Turning an idea into a functioning enterprise requires foresight, planning, communication, investment, and time. By the time we’re ready to launch, we feel excited, relieved, anxious, and determined. The one feeling no one escapes is the nagging sense that we’ve forgotten something important, that all our hard work might fail to pay off.
That fear is justified, considering that the vast majority of new businesses fail within their first year. Let’s examine some of the most common reasons that young businesses don’t make it, and what you can do to make sure your startup doesn’t become a statistic.
The most common reason that business fail early on is unexpected financial trouble. As business owners and industry experts, the desirability of our own products and services seems obvious, and we often expect that our target markets will see it the same way. Of course, that’s not how it works. People are creatures of habit, and even great businesses need time to reach out to and build a customer base over time. Depending on the business, it could take many months or years to begin turning a profit. To manage unsteady cash flow, unexpectedly slow growth, and financial disruptions during this phase, businesses need financing tools to keep the lights on and the business running.
Business lines of credit
A line of credit works much like your credit card. You can draw funds as needed and repay them with interest at your leisure. Unlike a regular credit card, you can secure this type of loan against your or your business’ assets. By using a line of credit instead of a regular business loan, you can have open and ready access to flexible funds whenever you want them without being forced to pay interest on a loan you might not even need.
Free standby financing
For businesses that might need large lump-sum loans, standby financing is an invaluable tool. Standby loans are negotiated in advance, but are effectively put on hold until you want to withdraw the funds. Until that time, you’re under no obligation to pay any interest or to finish taking the loan out at all.
The quality of your products and services is contingent on the consistency of your supporting systems, staff, contractors, and suppliers. It’s difficult to appreciate the amount of coordination that’s required to create a consistent and valuable product until you try to do it. Further, businesses need to be able to adapt rapidly to unexpected changes without compromising their clients’ experience.
If a critical supplier or a contractor misses a deadline, or you lose an employee unexpectedly, the quality of service rendered to customers can seriously suffer. Small businesses that are operating on tight margins and don’t have an established reputation to help them hold on to and attract clients often can’t recover from a blow like this.
The solution is a managed and purposeful level of redundancy. In terms of physical goods, it’s important to maintain enough stock to smooth over hiccups in the supply chain. Additionally it’s a good idea to vet and build relationships with multiple suppliers and contractors so that you have ready options if someone breaks a contract. Similarly, it’s worth the effort to cross-train employees to such an extent that they can temporarily absorb some of each other’s responsibilities at need.
Even well-organised and well-funded businesses fail. In those cases, it’s often a marketing and sales issue. Businesses need to reach out to and effectively communicate with their target markets in order to generate the leads they need to establish themselves and grow.
Great marketing is one of the cornerstones of a successful business because it drives growth directly while also indirectly reducing the financial pressure on your operation. By focusing on attracting leads quickly and actively establishing and building a reputation, you directly reduce the amount of time your brand new business needs to begin turning a profit.
Startups, of course, don’t usually have the budget to launch major marketing campaigns. However, that doesn’t mean that there’s nothing you can do to get things moving. Sit down with a professional and work out a basic marketing strategy that’ll fit your budget and ramp up slowly, even if you can only start with some basic social media work or an email marketing campaign.
By taking the time to make sure that your bases are covered in these aspects, you’ll go a long way in making sure that your business doesn’t fail before it ever has a chance to establish itself. Even better, you’ll establish yourself more quickly, and set yourself up to provide a better experience for your customers in the long term.