According to BLS or Bureau of labor statistics, 20% of the new business fails in the first two years of its establishment while 65% of new businesses fail in the first 10 years. So, it is only 30% that make it to 10+ years. Besides, this data has not changed over the past couple of decades. Even though there are a number of new pieces of tech and tools available to help people succeed in their business, the number still remains unchanged. Therefore, one of our most important concerns is why new businesses fail with all of the efforts that people put in.
Below we have listed some common reasons why businesses fail.
Why New Businesses Fail – 8 Common Reasons
1. Poor Planning
Most businesses fail in the first few years because of the lack of planning and research. This is also why business owners underestimate the importance of planning things ahead.
Even though the chances of a business being successful may be very little, it does not mean that you should give up on your passion or choose to be a part of the 9 to 5 job ritual. Instead, before you do anything to start a business, you should spend a good amount of time researching and planning.
The research will give you an insight into what is in demand or people’s needs while the plan will help you define your strategies and your proposition in the market. For instance, if you want to build an e-commerce store, you must be familiar with the fact there are already thousands of e-commerce stores out there. The key here is to find out what may help you stand out from this crowd. Is it the products that you sell? Or the website? Without discovering what may help you stand out, if you enter into the competition, you may soon have to pack up your suitcases.
Besides, you may also define your purpose, how you will reach your potential client or customer, what will be your marketing strategy, what can be your cash flow projections, and much more.
2. Not Understanding the Customer Demand and Behavior
One of the most important elements of growing a business is to make sure that your customers are satisfied. They get what they are looking for. For instance, the quality of your product and service is highly important to make sure that your customers are satisfied. Besides, the payment option is one of the most important elements that make your customer either buy products and services from you or not.
How to find out what your customer needs or demands?
Well, we think social media platforms are the best ways to discover what people are looking for. Besides, you can also learn more about their pattern of buying things or getting a service. Besides, social media platforms can also tell you about competitors and whether or not their customers are happy with them. In addition, you can also learn about your niche and how you can improve things to make your business a success story.
All in all, your customers’ dissatisfaction can cause your business to fail in no time.
3. Remaining Rigid
Once you are done with the planning, set your business, and gained traffic and customer, you are not done yet. You have to keep a close eye on the market, the changing trend, and how you can further grow your business. For instance, pre covid 19, most business owners were content that they have built their proposition in the market.
However, once covid happened and everything was closed, only a few businesses could survive. These were the business that adapted new strategies to keep working even away from the workplaces.
4. Poor market knowledge
Most businesses fail because the business owner either does not have any understanding of the market or has very little knowledge.
Before a soldier enters the battlefield, he must know who his enemy is. Similarly, before you enter the marketplace, you should know who your competitors are. Besides, just knowing your enemy aka your competitors is not enough, you should an in-depth understanding of the size, resources, and strategies of your competitor.
In addition, to build a successful business, you should also understand who your potential customers are and what their needs are. So that you can provide your services. Hence, in order to run a successful business, you should have a thorough understanding of the market, your competitors, your customers, and your customers’ needs.
5. Incompetence
Let’s admit that most people fail to build a successful business because they are not capable enough. Just because you have a dream to have run your own business does not make you competent. You should be worth the position that you dream about.
Make sure that when you claim about a skill, you have it. Therefore, reading, building new skills, and expanding your knowledge is just a couple of pieces of advice that we can give you.
6. There’s No Market or Too Small of a Market
The best business idea will fail in no time if there is not any need or demand for what you are selling. New businesses also fail due to natural disasters and economic changes. It is, of course, impossible to predict any natural disasters but one should do thorough research before setting up a business.
You should check whether there is any need for the service or the products that you want to sell. Besides, you can not answer this question efficiently if you are targeting a very little group of people.
Hence, before you set up your business anywhere, do thorough research to check whether there is any need for the product or service you are selling or not.
7. Wrong Location
If your business is based on a physical location, you should rethink it before setting up your business there. A good location will help you explore and grow. However, a bad business location will spell disaster even on the best-managed business idea.
How to find out the best business location? Here are some common elements that you should consider before finalizing the location.
- Where your customers are from
- Accessibility including traffic, parking and lighting
- condition and safety of the location and building
- Equipment storage needs
- Location of your competitors
- And how has been the community receptiveness to any new business in the location before.
Lastly, if you do not have any potential customers when you set up your business, choosing a good location for your business will help you gain customers in no time.
8. No Social Media Presence
Today if you think you can grow a business without a website or social media profile, you may be wrong. Because of the fact that the digital world has completely taken over every field. So, you need a well-designed website and be present on social media platforms to reach your potential customers and grow your business.
If you are looking to build a website to grow your business, check out some beast cheap hosting providers to help you get started.
You can read more about:
- How to Build a Successful Business in 2022
- 10 Rules for Building a Highly Successful Business
- How to Write a Business Proposal in English – A Step by Step Guide
- Benefits of Earning a Business Degree Online