Failure among startups is unfortunately extremely common. According to the Small Business Administration, over 50% of startup businesses fail in the first five years of operation. Some of these failures are due to bad luck or a sour economy, but others happen because people aren’t aware of where they are going wrong and continually fail to look at their own shortcomings.
Before you invest a lot of time, money and resources into entrepreneurship, familiarize yourself with this list of common reasons that businesses fail. Understanding these pitfalls will help you know what to avoid and how to fix small issues before they become bigger problems.
1. Lack of experience.
Have you ever managed teams or delegated tasks? Do you have experience in your industry? A smooth and successful operation requires thorough knowledge of the industry, business experience and management skills. Many first-time owners lack leadership skills and the ability to communicate their ideas to others. Good ideas need good execution, knowledge of the market and a leader who can effectively share the company vision with their employees. Leaders should not only be able to communicate, but they should also inspire employees while maintaining their respect.
How to Prevent:
Gain the necessary skills through training and personal development classes—ideally before you start your business. Leadership skills, client relations, basic business tactics and management skills can all be gained through the right research and practice. Also consider reading books by influential CEOs and meeting with other business leaders to ask for advice.
2. No clear and formulated plan or mission.
While this may seem simple, it is vital to outline exactly what your vision is for your business and how you will reach your goals. What product or service will you provide? What are your objectives, and how will attain them? Customers also need to be able to clearly understand who you are, what you do and why you are valuable to them. You must be concise and compelling. Can’t explain your business in a minute? You may need to work on your business plan.