Simon’s Notes

are you starting a new business? Let me warn you now, the odds are against you making it a success. The good news is that anyone can succeed, stats are just stats, so you have to look at the reasons behind the failures. The main reasons for failure in any start up can be boiled down to one thing, and that is lack of preparation.

Of course it helps a lot if you have some idea of what to prepare for. If you know why most new businesses are bound to end up in misery you might have a better idea of what you need to look out for. I’ll get straight to the point, here’s a list of the top 9 reasons for failure in any venture.

1. The number one reason for business failures is insufficient capital. The golden rule of initial capital is that ‘it’s better to have too much than to have too little’. Sounds like a no-brainer, but you might be surprised at the staggering amount of new business owners that don’t adequately plan for capital shortages. Sort this problem out and you’re on your way.
2. The second biggest reason for failure is kind of related to the first reason, cash flow shortages. One could easily think that a new company might struggle to make a profit in the first few months, but that is often far from the truth. There are a lot of new ventures that make a good profit right from the start, but they still collapse. Why? Negative cash flow. There is no point making a profit on paper if you don’t have money in your hand.
3. Incorrect sales forecast. It’s ok to be positive, but don’t be stupid. It’s better to plan for too little than to hope for too much, that way you will never be disappointed.
4. Inadequate market research. Market research doesn’t have to be a daunting task, the important thing to remember is to poll a large variety of people, don’t just ask your friends what they think. And be sure to check out my old post on market research.
5. If you want to succeed in business then the last thing you want to do is write up a poor business plan. I’m just like the next guy when it comes to writing business plans, I don’t like it, but it must be done. There are a few things that should be included in your plan, a clear statement of your objectives, a timetable, a thorough analysis of your competitors, and a good description of the administrative procedures you intend on using.
6. For a lot of people, deciding on prices might be the funnest part of a new venture, but make sure you do it with a purpose. Instinct tells us that if we go cheap we might beat the competitors, but that is often unwise. Make sure you take everything into account, including overheads. It is sometimes better to offer a better service than a better price.
7. When you first start out you will find that you’re the magic in your business, but don’t be afraid to delegate if the need arises. A lot of new entrepreneurs want to do everything on their own, but if you spread the load you will find it much easier to manage the whole.
8. Lack of good advice. Don’t be afraid to ask for help. Don’t fall into the trap of thinking that you know everything, ignorance can be a powerful tool if you use it properly. Surround yourself with people that know about every aspect of the business you are involved in.
9. Don’t be hasty. Sometimes new business owners will rush to market a new product or service that hasn’t been properly tested or thought through, this can be disastrous for credibility. Make sure you have everything in order first.

Ok that’s it. I hope this helps. Just remember that the key to success is plan, plan, plan, and plan some more. There is no such thing as too much planning, but you don’t want to experience too little.

Simon

If you like this post consider subscribing to my full RSS feed.

Filed under: Money and Finances by Simon Rodrigues