Top Reasons Why Small Businesses Fail Within the First 5 Years Of Startup
As most business advisors say, you don't necessarily think about your business's failure when starting. But it would help, if you avoid those common mistakes, which most business startups make, and ultimately end up failing.
According to the research analysis published by the small business administration (SBA), about 20 percent of the business startups fail within their first year. Within five years, about 50 percent of the business startups end up failing. And after ten years, only 33 percent of the business startups manage to keep growing at their initial pace.
Here, we have compiled some of the main points of why many business startups fail in their initial years. These points are as follows:
1.Wrong Mindset Or Wrong Reason For The Startup
Many startups fail in the initial stages because they aren’t clear on why they want to start that business in the first place. Due to the wrong mindset, they ultimately end up losing everything. Resulting in losing money, or the phones stop ringing, etc.
Rather at the time of starting your business, you should have the following:
Love and passion for your business.
Your business fulfills the need of the market through your products or services.
You must have done your homework to research and analyze your business.
Desire to do right and operate in honesty, integrity, and mutual interaction with your ideal clients.
2.Identify The Market Demand
Most startups fail due to a lack of market demand or trend for that particular product or service they are offering. Before starting your business, check to what extent the market of that product exists. If the market is small, it means it doesn't have more potential customers, and due to any calamity or natural disaster, that market may crash. But if it has a bigger market, then there are many chances that your business may excel even in hard times, you may still have a market presence. After starting the business, you must keep an eye on the ongoing market trends and cope with them to stay relevant.
3.Poor management
Many business advisors rank poor management as one of the major issues in any startup's failure as the new business holders don't have a good insight into purchasing, selling, hiring employees, managing their duties, etc. To avoid this mistake, business owners must have a particular skill set to manage everything professionally or find someone who does. They can also seek help from business consultants to solve their problems timely and efficiently to avoid failure.
The management department is the backbone of any business, as businesses need to be organized and checked up regularly. Thus, a good manager can help the business achieve its short-term as well as long-term goals.
4.Insufficient Availability Of Funds
The most common mistake of every failing business is the lack of sufficient funds required to successfully run the business in the initial stages, particularly, when the earnings are minimal. Business owners mostly misunderstood the amount of money they would need for that business, which ultimately leads to failure.
Among the cost of starting a business, you, as a new business owner, must consider the cost you need to stay in business because businesses can take up to 1 to 2 years to be in a position to earn a profit.
5.The Wrong Location
Location plays a vital role in the success of any local business. Even if your business is among the best ones regarding the management, the services, etc. But if you lack a good location, then chances are you won't find the potential customers who need to connect with your business. This also applies to online businesses. Is your business operating on the right platforms? Are your ideal clients on the platform you are using?
Choose your business location wisely, and it can serve as a backbone for your business growth!
6.Lack Of Planning
If you have ever supervised any major event in your life, you must know how necessary planning is, in success. Similarly, any business can't flourish if leadership doesn’t have proper planning. Planning describes a way forward for your business because direction and dedication are far more important than speed.
You must commit to planning everything, including the business goals, market demands analysis, finances, needs of your workforce, budgeting, etc., to move ahead successfully in the launch of your business.
7.Over-Expansion Of business
Expanding the business too quickly may also lead to failure, particularly in the initial stages, which can exhaust your finances dedicated to your business. Still, you can gradually expand your business, keeping in view your existing financial status. Doing so will ultimately increase your chances of growing the business at scale without exhausting resources.
8.Zero Internet Presence
Nowadays, e-commerce markets are trending, and people can order anything while sitting simply on their couch. In this age, if your business doesn't have an Internet presence like availability on social media platforms or not having a proper, well-established, and well-managed website, you are surely lagging and knowingly giving away your customers to other online stores. So, you must have a social media presence to be more successful in your business.
If any new startup manages to avoid these mistakes and adopt particular solutions, they will have a greater chance to excel in launching their business.