TOP REASONS WHY START UP BUSINESSES FAIL
One of the major things that discourages individuals from starting up a business is obviously losses or fear of failure. When an individual starts up a business, remember regardless of whatever the person has in mind or whatever the desired goal is, individuals don’t want losses or let’s say they don’t expect losses. Losses or failures could however mean something is probably wrong somewhere either in the operation or the strategies put in place for the business. Too many losses are what eventually leads an entrepreneur to lose interest and decide to quit or sell the business.
In whichever case it is, individuals have to be proactive if they expect to be successful entrepreneurs and also successful at their businesses. Being proactive means looking ahead and planning for the future which includes unforeseen events such as losses or business failure. As an entrepreneur, risks are almost inevitable to take and sometimes these risks might prove decisive for the progress of the business. Same goes for losses too. Entrepreneurs are expected to believe that losses can come and it could be really bad. The way they act during this time determines what happens to the business.
All this brings us to the fact that failures of a business are sometimes man made or let’s say entrepreneur made. It happens as a result of things the entrepreneur has done. Losses won’t come if you work hard, put in commitment and have what can be called a perfect strategy but then again, there is nothing really like a perfect strategy. There will definitely be ups and downs especially for an individual who is building a business from scratch. Detecting and accepting that you have made mistakes or you’ve made a wrong move is the first step to solving these issues.
In the next sub heads, I’ll be discussing a number of common mistakes or things that entrepreneurs or owners of start ups do that could easily plunge the business into losses and a potential exit. Here are some of the reasons why many start up businesses fail.
1. LACK OF PASSION
This probably always leads the way in detecting problems wrong with a business. Different individuals start up businesses for different reasons. While some are for the sake of fulfilling a dream or giving back to the public or rather solving a common issue or social problem in the society, some are there because they saw someone become successful because of his/her involvement in that type of business. This mostly happens when people are more motivated by the money they are going to get from the business.
Many start ups today are started on the back of trying to get money as soon as they can get from the business. The owners lack passion and are not willing to pay close attention to details or try to be patient in decision making or even stay committed to a process already established in the business. This might work for some who eventually develop passion for the business but it’s not always the best to start a business without loving what you do or have passion for it. As mentioned earlier, there are risks, big risks involved at times, and these kind of individuals are ready to take as many risks as they can just to get what they want.
Someone with passion will most likely work towards making few losses and even getting back up after a loss. In many cases, individuals who don’t like what they do or people with this kind of mindset are willing to take the first exit or sale stop without even trying to save the business.
2. LACK OF MONEY MANAGEMENT
If a greedy person tries starting a business, there is every chance that the business doesn’t last and ends of closing up after a few months. Some individuals don’t just know how to manage money. Money for business should never be put together with money for personal interests. They are two entirely different topics and they don’t even work hand in hand. The ability to manage money is highly important for start ups as it could affect even the smallest of things in the business.
It is always advisable to have a good money management plan. Draw up strategies as to how business money or money meant for the business and profits generated would never be mixed with money used to buy personal things of interest. Yes, some people always want to enjoy their profits, it’s like the reason or sole aim of starting a business for some anyways, but not everything should be spent. Split the profits into percentages to suit both your needs and that of the business. That way you enjoy and your business doesn’t suffer. In the process of planning, you can add it right from the start too. It helps you keep track and monitor your spending.
I know it’s all easy to say and write in a plan or devise strategies to help manage the money but most importantly after all that, any owner of a business, a start up in this case, should stay disciplined. The plan can be there and money will still be spent badly. It is up to individuals to discipline and control themselves to stay focused, spend wisely and make that sacrifice for the sake of the sustainability of the business.
3. PRESSURE TO MAKE PROFITS OR HASTINESS
After starting up a new business, it is almost normal to feel pressured as you go about things. Some people probably took loans and look towards the success of the business to be able to pay back. They have spent so much into bringing the business into light and the only thing they want as bad is to make the money back as soon as possible. Also, some entrepreneurs run businesses for people or even family. They will need to give progress reports and in order not to disappoint, they make hasty decisions that ultimately brings losses.
Decision making is a process that must be carefully conducted and most of the things that can be identified as problems with failing start ups all comes down to decision making. Even starting the business can be hasty sometimes. Individuals just want to get started so they can start reaping the expected benefits without even having enough information or knowledge about what they’re about to venture into. It’s not always easy but entrepreneurship is like a process that must be carefully followed to have high chances of being successful.
4. POOR MANAGEMENT TEAM
When starting up an enterprise, it is very possible that an entrepreneur will need workers or several other people to work together to achieve the success of the business. When a management team is filled with inexperienced people or people who lack actual skills to fill the role they currently work in, it is most likely that the business doesn’t move forward. Simply put, everyone has to know what they’re doing and possess the neccesary skills to carry out their respective tasks. Also, there are issues relating to leadership that causes failures. Entrepreneurs who plan to employ workers or even when there are no workers, must be able to lead the group and make key decisions as a leader.
5. POOR MARKET DEMANDS FOR PRODUCTS
This happens to a lot of start up businesses. Some products are just not needed. Creating smart ideas is a thing but creating smart ideas that develops products that solves reals problems in the society or have a good market demand is the key. As you expect to make profits, it is advisable to take a look at that point before starting. Will this product solve any problems? Will it provide a suitable alternative to existing products? How well will people need the product? These are some of the many questions entrepreneurs need to ask themselves before starting their businesses.
If there’s one thing all these reasons points to, it’s the fact that adequate research is needed before anything at all is developed. Entrepreneurs need to properly research and be well aware of what they are about to do. Also, equipping one’s self with basic entrepreneurship principles and skills might play a role in the success of the business.