The Top 5 Reasons That Start-Ups Fail

Fri, Apr 6, 2012


So, you’re about to take the plunge. You’re ready to start your own business. Some people may find that to be a bit risky, but there are actually a lot of business consultants out there who believe that if there has been one major benefit with the recession and the low employment rate, it’s that people are being daring enough to pursue their own dreams; to not be someone’s “employee”, but to step out and become their own employer.

However, in order to be truly successful, it helps to be able to know about some of the obstacles that are before you because according to the U.S. Small Business Administration, as many as 50% of new start-ups fail within the first five years.

Do you want to know some of the reasons why? Keep reading.

Not having enough capital. When it comes to starting a business, you don’t need enough money to simply open the company’s doors; you also need enough to keep it afloat, no matter what unforeseen expenses come your way. The reality is that when it comes to a lot of new companies, the first couple of years rarely turn a noticeable profit, if they even break even, and so if you start off not having enough money to cover you for at least the first 12 months, you can find yourself digging a deep hole that may be extremely difficult to get out of. Good insurance, a business account (with money saved in it) and even some capital investors are all wise recommendations.

Not being excellent at what you do. While you have the freedom of being the boss, it also means that you really have no one else to blame if things don’t work out as planned. Therefore, you have to work harder than you ever would if you were employed by someone else. So, whatever it is that you decide to do, make sure it’s something that you don’t simply know about, but do extremely well. Not only because you’ll be spending long hours doing it, but because chances are, there’s someone out there who has already implemented a plan similar to yours and you’ll need to be able to be a strong competitor.

Not using good marketing skills. How can people utilize your services when they don’t even know that you exist? Unfortunately, there are some people that are more focused on what kind of office furniture they should have or what kind of sign should be in front of the building, that they didn’t even put a marketing plan in place to let people know how to get to the furniture…or the sign. When it comes to advertising, technology really makes it easier on start-up companies because there are so many ways to market your business without spending a dime. Start up a Facebook fan page. Get signed up on LinkedIn. Create a blog or website (Blogspot and WordPress are great places to start). Encourage people to bookmark your site with Digg and Magnolia. Send out monthly newsletters via Constant Contact. The options that are available to you are literally endless.

Not having exceptional customer service. These days, it seems like the art of excellent customer service is becoming an endangered species. Some people are curt in serving their customers. Others are not knowledgeable enough to properly assist them with their needs. Still, there are more who almost make you feel like you’re inconveniencing them even though it’s their job to help you. There are a lot of successful businesses that have gained a reputation, not so much for what they do, but how they treat their customers while they’re there. A boutique that has sparkling cider and handwritten thank-you notes will gain a reputation for having repeat clientele much quicker than a high-end department store with staff that acts like you barely exist.

Not growing with the demand. Sometimes, in order to save some extra bucks, you will try and do all of the work yourself rather than hiring some extra staff (or at least getting a couple of interns). Not having to use any more of the inexpensive checks in your banking plan to pay for employees may seem like the best thing to do, but if you’re losing customers because you can’t take all of the calls or fill all of the orders, then you’re losing money anyway. You started the business so that it would grow, remember? Make sure you’re able to keep up with all of its demands.

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