According to research by various organizations like the Small Business Administration, 50% of new businesses will fail within the first five years and only one third of new businesses make it to 10 years or longer.
So why do so many new businesses fail within the first five years? Here are three mistakes new businesses make and how you can avoid them.
1. Failing to Have a Good Business Plan and Doing Market Research
In order to start a small business successfully, you need to have a good business plan and do your market research. You may have a fantastic product but if there’s very little demand for it in the marketplace then your business is doomed to fail from the outset.
Take your time when doing market research and determine how much demand there is for your product or service. If you’re going to open a dog grooming salon for instance, are there enough dog owners in the area with the types of dogs that need regular grooming? How much competition is there for your business? What type of services does your competition offer and can you add extra value to what your business will be offering to potential customers?
This type of information is fairly readily available from local councils in the form of local area statistics on the type of households that reside in any particular area. Make sure you do enough research to establish whether setting up your business in any given location would be a viable proposition.
Once you’ve done your research, you need to set up a simple business plan so that you have a roadmap on how you will establish your business, how much finance you’ll need, whether you’ll need staff and how you are going to market your new venture. You can find software online which will enable you to write up a business plan quite easily and effectively.
2. Not Having Enough Startup Capital
Once you’ve made your business plan, you’ll have a better idea of how much startup capital you’re going to need to set your business up successfully. You should also factor in the costs to keep your business running for the first year or two as profitability doesn’t happen immediately.
Also, consider your personal living expenses as these will still need to be covered whether your business is making a profit or not. You may like to consult with a financial adviser or maybe use an online startup calculator to accurately predict how much money you’ll need to have in reserve. And don’t forget to also factor in marketing and advertising costs.
3. Inadequate Marketing
Even if you have the most fantastic products at competitive prices, if your potential customers don’t know about them or where to find them, then they can’t purchase from you. In today’s fast paced world, it’s almost mandatory for any business to have an online presence so even if you have a physical store you should also consider having an online store as well.
This will not only enable you to sell more products but will also broaden your customer base much wider than your local area. You can get assistance for setting up an e-commerce store from companies like bingdigital.com who are specialists in this industry and will give you advice on effective marketing strategies as well.
If you do adequate research, create a viable business plan, have enough startup capital and an online and marketing strategy you’ll have a much better chance of building a successful and thriving business. Make sure that you steer away from the mistakes in this article if you don’t want your business to become another statistic.