Image Credit: thinkpanama
There are many stories of how a business grew from very humble beginnings to become multi-million dollar market leaders. What almost never makes it to the Business section of our daily newspaper is the sheer number of startups that are forced to shut down within months of inception.
If you have the chance to visit the local branch of the Companies Commission (or similar government department) you’ll most likely see that there are millions of companies registered in your country. By the time you browsed through the first 50 or 60 companies, you’ll discover that the vast majority of them no longer operate.
This my friend, is the reality of doing business. Only the toughest will survive. If you’re planning to start your own business, you’ll pick some pointers on not letting your startup join this pool of failures by reading the rest of this post.
Lack of Market Knowledge
It’s not enough to just develop a product or service to be sold. Anyone can do this. I have no doubt that this is the biggest reason why most startups fail without seeing its first anniversary.
I think it is essential that an entrepreneur realize from the offset that there is a market out there. No, not a market for your product, but a whole complex ecosystem of products, competitors, partners and customers. No matter how good you think your product is, it really doesn’t matter.
To have a fighting chance in the world of business, your product (or service) must fulfill all these criteria:
- It must have a sustainable customer base
- The customers must be willing to purchase the product at a profitable price you’ve set
- Your product must have at least one significant advantage over the competition (and make sure you push this fact at every possible opportunity!)
- Regardless who you are, you can’t market your product alone! Find reliable and passionate partners to assist in non-core areas of your business while you focus on running it as a whole
It also helps not to fall too much in love with your product. This makes you blind to its flaws, some of which may be fatal.
Not Keeping a Close Watch on Costs and Expenses
A reality of business is that there will always be costs and expenses involved. Failure to realistically factor this in your pricing and general operation will result in your business tanking in no time.
In the early stages of your business formation, resist all temptations to spend on things that doesn’t directly contribute to revenue. There’s a fine line between being thrifty and downright stingy. Unfortunately, there’s no clear cut way to differentiate between the two across different industries.
For example, if your business runs primarily online then renting an office space probably isn’t a good idea when starting out. Instead, focus on the essentials; like fast and stable internet connection, reliable web hosting and efficient sales tracking system.
Be very sharp in pinpointing your costs and expenses. Don’t just identify them, document every instance of money going out of the business and its justifications. Complacency in this area has resulted in countless downfalls of businesses everywhere. Don’t let your enterprise join them!
Not Setting Reasonable Small Milestones
There’s an old saying; Failing to plan means you’re planning to fail.
Running a business by going with the flow is a dangerous exercise. You won’t drive to a city you’ve never been before on a borrowed car with a broken fuel meter and no spare tyre, would you? By not having a proper business plan (a map) and setting achievement milestones (landmarks on the map) where exactly are you taking your business (the car)? Nowhere of course!
Not Actively Participating in Community Activities
Zero visibility means zero business. A proven method of being visible is by participating in community activities. Mind you, this doesn’t mean pasting your company logo on some billboard promoting the town’s annual charity run. That’s just a passive brand awareness exercise and when you’re not yet running a multi-million dollar establishment, it doesn’t help your company in the least.
What the small startup should do is to make the community be aware that:
- The enterprise exists!
- The enterprise is part of the community
- The enterprise can help them
- The enterprise wants to help them
- The relationship between the community and the enterprise is symbiotic; they need each other!
Not Presenting the Enterprise Professionally
Even if your product is absolutely the best in its class, it is useless if people won’t buy from you. The main reason a prospect doesn’t convert into a customer is that she doesn’t have confidence in your brand, company or representative.
Many business opportunities are lost due to this problem. Therefore, you must ensure that your corporate image reflects the success you want to achieve. You may not be successful yet, but you must dress and act as though you’re already a major bigwig in the industry.
However, you should also remain down-to-earth and not look down on others. Look like a million dollars but be humble and true to your roots. Remember that the existing pool of customers you already have probably chose you over hundreds of other companies because of how well you treated them.