The majority of entrepreneurs seem to have what it takes to run a successful business. They’re bold, they’re determined, and incredibly competitive. However, a recent report from Bloomberg has revealed that 8 out of 10 new business start-ups fail within their first 18 months in operation. Why small businesses fail is because of these 5 pitfalls that almost plague every unsuccessful start-up:
1. Out of Touch With Customers
Small businesses are often born from a great idea with serious market potential, but entrepreneurs often retreat to their offices and neglect to stay in touch with those who gave them this idea: their customers. Your customers are the key to the success of your business, and so entrepreneurs should maintain an open and judgment-free environment for interaction, both online and offline. Which leads us to our next reason why small businesses fail.
2. No Online Presence
Even if you have no intention of doing any business online, a website is a must-have if you hope to be successful. Not convinced? Then consider a recent Invesp study which revealed that 80% of Internet users have used the Internet to make a purchase, with 81% using it to research products and services before making a purchase. Add the fact that a growing number of potential customers are checking you out online through their mobile devices – even while they’re in your store – and you have a strong case to build a presence online.
If it’s not in your budget to have a website, there should be nothing stopping you from creating a Facebook and Twitter account. This not only gives you an instant online presence, but it helps support key failing point #1 by providing another way for customers to keep in touch with you and for you to gain incredible insight from them.
3. Poorly Managed
Many entrepreneurs have stated that the reason why small businesses fail is because it was poorly managed. A lot goes into managing a small business: financial management, marketing management, production, hiring, employee management… even janitorial duties often fall on the new business owner. Entrepreneurs need to step back and have an honest look at the business and acknowledge where they excel, and where they could use more help. Fill in any weak areas with experienced staff as passionate about your business as you are, and you have a strong foundation to stand on.
4. Lack of Capital
In order to improve their chances of obtaining a loan from the bank, many entrepreneurs will purposely underestimate the amount of capital they’ll need in order to operate their business. Savvy business startups will not only have enough capital to start but will have enough to stay in business while the business gears up and gets going (which can easily take a couple of years).
5. Started for the Wrong Reasons
Finally, the reason why small businesses fail is because they were started for the wrong reasons. Many start a business so that they can be their own boss, or they think they’ll make a ton of cash, or they hope to then be able to spend more time with their family. If these are the reasons why you’re considering starting your own business, then do a 180-degree turn and move as far away from the idea as possible. Starting a small business is incredibly demanding on almost every resource you have, from time to money and beyond. But if you begin a business with a passion for the idea, are independent and can adapt to new situations and scenarios, then you have the ingredients necessary to be successful.