Starting a business is an exhilarating feeling. But it’s shrouded in risks. And the main risk many prospective business owners have to contend with is business failure. Statistically, 60% of startups fail within the first month. It’s so painful to watch what you’ve dedicated a ton of time, money and effort over time go down the drain. That’s why prospective business owners must do a thorough research beforehand to know why businesses fail to take off. This knowledge helps them to discover weaknesses and enable them to build inherent strengths before committing resources. This knowledge will also help them get acquainted with the market they are going to compete in. So if you intend to start a small business, here are the main reasons why businesses fail to take off:
• Most people start a small business and treat it as a hobby
Many would-be entrepreneurs think that just because they love to do something, they can simply convert it into a business. Most of those who start businesses that way fail terribly. It always a good idea to meticulously research your business idea to ascertain that it’s viable before implementing it.
• Failing to plan is a bad way to start a business
Many would-be business owners overlook the crucial step of writing a business plan. It’s one of the gravest mistakes you can do as an entrepreneur. Without a plan, you cannot know where you’re heading to. An online business plan helps you focus on your business goals. A business plan is an effective resource to help you realize those goals. If you’re starting a small business, a 3-page business plan will suffice. If your business is a complex one, you may need a 40+ page business plan. With a business plan, you can figure out the challenges the business might face, and this will help you formulate policies that will address them when they manifest. A business plan is also crucial when you need financing to scale your business, as lenders look at it before extending such loans.
• Excitement is another reason many start a business unsuccessfully
First-time business owners tend to get excited about their initial business ideas, and that makes them overlook the crucial step of ascertaining if the ideas are actually viable. You should not get excited when you find successful business ideas. Instead, that is the time to conduct extensive research to determine if a particular market is right for you or not and the kind of product and services you’ll be able to offer and those that you won’t. Ideally, you should figure out if you have the time and knowledge to implement the idea.
• Many small business ideas fail to take off because of poor financial management
This is one of the main reasons most small businesses fail to take off. It’s prudent to keep in mind that a new business might start to generate impressive profits after one or two years of its inauguration. If you have a sound business plan, this will be easy. But if you don’t, you’ll find yourself burning money, and this could lead your startup into a financial abyss. A business plan will help you plan your finances well. And if the business starts bringing in a lot of profits in the first six months, you may need to review your budget.
• Entrepreneurial burnout is another reason many start a business and fail
Starting your own business will require you to dedicate a lot of time and effort than you would in a 9-5 job. There are highs and lows when starting a new venture. So if you are not conditioned to deal with them, you might not make it as a business owner.
There are many other reasons why small businesses fail to take off, such as poor time management, inefficient marketing, poor record keeping and inefficient sales techniques. As a prospective business owner, you must know all this reasons upfront to reduce the possibilities of business failure.