According to Inc Magazine, 33% of new businesses fail their first six months; 75% fail within the first three years and 50% within their first two years of operation.
Here are the reasons why most businesses fail their first year:
1. Business plan
If you’re a business owner, you’ve probably heard of what is called ” a business plan’’ and if you haven’t, then you should be caned (just kidding).
Too many small business owners start up businesses without a strong business plan. They just start up businesses and expect the leads to come. One of the things you need to work on before starting your own franchise is your business plan.
Your business plan will identify your business goals; the amount you’re thinking of investing in the company’s first year of operation and the strategies you will utilize to make the business a success!
2. Lack of goals and objectives
If you lack preparation, you will perform poorly. I don’t know of any successful business today that did not set goals and objectives—in fact, some of these businesses go as far setting goals for themselves and measuring their performances throughout the year.
Many business owners create a business plan with the purpose of obtaining a loan–which is not supposed to be (my opinion). While it’s important to have a business plan, it is also important to have very specific objectives for the first year of operations.
When planning, create goals for your business. You can break these goals or objectives by quarter.
What I mean is, you can bring your objectives by first quarter, second quarter and the fourth quarter (you also need to measure your success).
You could set specific business goals like profit objectives, specific marketing and operational activities.
3. Failure to measure goals
I guess this was the reason why my dad’s first business collapsed its first year.
My Dad was too busy in growing the business and never had the time to access the progress or success of the business; so, his business collapsed the first six months.
It is good to establish business goals and objectives, but you also need to measure your efforts.
Hint: This tip is one of the most important things you need to implement in your business.
Pro tip: Measuring your goals and objectives will tell you whether modifications are required.
4. Failing to track finances
The reason why it seems like most new businesses fail is because many of them took on too much debt. Learn to pay attention to your finances. Don’t spend anyhow.
Pro tip: You need to keep careful records of the cash going in and out (cash flow record).
5. Failing to adapt
Most new businesses like doing things the old way–which is why most of them ‘flop up’ within the first few months. If you keep doing things the old way and you ignore the current changes in business, then you’re sure bound to fail in business.
Pro tip: You need to recognize opportunities and learn to develop new areas of expertise.
6. Poor marketing plan
You can’t get people to do business with you if they don’t know you exist.
It is a different thing to start a business and an entire different thing to know how to promote it.
It doesn’t cost a fortune to advertise and promote your business through online marketing, email, local search, media, public speaking, referrals, cold calls, sales letters, trade shows, workshops, seminars and direct networking.
Pro tip: Nothing is too expensive for the growth of your business. Invest wisely and you will earn the rewards in the nearest future.
‘’Be a viral marketer and your customers will locate you’’.
7. Underestimating the competition
You can’t expect your customers to be loyal to you– you need to earn their loyalty.
Watch your competitors, study their marketing strategy and refine yours to stay ahead of them.
You can do this by lowering your prices, offering huge customer discounts, giving freebies, extending warranties, improving product quality and introducing new products.
Pro tip: Pay close attention to your customers– if you don’t take care of them, your competitors will.
Do you want that?
8. Lack of funds
Many businesses fail their first few months because the CEO or owner runs out of cash.
Before starting up your business, you ought to know that you’ll need a start-up capital to sustain the business for the first few months.
Running out of cash is because of poor planning.
A properly written or developed business plan will tell you the exact amount you require for expenditures until the business starts generating cash for itself ( I mean until cash flow is positive).
A smart business owner should develop cash flow or income statements for the first two to three years of operation– that will tell whether you have sufficient funds to run the business until it becomes stable (profitable).
Are you a business owner? Did you succeed in business within your first year of operation? Share your experience with us.
Let me know what you think in the comment section.
Read more: Are Your Proposals Losing New Business?