Business start-up failure rates vary across the world, but these statistics all have one thing in common; they are alarmingly high. The fact is, getting a new company off the ground and sustaining success for more than a year or two is not easy. It takes skill, dedication and in some cases a decent helping of luck. Here are just five of the mistakes that budding entrepreneurs often make and that can spell disaster for their fledgling firms.
1) Financial planning failings
Finances can be extremely tight for start-ups. After all, businesses tend to incur a range of costs before they start generating a profit. To make matters worse, many entrepreneurs fail to find sufficient capital to give their companies a fighting chance. For example, if they don’t create a persuasive business plan, they can find it difficult to attract investors or to secure loans. Bosses can also run into difficulties if they fail to produce a contingency plan for when money’s low and if they don’t seek professional advice when their situations worsen.
Another pitfall that can catch new firms out is insurance. Many business owners don’t take the time needed to get to grips with the types of cover their organisations need, and this can cause major problems for their long-term finances. One type of insurance that all firms with workers must have is employers’ liability cover. These policies enable firms to meet the cost of compensation for personnel who are injured or develop an illness as a result of their work. Another important form of cover is public liability insurance. Unlike employers’ liability insurance, this is not a requirement for all businesses. However, as expert broker www.chill.ie/ notes, it can play a vital role in helping to safeguard firms’ finances. The policies protect companies if they become legally liable to a member of the public for injury, death, illness, expenses or property damage. Other important policy categories can include office and contents insurance and vehicle cover.
Without suitable financial protection in place, companies can store up serious trouble for the future.
2) Inadequate research
Failing to do enough research early on can hurt new businesses too. For example, all too often entrepreneurs have an idea and proceed with it without doing in-depth market research to see if there’s actually demand for it. Before committing too much cash to a particular idea, people must engage in rigorous testing and research. As part of this, they should get feedback on their ideas from potential customers and establish whether existing companies are offering similar products or services.
This can help entrepreneurs to hone their ideas and, in some cases, it can persuade them to go back to the drawing board to come up with new and better business suggestions. In contrast, when people try to forgo or rush this stage, they can end up splashing cash and wasting time setting up firms that are destined to fail.
3) Insufficient advertising
It doesn’t matter how good products and services are, if they’re not marketed properly, they are unlikely to sell. This is one of the most fundamental business principles, yet a surprisingly high proportion of entrepreneurs fall into this trap. One of the reasons for this is that amid the frenetic pace of day-to-day life running a new firm, it’s easy to get distracted from strategic advertising goals.
However, the fact is, if companies don’t take advantage of the myriad, multi-channel marketing opportunities now on offer, they will struggle to survive.