So let me break it down to you, 90% of startups fail. Yes, 90% will probably go out of business before they even begin their second year. Until now, People still debate the reasons why 9 out of 10 businesses fall short. Some blame it on the recession, economy downfall in the Middle East, the uncertain market of the region, politics or many other outside factors.
But think about it, why do some companies fail while others don’t in the same market?
To answer that question I’ve round up 7 expensive mistakes that you have to avoid if you are willing to make it another year:
MISTAKE #1: Being impulsive and skipping the planning phase.
In an uncertain and risky environment, it is extremely tempting to jump into business operations saying: “Why plan when everything is crazy around me”. Some owners do not see the urge to plan when they think that everything might change eventually.
Yet, it is important to note that planning is the foundation for all operations as it creates a roadmap for ultimately achieving your goals.
Among the benefits of planning:
- Efficient use of resources: the information helps you allocate your resources more effectively.
- Managing risk and uncertainty: planning gets you prepared for unforeseen events, and helps you adjust your strategy to changing conditions.
MISTAKE #2: Choosing the wrong team: from partners to employees.
Picking who you want to work within a new business is like playing basketball in school; you pick your friends and people you like to play with, but eventually, if you want to stay in the game you have to opt for the right team members.
PS: Team members do not only consist of the employees you hire but also the partners you choose.
Selecting a business partner.
Selecting someone to guide and run the company alongside you is as essential as choosing a lifetime marriage partner. You need to complement each other in terms of skills and competencies but also share the same values. Not everyone is meant to work with you; your partner might be a genius, but might also be the worst at communicating.
Choosing the wrong employees.
Hiring the wrong employees is not only a waste of your time and resources but when the push comes to show, may also lead to potentially unnecessarily stressful situations. Don’t rush into the hiring process just because you need someone. Take your time, the right candidate will come.
MISTAKE #3: Overspending and lack of budgeting
It’s in our culture to rush into buying the best equipment, software solutions, marketing tools, and so forth. Business owners tend to believe that the most expensive things are the most reliable when cheaper alternatives may work better for them.
Owners get so caught up with the product or service they are offering that managing finances comes second. Budgeting and financing are usually put off (mainly to the end of the year) as new owners don’t want to spend much time on less exciting and more difficult tasks. We all know that one thought you get when dealing with accounting for example: “Not today, it can wait”. No! It can definitely not wait!
However, small businesses that avoid those critical details are far more likely to fail than the ones that pay attention.
You need to make sure that you generate enough cash flow and profit so that you cover all your company’s expenses. The only way to do that is to establish a budget. It gives you control. It allows you to plan.
MISTAKE #4: Acting as the “One-Man Show” manager.
Yes, you love your business, you love your product, you love being in charge and you barely trust anyone to handle anything. Well, you are most likely going to end up stuck in a pit, overwhelmed with unexpected and time-consuming tasks. Before you get sucked in, take a step back and ask yourself which tasks are distracting you from your goals. The rest can be passed on to someone else.
There are two ways to help you hand over your tasks to other people around you and take some weight off your shoulders:
Assign some of your tasks to your partners or employees. Begin by creating an assignment plan where you set specific steps and measurements to track the progress. Then, keep on communicating frequently to build trust.
If the tasks are outside your area of expertise, outsourcing will give you access to qualified professionals. This will definitely add efficiency and productivity to your business while minimizing your overall expenditures and keeping your headcount stable.
If you’re interested in learning more about the outsourcing basics, read the Beginner’s Guite To Outsourcing.
MISTAKE #5: Failing to identify the ideal customer(s).
The product or service is not going to market itself; if it doesn’t cater to a specific segment in the market how do you plan to sell it? A huge marketing budget and campaign are simply not enough.
Market research should be your starting point as you need to define who you want to reach, where to find them and what they like in particular.
Creating buyer personas is one of the best practices in understanding your customers. The buyer persona is a representation of your ideal customer based on extensive market research and real data extracted from your customers. It includes customer psychographics, behavior patterns, motivations, and goals.
You can start by downloading a free buyer persona template here.
MISTAKE #6: Being stubborn & failing to evolve with the current market needs.
Some business owners usually fall in love with their product or service and get so attached to their initial idea that they just stand still. Nothing is written in stone, the world is rapidly evolving and so should your business. You have to keep looking for new trends and technologies for you to stay relevant. Tailor your product or service to the present market demand, to make sure you keep your customers and acquire new ones.
Ask yourself why are your customers shifting from your offers to the competitors? What has changed in the demand and how can you modify your model to meet the new needs?
You also need to keep an eye on competition; don’t get too focused on your original design while others innovate and break through.
MISTAKE #7: Failing to overcome failure.
Failures in a small business are unavoidable and can be very costly with the little time and money available. Naturally, most business owners get discouraged and rage against their own company.Failures can include small mishaps with a client, a bug in a mobile app, losing a big contract, and so forth.
How you perceive failure defines your outcome “post-failure”.
Small bumps on the road are simply test results; they let you identify what went wrong and how to avoid similar situations. You learn with time the art of minimizing potential failures and the lessons learned help you get back up on your feet stronger than ever.