Why do businesses fail? Here are my top 10 reasons.
I have therefore compiled a list of the top 10 reasons start up businesses fail.
Reason 1: Too many partners
When starting a business, we often find it tempting to involve more people despite the fact that it is not necessary. The amount of partners we start with can help us but hurt us more than we think. As discussed previously, our entourage makes our lives better or destroys us more than we expect. Please select your partners carefully and ensure you all bring the same level of commitment, resources and knowledge to the table and that you all share the vision from day 1.
Reason 2: Under estimating financial needs
Financial Freedom has a cost, you have to start somewhere and spend some money on your idea, we often miscalculate the cost of being in business, we neglect to save enough capital and make our self believe that our idea is full proof and will make money right away. WRONG!!!! Please remember to save at least 1 year worth of resources, as you will need it.
Reason 3: Cost projections are way too low
We often predict the cost of our business but do so without actually checking all angles or stating to build our product. When we are ready to begin, we realize the cost to be higher to produce and market our product and therefore our pricing to be wrong, either we loose clients at a higher price or we loose our profit margin as we make less per product.
Reason 4: Spending too much money
Image is important but its not everything, its more important to focus your capital on your products and services rather than hire too many people, buy fancy furniture and have a high overhead. Start small, dream big and upgrade as it makes sense, not too early.
Reason 5: Hiring the wrong people
It is easy to hire the wrong people, we often look at our friends or family first despite the fact that we know they bring no real value to our business, it is simply easier to keep it in-house, but is often wrong. Hire people for their skills, not their ties to you.
Reason 6: Losing focus of the big picture
The big picture is often forgotten as we micro manage our business, and forget the vision of what we wanted to create to begin with. We don’t manage the business as a whole. We find a section of our business that amuses us and focus our entire time on it, instead of moving the business forward.
Reason 7: Seeking approval, not the truth
Criticism is necessary and welcomed in a good business, in other words you should want honest feedback from your critics, good or bad and you should want to know what your customers don’t like. More often that others we seek approval rather than criticism and find ourselves lost in the illusion that we have a great product and never redefine our product or service.
Reason 8: Too complicated
Dont complicate your business vision, focus on what matters and keep your concept simple, do no stray away from your vision. If you simplify it, you will make it more desirable and targeted to an audience.
Reason 9: Accepting failure is not right
Nothing comes easy and nothing succeeds in one try, so not giving up and being flexible in improving, changing or redefining a failed attempt will help you succeed. Never give up, stay positive, think strategically and do no accept failure. Failing is only the first phase of winning.
Reason 10: Lacking an exit strategy
Sometimes you have to admit to yourself that an idea won’t work and need to have an exit strategy. The idea of business is to make money and if you don’t then you need to turn your business around or start over. Knowing the benchmarks and the barriers you must breach can help determine stay or leave. When its time to leave, simply have a plan.
These are my top ten and remember, your business is only what you make it to be.