Top Reasons For Startup Failure, And How To Avoid Them
So, you have a business idea that has become a burning desire. You must find a way to get it off the ground; you’re motivated, excited at the prospect of being your own boss, and you believe you have an idea that has the potential to net millions. If passion and desire were enough, there would be many more successful entrepreneurs running their own businesses. The cold hard reality is, for every business owner that requests venture capital, only two secure funding. Of those two that are able to get off the ground in the first year, only one will be in business five years from now.
How on earth are you supposed to navigate those odds?
Take a deep breath; don’t give up on your dream just yet. Becoming a great entrepreneur is a process filled with both successes and challenges; learning to identify and minimize potential risks is key to being able to stay afloat when times get tough. Here are the most common reasons that startup businesses fail, and more importantly, here is what you can do to avoid these pitfalls:
Mistake #1--Failing to identify customer pain. We business owners are so egotistical sometimes; we believe that our idea for a product or service is so brilliantly innovative that the only thing we need to do is develop that product, and our customers will magically appear. Savvy consumers are naturally skeptical of products and services that they have not heard of before, so they steer clear until there is evidence that you can stand the test of time. How do you get them to stay with you once they’ve been exposed to your products?
Identify their pain. The more you can clarify what their pain point is---the problem that they need solved---the more you can present yourself as the ONLY solution to their issue. Presenting a convincing argument as to why you are the best solution is key to getting them to follow you and ONLY you.
Mistake #2--Failing to listen to feedback on early prototypes. One of the worst mistakes a new startup owner can make is to fail to listen to feedback that he is getting from customers. No product is flawless from the beginning and getting critical input on how something is developed will make it more appealing to customers. Toughen up that skin, commit to hearing a few critical comments as you perfect your product, and take each piece of information as an opportunity to improve both your relationships and that which you give to your clients.
Mistake #3--Failing to communicate your passion for your product. Tony Robbins has a following for a reason; he brings passion and excitement to even the smallest encounter with others and experiencing his zest for life is contagious. No one wants to maintain a relationship with Droopy Dog; you get the opposite effect. If you have a passion for your product and a mission to fulfill through your company, communicate that to your customers! Tell them why you think your work is so important, and as your excitement flows to and through your communication, you’ll inspire others to follow you.
Mistake #4--Failing to develop entrepreneurial skills. Think again, dear entrepreneur; your job is more than hiring talent and signing checks. If you are not willing to do some of the grunt work to get your company off the ground, then it is likely you will fail within your first year of business. Learning some of the required skills that you expect your staff to have is smart business; should you find yourself short on people, you can still run the day to day operations as you usually would. Being intimately involved in as many aspects of your business as you can will ensure that little will escape your attention, and you’ll be able to make more informed decisions that will positively impact your business.
Mistake #5--Failure to keep a tight rein on your cash. If you are not good at managing your finances, you have two options: 1) Become good at controlling your money, or 2) Hire someone else to take care of this aspect of the business for you. Surround yourself with smart people who can give you sound advice on what to spend money on, and when to save for bigger expenditures. Knowledge is power; study the basics of financial management and planning, and this will pay for itself in dividends as you see more black than red.
Mistake #6--Failure to raise capital. Regardless of how good you are at money management, there are bound to be times when you need a little assistance to make some of your bigger visions come to pass. When crafting proposals for potential investors, realize that rejection is a part of the process. Let the powerful law of averages go to work for you; the more you put yourself out there, the more likely it is that you will find someone to invest in your business that shares the same excitement for what you are building. Refine your pitch, refuse to quit, and believe in what you are doing. The right investor is just around the corner.
Mistake #7--Failing to provide solid leadership. If you don’t develop a knack for hiring the brightest and best, and then training them to produce the quality that you expect from your company and your products, it’s only a matter of time before your doors close. Invest in yourself and your leadership capabilities first, then pass these along to others as you build relationships and increase buy-in, knowing that you are all working together toward a common goal of success and prosperity.
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