The dream is dead. Your business isn’t the blockbuster success that you thought it would be, and the time has come to close the curtains on the venture.
Not to fear, though; success is built on failure, and failure offers a unique opportunity – the chance to learn from your mistakes so that you don’t make them again.
After all, many of the greatest entrepreneurs have experienced failure time and time again.
There are 101 ways in which a business can be run in to the ground; these mistakes have been made before and repeated ad infinitum.
By knowing what the mistakes and pitfalls are, you’ll know how to avoid them and to prevent your start-up from going down the same unfortunate route – and hopefully avoid having to live through the nightmarish first two sentences of this piece.
CB Insights, a US data analysis firm, has carried out a huge and in-depth review into more than 200 start-ups which failed, and published the results in a report called The Top 20 Reasons Startups Fail.
In the report, the twenty reasons are rarely standalone; instead, a combination of factors come together to kill off businesses.
Keep on reading to find out the key takeaways from the report, and find out what has ended other businesses and ensure that you don’t do the same.
Reportedly, poor marketing saw 14% of respondent businesses fail. An inability to identify customers, successfully target them and generate revenue from them is fatal for businesses.
Having good marketing strategies in place – whether through online or analogue channels – can be essential in establishing your business, but it can also play an important role in growing your sales.
Embracing those dual functions will help to get your business on the road to success instead of failure.
Poorly thought-out and poorly designed products are unlikely to attract consumers. Worse still, they will alienate customers who know there are better alternatives out there.
It’s difficult to put yourself in a position where you can speak with authority on user experience, especially if you don’t come from that background – but it really is key when designing a product.
Poor products and poor product design killed off 17% of US start-ups in 2017, according to the CB Insights report, so try to bring some experience into the business at the earliest opportunity to prevent that outcome.
Lack of financing
Money makes the world go round, and it will help get your business off the ground. But almost 8% of start-ups cite a lack of investor financing as one of the reasons leading to business failure.
Securing investment isn’t easy, but having that financial cushion can help to safeguard against failure in the early days and gives you the scope to scale when the time is right, as well as giving you the budget to invest in marketing collateral and product development to avoid the above failings, too.
9% of failed start-ups cite location as an influencing factor, and it’s undeniable that some locations are more suitable than others.
Setting up in a poor location – where there is little demand for your products or services, where industry supply chains are not yet established, and so on – is going to make success that bit harder.
Alternatively, you can situate your business in an established business cluster, which is likely to benefit you by providing access to established markets, supply chains and skilled workers.
Opus Energy has published research around the UK’s business clusters and the opportunity they present for SMEs – you can find out more about the UK’s business clusters by exploring our interactive map here.
A saturated market can also be fatal for start-ups, with almost 20% of respondents citing this as a reason for failure.
Don’t ignore your competitors: you can learn from them and monitoring them will keep you aware of their pricing, marketing and other strategies, letting you react to stay ahead of them.
Price is a real concern for all businesses, but for start-ups and small businesses, it can have a serious impact. 18% of respondents to the CB Insights report cite pricing issues as a pressure point.
Set prices too high and you won’t appeal to customers; set them too low and you’ll struggle to cover your costs and get yourself into profit.
No market need
A mammoth 42% of failed start-ups report that there was no market need for their product.
Whether the business idea is before its time or there is just no need for it at all is irrelevant; this highlights the importance of market research before coming to market.
This gives you the opportunity to go back to the drawing board and modify your concepts to help tailor the product to meet market demand. Without satisfying a need, a product is pointless and though it’s easy to say that retrospectively, it’s important not to fall into that trap.
This was cited as one of the least influential factors in a failing business, with only an 8% share in the report, but it’s a valid concern.
Being able to recognise when your work-life balance (or imbalance) is exerting a negative effect, and taking steps to correct that, could be the difference between a successful start-up or one which ends up consigned to the pages of history.
There is plenty to be wary of a business owner. Make sure you can identify weaknesses in your approach and be open to constant re-evaluation. You can see the CB Insights report in more detail here to identify which other factors may present a risk to your business.