Strategy and knowledge are the key factors to be an entrepreneur.
Having a business does NOT make you an entrepreneur. Your business behaviour does. Business behaviour, knowledge and strategy are the key factors to determine if your business will survive for more than five years in the market.
The main objective that I would like to address in this content is the mindset to become an entrepreneur and make your business survive. According to the information published in the Government of Canada article Birth and Survival Rate for new business over the period from 2002-2014 “On average, 98 percent of new firms survived the first year, 63 percent survived after five years, and merely 43 percent survived after ten years. The pattern of survival rates was found to be broadly consistent among cohorts of new firms established between 2002 and 2014”.
Business needs to be seen from a wider prospect. You can have the best product or idea to offer and still not be able to make any profit from it. On the other hand, a simple product can be extremely profitable. The difference is what mindset is managing your business.
Top 4 Reasons new businesses fail
Every project for a business starts with the budget, cots, ideas, business plans and others. However, the most important topic even before considering opening a business or while working on a strategy under a business plan is to know the weakness of your business and your management behaviour. Understanding how others succeeded and failed can drive your business to success. For that reason, I will illustrate the four main reasons new businesses fail: lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.
1- Lack of Capital or funding
Financial Planning is the first key to success. Small businesses fail for many different reasons, starting with a lack of money or operating capital. A business owner is usually well aware of how much money is required to keep operations going daily, including funding payroll, paying fixed and variable overhead expenses. On the contrary, a business that fails is not fully away of any income made through product or service sales. This could lead to cash flow problems and lead the business to a dead-end road.
A second reason is the low price strategy used for their products and services. Companies may price a product or service much lower than equivalent products to attract new clients in heavily saturated industries, to beat out the competition. This strategy could be used initially in specifics cases where it may work under certain situations, has a high chance of failure in most of the others situations. Companies will fail when the costs of production, marketing, and delivery are higher than their revenue.
Small business owners should first develop a realistic budget for company Small Small business owners should first develop a realistic budget for company operations and be willing to give some funds from their coffers during the launch or expansion period to help a small business overcome common financing challenges. When it comes to obtaining financing, business owners should already have a number of options.
2-Inadequate Management Team
A lack of knowledge and management skills on the part of the management team or by the owner who manages the company is part of the top 4 factors for small enterprises failing. In some cases, especially when a company is in its initial year or two of existence, a business owner is the only senior-level employee.
One of the major issues is when the leadership is concentrated on one person, which is usually the business owner this can lead to an unhealthy workplace and unhappy employees. If there is any misconduct or any conflict to be addressed the employee will feel discouraged and will lose interest in the company. A competent One of the major issues is when the leadership is concentrated on one person, which is usually the business owner this can lead to an unhealthy workplace and unhappy employees. If there is any misconduct or any conflict to be addressed the employee will feel discouraged and will lose interest in the company. A competent management team will fulfill the company and employees’ needs. However, if the company is small and only requires one manager this must have a leader behaviour.
Entrepreneurs should outsource power where they are not succeeding or for which they do not have their interests. The most important action that owners should have is to hire a competent management team.
3-Faulty Infrastructure of Business Model
Before operations begin, business owners who fail to meet the demands of the company through a well-thought-out plan are setting their organizations up for major problems. In the same way, director that does not care about their initial business plan regularly or is not willing to adapt to changes in the market will face uncountable challenges on their way.
Entrepreneurs should have a thorough understanding of their industry and competitors before establishing a firm to avoid the dangers associated with business plans. Long before items or services are given to clients, a company’s specific business model and infrastructure should be defined, and possible revenue streams should be reasonably forecasted well in advance. A successful business requires the creation and maintenance of a business plan.
To create a business plan you need to outline at least an executive summary, an overview of your products and services, thorough market and industry research, a marketing and sales strategy, operational details, financial projections, and an appendix.
Important Tip: Start your Business Plan with Canva
4– Unsuccessful Marketing Initiatives
Many business owners fail to predict their company’s marketing needs financially, audience reach, and accurate conversion-ratio predictions. It can be challenging to allocate funds from other corporate units to cover the miscalculation when their team produced an incorrect estimate of the entire cost of the marketing initiatives. Knowing that marketing is one of the biggest priorities of an organization mostly in the beginning companies must ensure that they have available enough money for present and future needs.
In the same way, developing realistic forecasts for target audience reach and sales conversion ratios is crucial to the success of a marketing campaign. Businesses that do not comprehend these characteristics of effective marketing tactics are more likely to fail than those that do.
In my opinion, this is the most important consideration a business owner should consider. The impact of the pandemic on the business required a fast and quick adaptation to the online world. Everything switched to a virtual and online lifestyle. A business that does not adapt and react to the online market will not be able to continue its activities.
Thank you so much for reading! Our next post will address the changes in business after the pandemic. Follow us to get updates.
Roberta Almeida
Key 4 