Starting a business is very exciting, but the pressure to survive in the first two years is not for the faint of heart. Only 10% of new businesses succeed, and your goal is, of course, to be in that top percentage. Here are the three most common issues that cause start-ups to fail, and how to avoid them.
1. Lack of Planning
This seems to be the most obvious starting point, but a lot of start-ups are born from great ideas that kick-start the business without stopping to plan the next steps after the product or service is actually born. The goal to create overshadows the need to make mid-range and long term goals that allow for realistic planning. The “what’s next?” question should be decided on months prior. Planning helps you prepare for future business needs and gives you time to research and explore better growth options for the company. Naturally, specific to-do lists and deadlines will be set in place to maintain your company’s push forward and prevent easily avoidable circumstances from tanking business.
2. Failing to Adapt
Your first couple years of business are spent slaving away over internal matters. However, it is absolutely crucial to pay attention to the many players, changes, and trends in your market. If you don’t take a peak at what is happening in the industry or watch where your competitors move, your business offering could become obsolete by the time you’ve finished building it. Stay aware so you can pivot the company if necessary, or better, find and create a solution to an underserved need that could make your business even more profitable.
If you want to learn strategies about staying ahead of your competitors, read this blog. The key takeaway? Make sure your business has at least one factor that differentiates itself in your market, or else your company will likely fade among its competition.
3. Not Enough Financing
The idea of a lease or additional debt may seem intimidating as a small business owner. Navigating your way through the financial world and deceptive broker fees can feel overwhelming.
In order to make money, you’ll have to invest (a lot) into the business and, more often than not, you don’t have that money laying around. A decision to not utilize financing for your business and its equipment can seriously restrict your company’s capacity to expand, and limit the potential revenue it could be making. Shelling out thousands (or hundreds of thousands) for equipment will likely be unfeasible in the early stages, and financing will allow your business to sustain a healthy cash flow in order to make necessary maneuvers as you learn and grow during your first few years. Don’t make the mistake of tying up a large sum of money (especially in equipment) that prevents you from having cash on hand to use for more appropriate needs.
Meet with your accountant to discuss all different methods of financing, and consider the benefits of working with a direct lender.