The statistics on how many new businesses fail are hard to nail down. It’s difficult to quantify failure, but the numbers suggest that about 25% of new businesses fail after a year, and somewhere between 35% to 48% fail after the second year.
The easiest answer for why a startup fails is that they run out of money. But this is a shallow explanation that doesn’t address the deeper-seated reasons for why they run out of money. As an entrepreneur, one of the best things that you can do to continue growing your company is to always seek new information, new strategy, and new ideas. By looking at the most common reasons that companies run out of money, you can make plans to guard your own business from the same fate.
Maybe we are biased, but competent management of a company’s finances is key to success. A lot of startups try to cut corners by delegating accounting tasks to professionals who aren’t trained to handle the finances. Mistakes are made and the appropriate checks are not in place. In small businesses where the entrepreneur wears all hats, business financial habits end up mirroring personal financial habits. Most entrepreneurs who struggle with their personal finance will bring that struggle to the company. Without oversight, poor financial planning can shake a startup’s foundation and lead to failure.
Small Business Financial Services
Companies like ours that provide accounting services can lift the burden from your shoulders, helping to ensure that your startup’s finances are tended and nurtured like a spark at a campfire. But unlike some of our competitors, we understand that most entrepreneurs are looking for coaching more than fancy services. Seek out expert advice and follow through for the best chance of avoiding poor financial planning.
Wrong Mindset, No Vision Of Success
Entrepreneurs who start a company and fail sometimes feel like they were doomed from the start. Maybe they have a hard time putting their finger on exactly what the problem was, but they always had a feeling all along that the company was going to go under. The fact is, that feeling itself is the reason the business failed, as the owner’s vision of failure became a self-fulfilling prophecy.
See It. Believe It. Be It.
All successful companies begin with an entrepreneur or a team who have a vision of success. If you cannot wake up the morning and envision yourself being success, you need to take a step back and focus on some basic mental wellness first. Have self-confidence and identify why you are starting a business. What are you goals? What are your dreams? Drive your future towards that highway.
No Connection, Poor Customer Communication
When companies don’t listen to their customers and don’t answer their customer’s needs, they will fail. It’s important to listen to the market you’re entering to and to be certain that there is a need for the product or service you offer. Attempting to railroad a market with an item or service that no one wants isn’t going to get you anywhere long term.
Even more frustrating is the business that knows it’s offering a needed service but can’t attract enough customers to stay afloat. This represents a failure to show the customers exactly how you will solve their problems. When customers don’t know about or can’t understand your business, your capital will dry up quickly in a lack of sales.
Listen, Then Talk
Don’t blare your advertising at top volume in a market until you’ve taken the time to listen a while. Let the market insights you gather guide your communication strategy, and let marketing efforts parrot back the themes you heard. Customers will respond when presented with a compelling solution to their problem.
Keeping It Together
Don’t ever let your fear of failure hold you back from the life you want to live. The last and most important thing to remember is that a lot of businesses fail! Instead of letting those words fill you with anxiety, own them. Many of the most successful entrepreneurs had a failed attempt or two before starting the company that makes them successful.