Starting your own business is an exciting time. You’ve got a great idea for a business and are eager to get started. Planning ahead is crucial to giving your business the best chances for success. By planning ahead, you anticipate challenges and develop ways to address them successfully, so they don’t upend your start-up.
Here are three reasons why start-ups fail and ways that with planning you can help avoid them.
Lack of Market Demand
You need to have a market to make money and profit, meaning that there needs to be a substantial amount of people who need your product or service and are willing to pay money for it. Without having demand, you won’t be able to cover your costs or earn enough to survive. Before you spend your energy, time and money starting a business, make sure there’s a need for it.
Some ways you can identify need:
Look for competition: If other businesses are not offering the same service, there’s a chance there’s no market for it. Initially, it might not stop you from wanting to move forward, but if competitors aren’t offering your product or service or anything close to it, you’ll have to do much more to prove that there’s a market.
Conduct market research: The research will help determine whether people in your target market agree with you that there is a need for your offering and that they would pay for it.
Lack of Expertise
Entrepreneurs might be tempted to hire or partner with their family or friends, people they genuinely like and would work well with. That doesn’t always translate to success. However, to have a successfully running business, you need to hire people who have knowledge and expertise in the area of your business, and you need people whose skills complement your own.
You are going to need people who are going to discuss your choices and decisions with you. Make sure that there’s a business case to be made for each decision you make. Having someone with a different perspective and opinion will provide a critical way to double-check whether your decisions will be the best in the long run or whether there are other options available.
Make sure you hire people with balanced capabilities. You will likely need a financial expert to help you with bookkeeping; you will possibly need a manager to oversee team members. If your business is going to rely on software, you may need to look into hiring a technical expert to ensure your technology will run smoothly. The same goes for if you open a restaurant, you should look at hiring individuals who already have experience working in a restaurant; ideally, a few people in managerial roles will have relevant experience.
There is nothing wrong with hiring people you like, but make sure your team also has the skills to manage your business successfully.
Lack of Finances
Money is vital as you need it to produce your goods and services and pay all team members. You need to make sure that you forecast your development cycle, how much inventory moves through your supply chain and variations in seasonal income. Therefore, it is not enough to know how much money you need on a month-to-month basis.
In the first few months, if your business isn’t earning as much as you initially predicted, you will need to quickly plan how to bring more money in to save your business.
To improve cash flow and diversify your options, consider using alternative sources. Don’t be too reliant on yourself, family and friends; consider business incubators, angel investors, or business grants.
Final Thoughts
By planning ahead, ensuring there’s a market for your offerings, being strategic with who you hire, and considering alternative funding sources, you can significantly improve your odds of success.
If you have any questions, feel free to Join the conversation…