Common Reasons that Startups Fail

Starting your own business may seem like a dream come true. You get to be your own boss, and you have the opportunity to become financially independent. However, you also take on a lot of risk. If business is bad, you may be looking at no money and a failed business.

Many startup businesses fail not long after they begin. In order to avoid becoming one of the statistics, it is important that you learn about some of the common reasons that startups fail so that you know what mistakes not to make.

Here are some of the common reasons that startups fail:

No Market for the Product or Service

In order to make money, you have to be able to sell a product or service, and you have to be able to sell a lot of it. That is a deceptively simple concept since there are many factors that contribute to whether or not you will be able to sell your product or service.

One of the top reasons that many startups fail is that there is no market for their product or service. In other words, these business owners did not take the time to research and find out if there would be a customer who wants to buy what they are selling. Maybe your levitating litter box is a really cool gadget, but your target customers may think it is overpriced, or they may not want to deal with tackling a litter pan every time it needs to be cleaned. Make sure you do your research before you decide to launch your product or service.

Not Enough Market Research

Extensive market research is essential to find out if a startup idea has any potential for success. However, many startups fail because they do not take the time to conduct this research, or they are not thorough in their study. In addition to finding out what customers may be interested in the product or service, market research also studies how much demand there might be for it and what competition is already in the market. You may find that you have a great idea with a lot of demand but that the market is already saturated and new businesses have little chance of succeeding.

Companies are available that can provide market research for startups, though their services are not cheap. However, the cost is an investment that can ensure the success of your business for many years to come.

Small or Unscalable Idea

Typically, niche products offer a great opportunity for startups since they meet a specific need and usually have less competition in the marketplace. However, niche products can also be the kiss of death for a startup since they are typically not scalable. What this means is that they only appeal to a small section of the population, and there is no opportunity to sell them on a large scale, thereby increasing profits and increasing the odds of success for raising venture capital.

Other products that may not be scalable include those that are labor- or material-intensive, such as handmade goods or custom items. It may simply take too long to product the items or the materials may be too costly in order to make a lot of the items or to make a large profit.

Not Enough Cash on Hand

Even startups with low overhead need to have a lot of cash on hand to get them through the first few years. The money covers salaries, product development, marketing and other expenses while you build your customer base and start generating profits. Many startups fail because they don’t raise enough venture capital to get them through this time, and they end up running out of money long before they start turning that profit or recuperating some of their investment expenses. When they run out of money, it becomes difficult if not impossible to convince venture capitalists to invest more, causing them to close their doors.

Not Enough Marketing

Even if you have a fantastic product or service and you have done all the research showing you that there are a lot of customers out there who want to buy what you have to offer and there isn’t a lot of competition already providing it, if you aren’t marketing yourself correctly, your customers will never know about your brand or your products, and you won’t make the money you need to succeed. Marketing is essential to your success, but many startups fail because they don’t invest the money they need in marketing, or they waste money on the wrong marketing strategies.

Many startups try to conduct their own marketing to save a few bucks. However, if you are not a trained marketing professional, this is a mistake. You need to hire a professional who can get you the results you need to ensure the long-term success of your business.

Poor Management

Not everyone can be an effective leader, and you need a strong leader in order to make your business a success. Without the right manager, you won’t find the right employees, to inspire them to do their best work or to make innovative decisions for your business, to effectively manage the finances, to ensure customer satisfaction and to build brand loyalty.

Again, just like with your marketing, if you are not a professional, do not put yourself in the role of manager. Having a good business idea doesn’t make you a good business leader. If you don’t have the management skills needed to make your business a success, be honest with yourself and hire a professional.

Lack of Flexibility

Even with the best market research and the most comprehensive business plan, you can’t prepare for every eventuality. You may find that a change in the market requires you to change the way you do business or the way you reach your customers. For example, real estate agents were not able to do business the same way after the housing market crash of the 2000s. Those who were able to adapt and to create a new business model were able to get through that hard time. Similarly, you have to remain flexible and be able to change your strategies as needed to make your business a success.

When it comes to business, there is never any guarantee. However, learning about what you can do to make your business a success can improve your chances of establishing your business for the long term.

5 Reasons You Need a Business Plan

5 Reasons You Need a Business Plan

A business plan is important for any business, even one that is a few decades old. It is like a roadmap that tells you where you are going and how to get there. It also helps to keep you on track. Business plans can be reviewed every year to make sure you are staying on the right track. Here are five reasons you need a business plan.

  1. It will get you financial backing. You can use your business plan to get investors interested in funding your business. You can also use it to get a loan for your business. The more solid your business chance is, the better your chance of getting a loan.
  2. You’ll be able to make major decisions. You’ll know whether or not you need to hire on new employees, managers or consultants.
  3. You will be able to delegate your objectives to your employees. You will be able to tell them exactly what your business is about, and how they play a role in accomplishing that objective.
  4. You will be able to manage your finances. You will know when you need to rent a space, rent a machine or make a new purchase.
  5. You’ll be able to sell your business. If you decide to sell your business, the buyer will want to see what you’ve accomplished and how you accomplished it. The business plan will tell them whether what you have is worth buying.

4 Things You Need to Know About Your Online Reputation

4 Things You Need to Know About Your Online Reputation

Online reputations are important. Nearly 100% of consumers that have been polled say that they use online reviews to determine if they are going to buy from a company. If you have negative reviews about your company, don’t panic. Here are some things you need to know about your online reputation.

  1. You can’t please everyone. No company has a 100% perfect track record of pleasing its consumers. Someone is always going to walk away unsatisfied. Just do the best that you can satisfying the needs of your consumers. If you’ve gone above and beyond and they still aren’t satisfied, it’s best that you both move on.
  2. Don’t panic. Panicking leads to making decisions that you will later regret. If someone alerts you to a negative review, take a deep breath, remain calm, and thank them.
  3. Be cautious. Sometimes negative reviews are planted by competitors or people who want to extort you for money. They will promise they can “remove” the negative items in question if you pay them a fee. In reality, no one can remove a negative item off of the internet – unless they planted it there themselves.
  4. If the negative reviews are damaging your business, making it difficult to make money, you can seek legal help. Legal counsel will be able to tell you how to proceed, and if there is anything that you can do to ensure that this doesn’t happen to you again.

How to Write an Effective Business Plan

How to Write an Effective Business Plan

Before any business dream becomes a reality, a plan has to be written. A business plan serves as the blueprint for a business. It is the layout of your business and it allows you to visualize your plan and determine exactly what you need to do in order to make your plan a reality.

Every effective business plan should contain the following:

 

Components of a Business Plan

  • A list of goals: Your business plan should clearly identify your goals. What is it that you want to achieve? What do you hope other people will gain from your business?
  • A list of objectives: Your plan should also identify your objectives. What do you want to provide people with? Do you plan on offering products or services? Why are your products and services beneficial?
  • The location: Where will your business be located? Will you operate it online, or will you have a storefront? If it will be located in an actual building, where is a good location that will lead to success?
  • Marketing needs: Of course, every business needs to have a marketing plan. Marketing helps to spread the word about your business, establishes your brand and helps to drive success. What type of marketing tactics do you plan on using?
  • The finances: The old saying goes, “You need to spend money to make money”. Before you can start making money, you are going to have to shell some out. How much do you project your startup budget will be? How do you plan on acquiring those funds?

How to Set a Marketing Budget

How to Set a Marketing Budget

You know that marketing is an invaluable part of your business, but in order to effectively market, you need to invest money. You know what they say: You have to spend money to make money. As a start up, it can be difficult to determine how much you need to set aside for your marketing budget. So, how do you go about determining how much you will need? Read on to find out.

 

 

Setting a Budget

  • Consider your marketing plans. What types of marketing strategies do you plan on utilizing? The types of strategies you use will indicate how much you need to spend. For example, print ads may cost more than social media marketing.
  • Look at the competition. Use your competition to get an idea of how much you should spend. Try researching to find out how much established businesses in your niche have spent on their marketing efforts. This will give you an idea of how much to put toward your efforts.
  • Winging it. There is another option that a lot of startup businesses rely on, and that is just winging it. These businesses find out how much a particular marketing effort will cost and make the investment as the move forward. It may sound a little haphazard and unreliable; however, as a startup, there are a lot of expenses that you simply can’t find out about until you actually spend the money. You can invest more or less as you progress.

How to Tell if You Have a Good Business Idea

How to Tell if You Have a Good Business IdeaStarting a business can be scary, especially if you’re unsure of whether or not it will turn out to be profitable or not. There are a few ways to tell if you have a business idea that will work or fail. Of course, there’s never really a sure way, but doing your due diligence never hurts!

What Makes an Idea Good for Business

Research can help you determine if your business idea is good. By conducting research about the potential market for your product or service, you’ll get a more general picture. Knowing your competition is also important, so that you know what has to be done to fair in that particular niche. Make sure that your target customers will be able to afford your product or service.

The financial aspects of your business idea are another important matter. You’ll need to research how much demand your competitors are getting, so you can have an idea of how much production costs will be. Knowing a prediction of your margins and the amount of repeat customers you’re likely to get.

Your business idea shouldn’t be a one-hit-wonder. Make sure that your idea has room for growth and can last for years to come. Try to find out what your market would look like in one to five years from now.

Your business idea doesn’t have to be 100% unique, but it should be unique in its own right. Try to put a spin on your business that will set it apart from competitors. This will give you a competitive edge, making your business idea more plausible.

How to Avoid Burnout as an Entrepreneur

How to Avoid Burnout as an Entrepreneur

An entrepreneur is a 24/7 gig. Anyone who has been in the position of a small business owner knows it’s tough to balance it all. Burnout is one of the number one complaints of start-up owners and entrepreneurs who want to do it all. Work as personal life begin to meld as networking and other events allow you to grow your brand efforts. You can avoid burnout, but you must be conscious going into each day to make sure your work life isn’t your only life. [Read more...]

3 Essential Plans for a New Business

Business Planning with Plan-Too

Any new business needs lots of planning. Whether it’s your money or an investor’s you want to get the most bang for your buck and ensure you do not lose sight of the bottomline. Where some entrepreneurs go wrong is they plan, but not necessarily in the right places. These are the three essential plans for any new business.

  • Financial plan.
  • Business plan.
  • Marketing plan.

Your financial plan is vital to your business. You must keep tabs on it at all times. There’s no reason to skimp in this department because it can ultimately make or break your business. You do not need a CPA or financial planner for this. You can be diligent and break down the numbers with the help of Excel.

The goal is to be aware of what’s going out and what’s coming in at all times. Also analyze where the budget can be reduced as the business develops and what areas could use more funds in order to grow your idea.

A business plan isn’t the same as the financial plan, but the two do work together. The business plan should break down your purpose as a business, your target consumer, how money will be allocated to bring the idea to life and the time frame in which you plan on doing all of this. Your marketing plan is also essential. It breaks down how you plan on presenting yourself to the public and what timeline you want to aim for in terms of an official launch.

Create a Mobile Office for Your Small Business

Create a Mobile Office for Your Small Business

The new office must be mobile. As an entrepreneur, you’re on the go around the clock and this means you need access to your office and files at any moment. There are many tools that allow technology to make your mobile office a viable component of your small business.

  • Have the right tools to work from home.
  • Have a system set-up for in-person interviews or meetings.

You want to be sure you have the right tools to work from home. There are numerous platforms for running your small business from home. These platforms allow employees to check assignments, deadlines, objectives and goals from anywhere with an Internet connection. Constant contact should be normal for a mobile office and you can hold meetings via Skype or Google+ Hangouts.

You can use applications like Dropbox which store all of your files on the web. No matter where you are, you can log into your account and access files or projects employees have uploaded, even from your phone or tablet. This gives you the ability to fit work when you’re on vacation, catching up with family or watching the big game. While the best entrepreneurs are efficient with their time, there may be occasions when you need access to your office during downtime. It’s best to be prepared for that.

Occasionally you may need an in-person interview or meeting. Have a system ready to go for this purpose. It can be a start-up lab or day rental office space. This gives you a means to get to know employees and potential hires in-person. If you meet with clients, a concrete office space is beneficial, even if it’s yours only for a few hours.

Common Burnout Experiences For Entrepreneurs

Common Burnout Experiences For Entrepreneurs

There are many reasons entrepreneurs and new business owners experience burnout. It’s very common whether you are new to the game or a veteran of start-ups. There’s no reason that burnout must determine your productivity. The key is to know when burnout is about to strike, so you can take a step back and move forward in a productive manner.

  • Choose your 100% days.
  • Have realistic expectations.

Choose the days that you should be 100%. This can’t be every single day. Be honest with yourself about what your goals are and how energetic and willing you feel to give your 100%. When you psych yourself up and get in this mindset it becomes easier to tackle your objectives. Focus on your goals these days and make sure those around you know what you’re trying to achieve so you can dedicate these days without interruption.

Have realistic expectations of yourself. Those 100% days won’t be the norm. There will be plenty of days when you need to recharge or take a step back in order to work at your full productivity the majority of the time. Be honest with yourself when you’re tired, exhausted or simply aren’t in the mindset to get serious work done. When you allow yourself these breaks, you are more likely to have productive work sessions when it’s time to clock in.

Because being an entrepreneur is a 24/7 gig, it’s hard to determine when it’s quitting time. Do your best to work regular work hours to prevent burnout.