Small businesses are the “backbone of enterprise”. 425,201 new limited companies have registered with Companies House this year, hot on the heels of the half a million that were established in 2013. British entrepreneurs mean business.
Starting your own company comes with a lot of risks, particularly if you are ill-prepared. Many before have tried and failed, providing us with the opportunity to learn from their mistakes.
We examined the experiences of British entrepreneurs, recorded, in part, by the Forum of Private Business (FPB), to come up with five examples of why startups fail so that you can do things differently.
You don’t believe in yourself
You are your business, at least while it is still in its infancy. If you don’t believe in yourself, you don’t believe in your business – and if you don’t believe in your business, you will never succeed.
Success is the result of perseverance and in order to keep working towards your final goal, you will need to really believe that you have what it takes. This should be evident in everything you do so that other people get excited about your idea too.
Michael Jordan said:
“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life and that is why I succeed.”
It is a nerve wracking time but believing in yourself, learning from your mistakes and persevering towards your goal are all hugely important contributors to success.
You haven’t done enough research
Lack of focus and planning are the second and third most common reasons businesses fail, according to the FPB. Lack of research means you will not fully understand your target market and therefore will not be supplying a product or service that suits their needs.
Dragon’s Den straight talker, Theo Paphitis, told the Guardian:
“The reason people fail is because they don’t do their homework.” You wouldn’t sit an exam without doing any preparation, he points out. “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 – 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?
You fail to listen to your customers
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 is important to actually listen to their feedback and ask 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.
There are countless examples of companies that have failed to listen to their customers and have subsequently failed or suffered a major PR disaster. Recently Joy, the clothing store, made a big blunder on Twitter when they failed to respond appropriately to customer concerns that a card they were selling was insensitive to mental disorders. As a result, many once loyal customers are now boycotting the store, bringing them to the attention of the national media.
You’re afraid to ask for help
Most successful entrepreneurs have great mentors.
One of the best ways to learn is from other peoples’ successes, and, more importantly, their mistakes. 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 are 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.”