Starting a small business requires lots of discipline and even so, many of them fail. As a business owner, you should be aware of the most common reasons for failure. According to the U.S. Small Business Administration, 20% of small businesses fail in their first year. Within five years about 50% fail, and just 33% make it past a decade.
There are various reasons for failure, the main ones are financing issues, lack of demand for the product or service, and a bad marketing plan. Understanding these common issues can give a new business an edge over its competition.
People don’t want the product or service
The first reason is that there is simply no demand for the product or service. According to CB Insights, this is the reason why about 42% of new businesses fail. Conducting research into your customer base is extremely important, especially for a new business just starting. If you just assume your product has adequate demand, you run the risk of failing. When proper research into the industry is not conducted you may not realize that your potential customers do not want what you are selling. Your business model should be based on what your customers find value in.
Bad marketing plan
Marketing is especially important to new businesses. If marketing campaigns are not budgeted appropriately, it can make the business struggle to gather enough money. If projections of conversion ratios and reach are not estimated correctly, it can make the business unable to plan appropriately. This can ultimately lead to cash flow problems. If customers are not able to see your services, this can cause competitors to acquire your potential customers.
You should read: How to keep your customers happy in inflationary times
Financing issues
One of the main reasons new businesses fail is due to capital issues. There are many expenses associated with running a small business such as payroll and overhead expenses. If the sales being generated are not enough to keep the business alive it will eventually start to run out of cash. We have all heard the saying that cash is king, and this is especially true when it comes to small businesses. Even businesses that have steady customers can run into problems if expenses outweigh the revenues. There are many options to secure funding for a small business, but this can be risky if the business fails. If a business does not have good credit, or need fast funding, Merchant Cash Advances are one of the best options available because it offers the highest approval rates of Small business funding.
Getting a small business off the ground is not easy in the beginning, and of course, there are tons of other things to consider but, if you do the proper research, create your business plan and keep an eye on these aspects, it may get a little easier to succeed.
Which other aspect do you think we should write about in the next post?👇