The statistics show that most start-ups fail. If you are trying to start your own business you need to take notice of the stats.
Starting a brand new business is hard, should you be put off by this? Hell no, the reality is most of the startups that fail failed before they started. They didn’t set their business up in the right way in the beginning so failure was almost inevitable.
So, if I haven’t already put you off starting your own business and you are now looking a new job, let’s discuss the main startup failure reasons and how you can set your business up so you don’t become one of the 80%.
Make Sure Your Market Size Is Big Enough
Markets sure your niche isn’t too small and prevents you from building a profitable and sustainable business.
Starting a business to cater to a market that is just too small to make a profit is another common business mistake. You and your network may think it’s a great idea, and you may have some early success in starting your business. However, when sales from your network dry up, is your business sustainable?
If you are operating in a tiny niche you have to broaden the market for your business. This may mean you will have to sell your product outside of your area or country. It could also mean you need to broaden your range of goods/services to cater for a different market.
Know & Understand Your Ideal Customer
If you are targeting everybody, you are targeting nobody!
If you don’t understand what your ideal customer wants then you are in big trouble. Know what their pain point is and how your business can solve that problem.
Too many start-ups go into business having a general idea of who they are targeting, this strategy will usually end up in failure.
You need to know how to create your own customer avatar. A customer avatar is a detailed profile of your target customer. You need to go deep and get to the bottom of your customer’s irrational fears and deepest desires.
What’s the point of doing this? The more specific you are in who you are in targeting the more focussed your marketing efforts will be. Ineffective marketing with no return on investment puts a huge amount of pressure on your cash flow and can lead to business failure.
Make sure your business is protected
When starting your business you should assess just how difficult for someone else to copy it and steal customers from under your nose.
Protect your intellectual property by using copyrights, trademarks. In some businesses, these methods may not be effective. For instance, If you own a Chinese food stall, there is nothing you can do to stop someone else from opening another Chinese food stall in the same market. They are your direct competition, a serious threat to your business.
You can protect your business through creativity and innovation. You need to make sure that people do not just want Chinese food, make sure they want it from you. The reason they want it from you can be the quality of the food, the superior service or the fact you provide seating. The important thing here is that you are trying to set your business apart from the competition so it cannot be replicated.
Just think of how many people walk past a Burger King to go to Mcdonalds.
Control The Supply Chain
Let’s say you have started a business and you have one supplier who is giving you a fantastic deal on a product. What happens when: the supplier goes out of business, they lose their distribution deal or the demand of the product from your competition drives up the price for you?
You probably will have to find another supplier who will charge you 30% more.
You can’t just pass that additional cost to your customers. You became successful because you were the cheapest in town.
What usually happens from here is the slow decline from profitability to loss-making.
The lesson here is that you should not put your business in a position when you are reliant on one supplier or source. If conditions change, your business may not survive. Risk assessment and mitigation should be one of your top priority as a business owner.
Get Your Pricing Right
Pricing is a difficult issue when first starting up. Most startups feel the only way to get a competitive edge is through price. They become the cheapest option on the market and they get a few sales but because their margin is small they cannot their reinvest profits into the business and barely survive. Sound familiar?
55% of customers would pay extra to guarantee a better service – Defaqto research.
Customers value customer service over price. Charge a price that makes you enough margin to stay in business but provide great value to your customers. If a customer thinks they are getting value, they will buy.
Analyse Your Competition
Competitive analysis is crucial to your business survival. Your competition is the single biggest threat to your business and you have no control over what your competition is doing.
Analyse what they are offering and which segment in the market they are catering for. Find out and compare them with your business, what are they doing better and what you do better
It’s not just what they are doing you need to track. Find out how many competitors and alternatives are there for your business? If the market is increasing year on year by 20% and there is double a number of competitors there were a year ago. Your business may be in trouble. You are fighting with twice the number of competitors for only 20% more customers. This is a big risk to your business if you do not do something about it.
Create A Business Strategy
So, where is your business heading in the next 3-5 years? Not having a convincing answer to this question immediately puts your business at risk.
In my experience, not having a proper business strategy (and business plan) is the most common reason most businesses fail. Knowing the long-term goals of your and how you will get there provides you with a focus.
The more focused and detailed the plan, the more chance you will achieve your goals. Having clear performance targets allows you to manage and review progress in your plan.
If you do not have a clear business strategy, make time and develop one as soon as you can.
Value Your Existing Customers
It’s hard to get a paying customer in the current marketplace. So why do you so many start-ups just ignore their existing clusters and focus on gaining new customers? A startup who knows how to treat their existing customers is on the path to success.
Treat them well and they will not only buy more from you, but they will also become advocates of your business, helping you to promote it.
Launch Your Business
We can help you start your business faster and easier than if you were to do it alone. Our Business Launcher service is the launchpad for startup success. We’ll provide you with all the tools and advice you need to become your own boss. Check it out here.