Start-up businesses: How to beat the odds and avoid ‘failure’ Entrepreneurism is currently buoyant in the UK with almost 90,000 new businesses started in Q1. However, there are scary headline statistics on failure rates facing our budding Entrepreneurs, typically stating that more than half will fail within 3 years and as low as 10% surviving long-term.
One might question the classifications but guarding against common issues, before ‘rolling the dice’ on starting a new business or side-hustle still makes logical sense. So, what are the common reasons why Start-ups fail?
Establishing and running a successful business typically requires expertise in a diverse range of subject matter. Small and Medium-sized Enterprises (SME’s) do not usually have the luxury of a board of Directors/Trustees, so typically this requires a sole Director to be multi-disciplined. Having a great idea for a business or being an expert at the business operations is not always enough to avoid the multitude of potential pitfalls, which we will now explore further:
Lack of Planning
There is a lot of truth in the adage ‘Fail to Plan, Plan to Fail’. Whilst it might not be always necessary to complete a comprehensive business plan for an agile start-up business, it is always important to think things through, test assumptions and conduct appropriate planning and research.
Lack of Product/Service Demand
It sounds obvious but you need enough customers to buy your product or service. It is extremely easy to fall into the trap of assuming this will be the case when you are in your own bubble, but reality can be quite different. Good market research will make your key assumptions more dependable and support your growth plans.
Lack of Funding
Raising funding for start-up businesses can be challenging and time-consuming, so you need to weigh up your options carefully. You will need to consider both the initial investment and the working capital needed, as well as your own personal situation.
Poor Financial Management
It is easy to under-estimate costs and over-estimate revenue or not allow sufficient time for the sales cycle. These can all cause start-ups to run out of cash much quicker than expected. Instead, good sales forecasting, staff planning, pricing strategy and credit control will help you to manage your business properly and maximise returns.
Poor Leadership
A business is far less likely to be successful if everyone in it is pulling in different directions. The Leader of the business is there to help set which way is ‘North’, to decide when to pivot and to help inspire and motivate others in pursuance of the goals and key objectives. An engaged, energised, and motivated workforce is more productive, determined, and resilient.
Knowledge & Skill Gaps
Running a business can be extremely demanding, requiring skill, knowledge, and expertise in many disciplines. Nobody is an expert at everything so you will need a team around you to bridge gaps. This can be done through direct employment or outsourcing. Leadership and Management skills gaps can be addressed through direct training and by using a Business Coach/Mentor.
People
People are one of the most valuable ‘assets’ of any business, so hiring the wrong people, building dysfunctional teams, or not training, developing, and retaining good employees will have a negative effect on your business. The right policies, procedures, strategies, and support can turn this business risk into a competitive edge.
Ineffective Sales & Marketing
Sales is the lifeblood of the business; without good sales and marketing you might simply remain a ‘well-kept secret’. You can be using the right channels but without the right message or be missing something in your marketing chain.
Poor Productivity
Poor productivity can come in many guises, many of which can be hidden, including poor time management, delegation, processes, scrap, rework, over-production, excess inventory, and down-time. Optimising your operations is a science but without the right systems, maintenance, and tools you risk creating ‘waste’ that will eat away at your profits and stifle investment.
Legal & Regulatory
Failing to comply with laws and regulations that apply to your business and industry sector can have critical consequences. This includes areas such as Health & Safety, Environment, HR, Data Protection, Licenses and Director duties.
External Issues
External and unexpected issues have been seen a lot in recent times with events such as wars, trade wars, Brexit, and the Covid-19 crisis. These can be difficult to predict but that is not always the case such as with most recessions. You can create a Business Continuity Plan which considers key risks and action that you can take to protect against them. Good examples are IT issues and incapacity of key workers or Directors.
Conclusion
A lot can go wrong when you start a new business and not all of it will feel within your control such as recent tax rises. However, if you have belief, determination and support you can overcome almost any adversity. Appropriate coaching or mentoring to fill gaps, provide accountability, a sounding board and fresh perspectives is also valuable.
At Empiric Partners we draw upon real-world experience to help overcome challenges and bring game-changing insights and opportunities through our range of business support packages, profit forecasting tools, start-up funding support, training programmes and expert advice. If you would like to stack the odds in your favour, visit www.empiricpartners.com to find out more or get in touch for an initial chat.