According to the research highlighted at Fundera, 20% of new businesses fail in their first year, 30% fail in their second year, and 50% fail after five years. It’s enough to put anybody off the idea of starting their own business.
However, it’s also important to turn those figures around. While there are those businesses that fail, there are also those that survive. This should be a cause for optimism.
To reduce the risk of business failure, startup owners should:
#1: Find out why businesses fail
Why do businesses fail? According to Research Briefs, there are many reasons. 42% of businesses fail because there is no market need for what they are selling, according to figures highlighted. 29% of businesses fail because of cashflow problems. And businesses also fail because of such issues as the might of the competition, poor marketing, and the lack of a proper business model.
When the startup owner knows why businesses risk failure, they can take steps to alleviate any future problems.
So, they might look for a niche in the market in a bid to reduce the competition, for example. They might outsource their marketing to those agencies that understand their business model, such as a software marketing agency if they were running an SAAS business. And they might commit to market research before starting out to ascertain whether or not there is a market for their particular product or service.
#2: Seek assistance from a business mentor
The business world is hard for anybody, especially those who are just starting out in their particular industry. This is why it’s always useful to have somebody on speed dial who knows what they are doing. A mentor can help the startup owner become a success, with advice on the pitfalls to look out for, a list of contacts with the resources the startup owner needs, and other information, such as tips on hiring, financial management, and goal setting.
Of course, this is assuming the startup owner knows somebody who can mentor them, although it shouldn’t be too hard to track somebody down. Networking events, social media sites, and small business development centers are just a few of the places where somebody might find the help they are looking for.
#3: Improve their skills
The startup owner doesn’t have to be the master of everything. They can hire staff members to take on some of those tasks that they can’t do alone, and they can outsource too.
However, there are the basics to consider, as skills in such areas as management, leadership, and communication could be considered the bare essentials when trying to run a successful business. To learn more, the startup owner should consider a business course or any other line of study and training that enhances areas they are weakest in.
With a good foundation of knowledge at the beginning, they will be less likely to make many mistakes down the line.
So, take heed if you’re a startup owner, but be assured that failure doesn’t have to be an inevitability. You can override the risks involved, so consider our suggestions, and get help from other sources if needed.