate in your journey toward achieving success in your own career and life.
  10. Entrepreneurship

    10 Characteristics of Successful Entrepreneurs

    Being a successful entrepreneurs requires more than just an idea or a lot of money. Here are ten things that set successful entrepreneurs apart.

You May Also Like

Trading Center