When you start a new business you are full of excitement and only positive thoughts. The last thing you want to focus on is failure. However if you address the most common reasons for failure up front you will be much less likely to fall victim to them yourself.
Here are the 7 reasons why most startups will fail and tips for avoiding them
1. Lack of planning
It is critical for all businesses to have a strategic plan. The “one page strategic plan“ can be drafted in a few hours.
The plan should Include:
- SWOT analysis of the business you are establishing
- Proposed Organisation structure for your business
- Examine the key areas of the business,finance,administration,staffing etc
- Establish your yearly/quarterly goals
- Define strategies for achieving these goals
2. Poor Management
Most new business owners lack the relevant management experience to run their business. They are good at what they do, be it a plumber or electrician, but aren’t trained in the financial or administration side of the business. To overcome this shortfall, they should surround themselves with a good team including an accountant, solicitor and mentor.
Learning and educating yourself in these areas is important.
3. Insufficient Capital
Before starting a business you or an accountant should prepare a cash flow budget for the year. Many business owners underestimate how much money is needed to fund the business. They also have an unrealistic expectation of incoming sales and revenue. Be conservative.
4. Starting a business for the Wrong Reasons
If the main reasons you are contemplating starting a business are to make more money, not be answerable to anyone or have more time with the family, then you should probably think again.
To be successful you:
- Have a passion and love for what you are doing
- Are physically fit and have the stamina to withstand pressure and challenges
- Have drive, determination, and a positive attitude
- Have leadership qualities
5. Grow too quickly
Over expansion is a leading cause of business failure. A focus on slow and steady growth is optimum. Many a bankruptcy/liquidation has been caused by expanding too rapidly. Careful consideration, professional advice and research should be undertaken before moving down this path too quickly.
Many business owners think the work will just come to them but most industries are very competitive. At the very least, every business should have a well designed website that enables users to easily find their business and how to avail themselves of their product and services. A social media marketing strategy is also highly recommended.
Ultimately the success of the business will come down to you, the business owner. Your willingness to acquire new knowledge will determine your fate.
© Fitzpatrick Group 2017
Rick Fitzpatrick – Director
Rick is a Certified Practicing Accountant (CPA) and Qualified Business Coach. Rick has more than 30 years experience in accounting and business. Click here to view more about Rick