I recently viewed some startling numbers compiled by Mashable and Harvard Business School, stating that 25% of startups will fail in their first year of operation, 36% will fail in their second year, 44% will fail within the third year, and finally 50% will fail in their fourth year. This begs the question, what are some of the reasons a small business may fail?
- Poor business plan.
You should have a well-thought-out plan for the future concerning your business. Think about market research, your target clientele, budgeting, potential challenges that might need to be overcome, and have a clear vision of where your business is heading. - Poor management.
Have you and your friend always wanted to go into business together, and then once you do, everything falls apart? Before filing formation documents, communicate thoroughly to ensure that you and your business partners’ goals and visions are the same for your business. Make sure you can properly manage employees, make good purchasing and selling decisions, and know how to create a positive work environment where your company can thrive. - Not enough capital.
Make sure that you have sufficient funds to operate your business. Many entrepreneurs underestimate how much it will actually cost to get their business off the ground and making a profit. You probably won’t make an impressive profit in your first year of business, and it is important to plan for that in order to keep your business operational until it starts turning a profit in addition to covering all of its operational costs. - No market
It is wise to conduct market research to ensure that you have a solid market for your product, as well as to measure the competition. Will there be a substantial market ready to buy your product or service? - No marketing
Customers aren’t going to buy your product or service if they don’t even know it exists. Devote part of your budget and time to marketing: creating a website, a web presence, and local and other online marketing.