Successful entrepreneurs believe that failure is a part of success, although not necessarily the direct opposite of success. It’s one thing to start a business but operating it successfully is the challenging part. Forbes reports that only 8 out of 10 businesses live up to the first 1.5 years after establishment. That means it takes just 18 months for 80% of start-ups to crash. The million-dollar question is why do some businesses make it while others quickly disappear without a trace? A host of internal and external factors often contribute to the failures of new businesses. Here are 5 factors that could cripple your business from growing.
Poor Knowledge of Customers
Many a time when entrepreneurs think they can do without knowing their customers, their businesses blow up in front of their faces. The fact is that customers are central to the success of any large or small scale business. Business owners must keep in touch with their clients by using the appropriate communication channels. Conversation is the key to strengthening customer-business relationships. Through dialogue, a business can know its customers inside out, and consequently, how best to serve them.
Lack of a Well-Defined Value Proposition
Entrepreneurship is not everyone’s calling. Some people attend career seminars, and after listening to one or two motivational speakers, dash home to start their own business thinking that they’ve had a eureka moment and discovered their genius. Well, more haste; less speed. If you start a business without understanding its value proposition, it may be difficult to break through the competition barrier in your industry. First, discover the uniqueness of your brand, and find out a long list of reasons why your business offers game-changing products and services. Entrepreneurs who fail to assess their business models against the market scope are most likely to see their businesses go up in flames before they know it.
Ineffective Marketing Strategies
Maybe you shouldn’t start a business if you’re not ready to invest in marketing. Your marketing strategies will ultimately determine your conversion rate and your altitude. Owning a business without advertising it means you’re eclipsing your own shine. Though you may have a really cool business idea, failure to get that idea across a vast number of consumers can stunt your growth. Expert marketers are helping contractors simplify their marketing and build a better brand. Pay good attention to marketing and branding techniques from day 1.
Capital is also crucial to the long-term operation of any company. In the beginning, start-ups may record discouraging profit margins. Statistics show that just 40% of small-scale businesses are profitable, 30% hit the break-even mark, while the other 30% only suffer losses. With meager capital resources to operate, a new business may run into bankruptcy and eventually collapse.
A business’ founder and its top executives are the pivot around which an enterprise revolves. Management has the power to transform a struggling business into a successful one. However, that will be impossible to achieve when a business lacks a strong team of experienced leaders. Dysfunctional leadership is often the overall cause of business failure.
To wrap things up, research also shows that just 50% of start-ups survive 5 years after their establishment. Only a third of them operate for up to 10 years. This tells you how easy it is to fail, compared to succeeding. Entrepreneurs must identify mistakes that cripple businesses, and then address them before failure crops up.