24 Jan Why Many Entrepreneurs Fail: Mistakes to Avoid When Starting Your Business
Every day, a business fails. Failure happens to even the best of people and the best business ideas. There are so many factors why a business fails. But through the years, these failures have been collated to help new entrepreneurs prevent repeating these so-called failures.
Why businesses fail and how new entrepreneurs can prevent them?
Let’s find out some of the reasons why businesses fail and the solutions avoid them or diminish the risks:
Doing business without a business plan
Many new entrepreneurs jump into the bandwagon thinking that if other people made a killing out of this kind of business, they would do the same. It doesn’t always work that way. You have to be smart about it. And this kind of “smart” doesn’t necessarily mean having the best IQ but having a high EIQ or Entrepreneurial Intelligence Quotient. Part of gaining a high EIQ is by creating a business plan. According to Forbes, an EIQ is a holistic understanding of business. A business plan will help you achieve that. A business plan is a step-by-step guide on how to go about your business. And part of the business plan is understanding the market. This is also a crucial document for you to have when you want people to invest in your business.
Not getting the right people
Even if you are starting a sole proprietorship, you will need people to help you out. But there have been so many instances wherein the demise of the business is rooted in the people working with and for you. There are many instances when a new entrepreneur depends on kin to help with the business for familial or economic reasons. But it’s not a guarantee that your relative or family member will actually be helpful in the business. He could slack off thinking that his boss is just family anyway. Or maybe that person is really just not suited for the position. There are also cases where new entrepreneurs go into a partnership with either friends or incompetent people just so they could get the business rolling. Having a bad partner means a liability to the business. Rooting out the good and bad partners and the loyal and undependable employees is part of having a good EIQ.
Not listening to the market
As mentioned earlier, it is so easy to just follow the trend. But the market for such a trend could already be saturated and that would leave no market for you. It is essential that you really listen to the market. See what need is still unsatisfied and try to work with that—but also make sure that this is aligned with what you actually want to do. You can’t put all your effort in business with blinders on. Perhaps you are filled with too much passion for this business and you heard a lot of geniuses saying you should do what you are passionate about. But business is not just about passion. It’s about the timing, the venue, the resources, and most especially the market.
This is where market research comes in. A study of what the local market wants is very important as it could spell the difference in a successful business. It is not just about learning about what the market wants and needs, but knowing what will make this market buy and its capacity to purchase. It is also about looking around for possible competitors and not just the direct ones, those selling the exact same product or services, but also those selling alternatives. A market study will help you gauge your potential for success.
Yes, you’ve read that right. If you’re a new business, it can be costly to hire too many people right off the bat. Outsourcing important things for your business just like accounting and bookkeeping will help you save more and get the tasks done right.
Not investing in marketing and advertising
With the proliferation of social media, it is easy to just scrimp on marketing with the belief that social media is free anyway. With Facebook, you can boost a promotional campaign at minimal fee compared to hiring experts to do marketing. But the keyword there is EXPERT. They are good at what they do and there is a science to marketing. So while funding will be needed, marketing and advertising are necessary expenditures when starting a business. It is understandable, though, for new entrepreneurs to be tight on the budget. After all, it will be spending money on something that is not yet guaranteed to earn. But that is more reason to spend on marketing and advertising: to give your business a chance to flourish. Marketing and advertising experts know just how and where to spread the word about your product and service in order to convert them into monetary gains.
Too much grandiose
Successful people always say to reach for the stars. That’s well and good. But you have to learn to differentiate ambition and expectation. Your goal is to reach the stars. But don’t expect to actually reach it without hard work and just with a snap of your fingers. Many entrepreneurs fail because they believe too much in their product or service and believe way too much about their abilities that they fail to listen to other people. Some no longer listen to expert advice because they have the expectation of the stars through their brilliant idea. A brilliant idea is just that without hard work and without help from mentors and other people. A brilliant idea will only transform into money if entrepreneurs shed sweat, tears and sometimes blood to make a concept an actual operational business. Don’t delude yourself into becoming rich the very next day. More often, success cannot be achieved until a few years later.
A successful business starts with a great concept. That concept needs to be nurtured and complemented with diligence peppered with intelligence. And in order to translate that concept into economic success, it should be processed by the right people and with the right funding and marketing. A lot of entrepreneurs fail because they think a great idea will lead them everywhere when in fact it only gets them outside the building. They have to get moving, knock and work their way up in order to reach the top of the building. Entrepreneurs fail because they lack the EIQ maturity. But just like the academic IQ, you can study and work harder to be better.