So what are the most common reasons that new businesses don’t succeed?
I was recently reading an article on this. It was the same reason that I’ve seen many other articles use – cash.
The article stated the main reason that businesses fail is they run out of money.
However, that’s not a reason.
That’s actually a symptom.
And through my 25+ years of experience, seeing many businesses rise and fall, I believe the real reason new businesses fail boils down to four things:
Not enough people know the company. That right there is a huge determiner of everything else that will happen to the business.
If from day one, nobody knows who you are you’re going to struggle to generate revenue.
If by month 6, still, hardly anyone knows you, your business is going to crash and burn.
At the end of the day, if you don’t have revenue you’ll run out of cash. So, many of the other articles aren’t wrong by saying money is a huge issue for new businesses.
But in essence, that’s a side effect of obscurity.
I always say, “If 7 billion people knew who you were, would sales be a problem?”
And of course, they wouldn’t be.
Lack of quality people.
Now I am as guilty as every other business owner because I have lacked this in the past.
You need to get quality people on board.
As company owners, we’re all guilty of working on a budget sometimes when trying to hire a team. We attempt to cut corners wherever we can.
And It’s kind of strange when you step back and think about it. These are the people who are going to help you drive your business, and yet we try to hire the cheapest people.
It is silly to pay your hires the smallest amount and hope that the person is going to realize your dream and be completely dedicated to you.
That is why it is a huge, huge issue.
New businesses don’t succeed because they don’t get the right people on board. Your team will make or break your business.
During the very early stages of my consulting company, we started helping businesses write business plans.
And of course, we had to talk about marketing budgets. I was honestly shocked at how many businesses either didn’t account for any marketing budget at all or only a pinch of what they should have been doing.
One of the reasons businesses fail is they don’t apply a big enough marketing budget to their business.
Chances are, as a business, you are not entering a marketplace that has no clients at all. More than likely you’re entering a competitive space.
This means your competitors might already have a reputation and a large client base. You have to compete with that. You have to be able to get yourself in front of an audience.
Remember the obscurity issue? Well, a marketing budget is going to help you solve that.
Lack of planning.
I know it’s easy to blame the media… but I am going to blame the media for this point because they’ve romanticized this idea of being an entrepreneur.
That leads to tons of young kids jumping into a business idea, with absolutely no planning, thinking they can make it big overnight.
Lack of planning and understanding of the market you’re moving into will guarantee your business fails.
You need to understand obscurity, marketing, and how to hire the right people in order to succeed. Not planning for those correctly will be a company’s downfall.
Planning is important, and while it can sometimes feel like guesswork, unless you’re moving into a marketing space that has no competitors you’ve got to know what they are spending to achieve their market share.
So, those are the four key points that I have determined over my last 25+ years of experience lead to businesses failing.
Some of my own businesses have failed for these reasons.
My first business failed due to a lack of planning. Absolutely. 100%. I entered the market space with literally no idea what I was doing and I just didn’t account for how much marketing was going to be involved.
I hope these points can help any new entrepreneurs looking to start their very own business.