As the old cliché goes: those who don’t learn from history are condemned to repeat it. If you don’t have an understanding of why businesses fail, your startup is pretty much doomed to go the same way as infamous flops like Trump Steaks and Virgin Cola.
We examined the experiences of British entrepreneurs to come up with some examples of why businesses fail so that you can dodge the bullets like a self-employed Neo.
If you don’t believe in yourself, you don’t believe in your business – and if you don’t believe in your business, why should anyone else? Your self-confidence and perseverance should be evident in everything you do so that other people can get as excited about your idea as you are.
Online video platform Youcastr cited a lack of belief in their own project as one of the major reasons for the company folding:
“We started the company because we liked the idea and wanted to do something entrepreneurial. We weren’t in love with the idea or market we were going after, and weren’t core users of our product. We worked really hard getting it off the ground despite this, but it made it more difficult to sustain the energy and to understand the best product choices.”
Not enough research
A lack of research will mean you don’t fully understand your target market and thus won’t be supplying a product or service that suits their needs.
Former Dragon’s Den straight talker, Theo Paphitis, told the Guardian that not doing their homework is a major reason why businesses fail:
“You wouldn’t sit an exam without doing any preparation… a business is no different. It’s about knowing more than the next guy or girl and performing better, and the only way you can do that is through knowledge. It’s basic stuff but we don’t do it.”
It is always best to begin by examining your market, asking questions like:
- Who is a leading presence already?
- What are they doing?
- How are people reacting?
- Is there something new you can add to the mix?
- What does your customer look like?
- How will they interact with your product or service?
Failure to listen to customers
A reported 78% of consumers will listen to the input of other consumers online more than any other source. Provide your customers with an opportunity to offer their feedback and interact with you online.
Social media is the perfect opportunity to interact with your customers but it’s important to actually take on board their feedback and ask useful questions about their experience.
- What do they think about your product or service?
- Is the pricing appropriate?
- What could you be doing better?
Being available and listening to your customers will make them feel valued and prompt them to recommend your business to others.
You’re afraid to ask for help
Finding a mentor you look up to and who is in a similar industry to you will provide you with the experience you need to take your business from strength to strength. If you haven’t found someone who fits the bill, joining a support group, such as your local Chamber of Commerce or the Forum of Private Business, will give you the opportunity to meet other entrepreneurs and gain valuable insight.
There’s a range of government schemes that offer support for new businesses, including growth vouchers, which provide up to £2,000 worth of business advice, including finance and cash flow, developing staff, marketing and making the most of digital technology.
You give up too easily
Many successful entrepreneurs failed before they succeeded. Henry Ford’s first venture to build a motorcar was dissolved a year and a half after it started because the stockholders lost confidence in him and his enterprise. Had he given up then, the future of the motor industry would have been changed considerably.
However, often the initial business idea evolves over time and it is important to be flexible with the direction this could take you. Using all of the information you have gained through research, advice and understanding your customers, you may find yourself in a completely different place than when you started. This is OK – many companies have pivoted and consequently found themselves on a much more lucrative path.
YouTube, which was founded in 2005, began as a video dating site called “Tune In Hook Up”. The site failed to gain any traction, which prompted the founders to pivot their idea and instead focus on simply sharing videos online. YouTube was then acquired by Google for around $1.65 billion in stock.
Thomas Edison famously said:
“I have not failed. I’ve just found 10,000 ways that won’t work.”
According to a recent Independent report, two-thirds of SMEs said they knew of businesses that had been forced to close because of cash flow problems, and two in five said late payments had caused serious problems with their own cash flows.
If you need to remind your client about an outstanding payment but don’t have a talent for officious-sounding correspondence, our free late payment reminders may be just what you need.