Crosspost - Top 10 reasons for business failure

Source - http://bit.ly/1a0VmXo

Some start-ups seem to get everything right the first time around. They are able to build successful products/services and a brand for themselves, and walk steadily on the path of growth. Some other start-ups are not so lucky. They struggle with being accepted by the public and, ultimately, fail and face closure.

What differentiates a successful business from the others? Why does a business fail? SupportBiz lists the top 10 reasons for business failure.

1.     Lack of market opportunities

You might have a wonderful business idea and think that your products/services are great, but that does not mean that your potential customers will think the same. One of the major reasons for start-up failure is the lack of market opportunities for their products/services.

The importance of market research cannot be stressed enough for a start-up. It is always advisable for an entrepreneur to conduct detailed market research to determine the viability of introducing his/her products/services to the world. Market research will clearly indicate the availability of market opportunities for the start-up’s products/services or the lack thereof.

2.     Lack of a business plan

Many businesses fail because they do not have a structured business plan ready to guide them when they need it. Several entrepreneurs underestimate the importance of a business plan, and avoid making one. However, that is not such a great idea.

A detailed business plan indicates the path that the start-up should take at different stages of its growth, including various aspects like marketing, product/service development, expansion, finance and customers. It serves as a guiding light for the start-up. It also provides the entrepreneur with an opportunity to thoroughly think about his/her business idea, and where he/she wishes to see it in the next five to 10 years.

3.     Inability to execute

The inability to execute a business on a day-to-day basis is another major reason behind start-up failure. Many entrepreneurs have a great business idea, but they are unable to take appropriate decisions, stand up to challenges, face risks and grab opportunities on a timely basis.

The services of an experienced business mentor can help a great deal in such cases.

4.     Inappropriate revenue model

Many businesses fail because they do not have a suitable and detailed revenue model. A revenue model serves as a guide for business, at different stages of its growth, and guides the entrepreneur’s actions and decisions. The lack of one can create confusion and frustration, lead to a lack of cash flow and, ultimately, the failure of the business.

Start-ups should try to avoid this situation at all costs. They should not underestimate the importance of a good revenue model, and have one ready well in advance. The services of a financial expert might be taken for this purpose.

5.     Inefficient team

An inefficient team of employees is another major reason behind the failure of a lot of start-ups. A team of inexperienced or inefficient people will not be able to take the right decisions at the right time, and not lead the business on the way to growth.

A good team is an asset for any firm, and hence, a start-up should invest in one right from the beginning. If the entrepreneur is inexperienced, he/she should try to find a co-founder who has managed his/her own business before.

6.     Lack of resource planning

Running a successful business takes a considerable amount of resource planning, including personnel, cash, industry contacts, marketing resources and distribution networks. Inefficient utilisation of available resources can lead a business to failure, as can the lack of availability of these resources.

It is, hence, crucial that an entrepreneur undertake thorough resource planning well in advance, and have a systematic plan for the same in place. If necessary, the services of experts might be taken for this purpose.

7.     Lack of intellectual property protection

A start-up might have the most wonderful of products/services, but they will be rendered valueless if duplicated by a competitor. This will, ultimately, lead to the failure of the business firm.

It is, therefore, essential that a start-up file for patents or copyrights on time, to safeguard their products/services.

8.     Increasing competition

An increasing level of competition in a start-up’s industry might spell out doom for it. If there are a number of firms coming up in the industry with similar, or better, products/services, it might put a start-up out of business.

To avoid this situation, it is advisable that an entrepreneur undertakes thorough research before launching his/her start-up. A start-up would be viable only when there is limited competition in the relevant field. It is always better for a start-up to choose a niche area, create products/services with unique features, and invest in building great customer relationships, in order to not be affected by competition.

9.     Insufficient marketing

A start-up might have the best of products/services, but that alone will not bring in customers, help it create a brand for itself, and grow steadily. Marketing efforts are inevitable to spread the word about the start-up and its products/services. Insufficient marketing can, hence, be one of the reasons for the failure of a start-up.

A start-up should have a well-thought-out marketing plan ready in advance, outlining the marketing activities it will undertake at different stages of growth. The channels of marketing chosen should be suitable to the firm and its products/services, and be able to reach its target customers.

10.  Giving up

Another common reason for start-up failure is entrepreneurs giving up too early. Setbacks and challenges are common in a business environment, and the entrepreneur should have the gumption to stick through the bad times. Often, entrepreneurs give up on their businesses when they face a series of setbacks. Had they held on, they might have seen better and brighter times.

Having a deep-seated passion for the business idea and faith in the plan are must-haves for all start-up entrepreneurs. These will tide them through the bad times, and help them take appropriate decisions to improve their situation. The services of a business mentor would be invaluable in such cases.