Why do businesses fail in the first few years?
Statistics indicate that 75% of companies fail before they are 3 years old. But Why do businesses fail in the first few years? En Hispanic Entrepreneurs We will try to elucidate what are the causes that generate these failed attempts to help you not to make the same mistakes.
Entrepreneurs hit a lot of bumps along the way and they also mishandle some things. Having a good business idea is not enoughThe important thing is to know how to execute it. The challenge is to make this a viable business that generates profits.
Why do businesses fail in the first few years?
There are many factors that can lead to the brand not prospering. A large number of entrepreneurs blame the failure of their companies on the economic crisis, politics and lack of financing. But experts say the reason is really a lack of planning and knowledge.
Among the reasons why businesses fail we have:
1-Lack of experience
You need to take some time to learn everything you need from the field you chose. Ignorance of the sector can lead you to fail. In this case you can choose to start a business in the area in which you have experience. Another option is to study it thoroughly if you do not handle it before entering this adventure.
2-Not having a business plan
It is essential to have a business plan to start any business. Having one will make you get investors, key partners and enter banking. In addition, you will be able to identify the goals that must be met and define the strategies to achieve them. Must include competitive analysis, income and expense forecasts, budget and marketing plan.
3-Having little capital or managing it poorly
Depending on the type of business you want to start, you will need more or less capital. If your idea is to develop one that needs machinery, raw material, pay for transportation or storage, then you need a good amount.
It is a bad idea to start a company of this size if you do not have enough financial capacity to make it work properly. In case you do not have the money or have little; the best is digital business.
On the other hand, if you have the necessary resources, manage them correctly. Strictly control money until you have solid and fixed income. The fundamental thing is to contemplate the initial investment, the current expenses of the first 2 years and the interest generated by the financing.
4-Inadequate marketing
All the marketing strategies they work when applied to the customer and not the business owner. Think about what your customers will get, about their needs, so you will have the key to sell the product or service.
It is essential to show the client that you are willing to do business and the reasons why they should do them with your brand. It is also a sentence to advertise to the wrong target and not have an online presence.
5-Lack of direction
An important factor for business success is having management and leadership skills. If this figure does not appear, it can cause confusion, which can affect the morale of the workers, lowering productivity. What's more, implies low quality and deterioration of the company's image.
6-Expansion without control
This happens more often than we imagine. When business goes better than expected, many owners decide to expand without adequate control. This leads them directly to failure because they do not analyze the new market, its consumers, and other key factors.
7-No differentiation
Another reason why businesses do not survive is because they are not clear about what differentiates them from the rest. What is your added value for the target audience. Some do not have it and others do not know how to highlight it. This is also solved by having a good business plan.
8-Having an unprofitable business model
The chosen business model does not always work. Therefore, it is advisable to do market research before launching the company. It is good to know if there is a potential customer base, what time and money you will have to invest to bring it to market.
9-Being alone in the business
It has been shown that successful companies are formed with the support of a team that supports them. Having supportive partners makes all the difference in most cases. So this is one of the great challenges that entrepreneurs have. Facing everything that the business implies completely can only discourage you and make you unable to respond.
Now that you know everything that would affect the good development of the business. Evaluate the strengths and weaknesses so that you can implement the necessary corrective measures.