CREATTIV.NET – Entrepreneurs starting new businesses is what drives the economy, innovation, and job creation.
However, about half of those new businesses fail in the first five years, and two out of three last less than a decade.
So, how do you become one of the 33% of new businesses that last for the long haul?
You do this by avoiding many of the common pitfalls that drive entrepreneurs out of business.
Here is a look at 11 common reasons new businesses do not make it.
Not Having Enough Money
Let’s start with the simplest and most straightforward reason any business fails: lack of money. Whether they self-finance, get a bank loan or take the “Shark Tank” approach and get partners and investors, many businesses fail before really getting started because they are not prepared with the capital it takes to operate a new business.
Not Knowing Your Market
Who are your clients? Who is your competition? What is your target market willing to pay for your product or service? Entrepreneurs must be able to answer these and many more questions about their market in order to run a successful business.
If you do not fully understand who your customers are, what they want and where else they can get it, you will be doomed to fail.
Lack Of Vision
The mark of a good leader is not only having a vision but imparting that vision to others in a way that makes them want to come with you on the journey.
Businesses without well-thought-out, long-term and short-term goals will fail because they don’t have clear success benchmarks along the way.
Biting Off More Than You Can Chew
Speaking of goals, they say “Rome wasn’t built in a day,” and neither was Amazon or Google or GE. If a newly formed startup’s idea is to rush to be a Fortune 500 household name in one year or even five from opening, it could be setting itself up for failure.
Trying To Be Everything To Everybody
Many new businesses are quick to chase money or a sale by adding products or services that they do not truly specialize in. Companies that know what they do well (and what they don’t) and stick to that last longer than businesses that try to become a jack-of-all-trades yet master of none.
Not Enough Marketing
You can have the best product or service in the world, but if nobody knows about it, you won’t succeed. You need to get your name out there and let people know about the benefits of your business. If you cannot reach your audience, you cannot find success.
One of the most effective forms of marketing is word-of-mouth marketing. It’s a form of advertising that comes directly from satisfied customers. Why does it work so well? Most consumers will believe a recommendation from a good friend or family member much faster than any ad or marketing strategy.
We have all heard the saying, “If you fail to plan, you plan to fail.” The absence of proper planning leads to subpar execution. A good business plan need not be overly complicated. It is as simple as knowing and developing a strategy around your company, your product, and your competition.
Not Accepting Constructive Criticism
Let criticism serve as an opportunity to do it better. Too often, entrepreneurs get offended by critiques because they are too emotional when it comes to their business. There is no such thing as success without failure and mistakes. As an entrepreneur, you must find the lesson and learn from criticism.
Some old sayings are delegation killers for entrepreneurs. “If it’s going to be, it’s up to me,” “Entrepreneurs are self-made,” and “If you want things done right, do it yourself,” to name a few. Many entrepreneurs start as a “one-person show,” and some can succeed in the beginning that way. However, as a business grows, you need a good team that can help bring the company’s vision to fruition.
Lack Of Soft Skills
Soft skills are the missing piece to the success puzzle for many entrepreneurs. Soft skills are the sometimes intangible and non-technical talents entrepreneurs need to lead effectively. They include attitude, communication, empathy, motivation, teamwork, networking, leadership, decision making, problem-solving and conflict resolution.
Related to not delegating, entrepreneurs can quickly burn out and lose their drive and passion if they do not get the right support. Starting a business is a 24/7 job in most cases, and if you are not able to ease that burden as you grow, you will never be able to sustain that long term. As Lori Greiner of Shark Tank said, “Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week.”
There are plenty of reasons new businesses fail. From the common reasons listed above to a host of other situations, starting a new business and scaling for the long-term is not easy. That said, when business owners understand the reasons why businesses fail, they can be better prepared to avoid the pitfalls and navigate their way to a long and fruitful journey through entrepreneurship.
Originally written by Pasha Carter. Pasha is a leadership development expert who helps entrepreneurs, corporations, and organizations build leaders from the inside out.