Why new businesses fail is a tough question to answer, almost as difficult as explaining why the lucky ones succeed. Every single business is unique, even those in the same industry have different factors effecting their success. The following issues are a few that we have witnessed but you need to critically think about your business, your risks and what your road to success is.
Two Heads are Better Than One
Most successful new businesses have more than one person as a founder. It is almost always better to start a new venture with someone that you trust rather than trying to go it alone. The old adage is correct, two heads really are better than one.
When making the life changing decision to jump into business, most new business owners simply underestimate the sheer volume of work and stress associated with getting a new business off the ground. For many, the stress will likely be too much to handle and even a promising business may fail due to founder fatigue. Having a trusted co-founder will help to spread the work load, offer a sounding board for ideas and help to mitigate a lot of the risks associated with having everything resting on a single persons shoulders.
Location, Location, Location
A business may thrive in one location and fail in another. Not all locations are created equal. Some communities are hubs for new small businesses with lots of local support and a thriving small business community. Other communities aren’t as supportive of new businesses and you will have bigger hurdles to overcome. Picking the right location can help you avoid these hurdles in the first place.
Know your target market and ensure that any location you settle in has a ready and waiting supply of potential customers. Also look out for your competitors locations and take those into consideration. Don’t write off a location because there is a competitor just down the street. If the location is working for them, it will probably work for you too. That is where you want to be and where you will likely have a greater chance at success than completely uncharted territory.
Tiny Target Market
Most new business owners look at an industry they like or see an opportunity in and highlight a niche market in that industry that they think they could serve. One of the biggest mistakes is targeting a niche market that is way too small, especially if you have chosen a niche for no reason other than your competitors aren’t focusing on it. You don’t want to completely avoid any competition, especially not by narrowing your vision too much. You need to accept that competition is a healthy part of being in business and is a major driver of growth and business success. Some of the best business ideas and local success stories in recent memory have come from the most competitive markets.
Originality is Key
It is really hard to come up with a new idea, something that no one has ever though of before. Every new business owner struggles with this and many fall into the trap of imitating the competition. Imitation may be the sincerest form of flattery, but it may be the nail in your business coffin. You competition can be a great source of ideas and inspiration but you should avoid imitation and look to create your own, original business. Focus on what you can offer and how you can serve your target market. By making sure that you are offing something original and not easily or readily imitable, you can increase your chances of success and reduce the likelihood of someone else witnessing your success, imitating you and pushing you out of your own market.
Change is Good
Having a clear business plan and a vision for what you want to create is the foundation for all successful new businesses. However, new business owners that refuse to look critically at their business as it evolves and do not adapt their original plans will likely falter and fail. All new businesses will run into problems and challenges that you haven’t planned for. Your ability to change and adapt to these challenges will be the key to your success. You need to be open to new ideas, responsive to challenges and welcoming of results that may not be exactly what you had in mind when you wrote your business plan at the kitchen table all those months ago.
Invest in Your Staff
If your new business needs more than just the founders to run it, you need to ensure that your staff are up to the challenge. Attracting experienced, qualified staff to a new business can be tricky as there is no guarantee of job security for them. Do not be tempted to hire whoever will take the job in the hope that you can train them up in time. To reduce the stress on you at a time when you have more important things to worry about, it is critical that staff are both experienced and share in or understand your vision and path forward.
Hiring inexperienced staff will only add to your workload and stress. You may need to offer higher remuneration or other incentives to attract experienced staff but if they can manage themselves and know exactly what they are doing, you will be in a much better position and your chances of being successful will increase dramatically.
Don’t Fear Your Launch
Starting up and launching a new business is not easy and can at times be a process filled with fear and apprehension. Most new business owners are afraid of failure from the outset and as a result they want to control every little detail in an attempt to minimize their perceived risks. While this is normal, it can be the root of more, serious problems.
When you start setting up your new business you need to set a timeline to launch and stick to it. Chances are that not everything will be perfect by launch but you need to build momentum and ensure that you launch before people in your target market and location lose interest in your new venture before it has even properly started. A slow or delayed launch can kill your new business before you even open the doors.
Don’t Launch Too Early
Don’t be afraid of your impending launch but also don’t be too eager to jump the gun and launch before you are truly ready. You have the business idea that you just know is going to work, the product that people want to buy and the perfect location. It must be time to jump in with both feet and get going, right? Wrong. You need to take the time, pace yourself and ensure that you have a sound business plan and path forward. Far too many new businesses are launched in the heat of the moment.
The vast majority of the tens of thousands of new businesses formed in New Zealand each year are set up in the first few months. The sun is shining, the ideas are flowing, your on holiday so hey, lets just give it a go. Hold on a bit. Launching too fast is just as sure to kill your business as launching too slow.
Find a healthy mid-ground, if you aren’t sure where the middle ground is then speak to a professional. Your local accountant and business advisor will be able to offer you a wealth of knowledge, experience and expertise to guide you through the entire process and offer insight you may never have otherwise considered. Having an impartial outside opinion can also help to create clarity and realistic time frames and expectations.
Avoiding Pitfalls With Planning
New businesses can easily fall into the traps highlighted above and fail. This list is by no means exhaustive and there are a myriad of factors effecting success. In our experience, the lack of any properly defined plan is often the Achilles heel in otherwise stellar businesses.
MBP has developed a business planning process that cuts to the core of your business and sets a strategy for success with clearly defined actions to get you to where you want to be. Although no guarantee, a solid plan and professional support can help to prevent new businesses failing. Talk to your MBP Business Advisor today about the benefits of our business planning workshops. Don’t have an MBP Business Advisor yet? Get in touch with the team to get sorted.