Top 6 Reasons New Businesses Fail

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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 you want to cover is already saturated with realtors, making it very difficult to This is a mistake that will cause you to fail from the beginning. You have to find an underserviced or unmet need within a market and then fill it, rather than break into the familar field. It's a lot easier to create, and then satisfy, a new demand – rather than compete in an already-crowded pack.

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 new enterprise through research and surveys; it will figure out the costs and inputs needed for the company; 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 your 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 really gets off the ground, and you'll still have a lot of cash to repay.

Reason #4: Bad Location, Internet Presence and Marketing

Location, location, location is everything if your business relies on foot traffic. Just as important, however, is internet location. These days, your web and your social media presence can be just as important as your company's physical presence. People shop, search and research online for everything these days. So if the need is already there, the virtual availability and visibility of your business is crucial.

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. So 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 or video industry to know that successful sectors 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 are physically growing, make sure that you understand the new areas and markets into which you'll now be reaching. If you're expanding the scope and focus of your enterprise, make sure you understand your new products, service and intended consumers 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 operations can sink the whole enterprise.

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