- The term entrepreneurship has some kind of magic associated with it which portrays the aspects of independence and being your own boss. It brings with itself the ability to convert our dreams and passion into reality and to be on our own. Usually entrepreneurship is also associated with doing the work which one loves to do. All this sounds appealing and highly motivating to take a step towards following what one actually wants to do in terms of professional life. But is it as easy as it sounds and if it is so then why do many small business start ups fail? Well, success is surely associated with hard work and passion, but there may be reasons which may result into failure of small start ups eventually taking the business downhill. So what are these reasons? Let us find out.
Insufficient research: So you have an idea for an incredible product or service and you feel you can take the entrepreneurship route right away. But one has to remember that for a business, groundwork and research is as important as a brilliant idea. Before you are part of the market, it is essential to conduct market research in terms of who will be your target audience, how your product or service would be different from others, what are others offering in the same category, how much the scope for you to enter the market is and so on. In short all the factors which would affect your business once you are part of the market should be given careful consideration as lack of this may create sudden roadblocks in your start-up. Market research is thus one of the essential aspects of starting a business. Also not having a right business model may hamper the start-up.
Your reason for start up may not be correct: The world today is said to be great for entrepreneurs and you have people around you starting businesses continuously. Immediate financial independence and extreme rush to be on your own may not be the correct reasons to go for a start up. On the other hand, being passionate and determined to provide value in the market through products or service could be of huge help. Also ability to learn from initial failures, optimistic attitude, and ease of working with others and long term vision of being independent could be helpful in starting your own business.
Weak product: This may be one of the core reasons why small business start ups fails. For a product to be a hit in the market, it needs to have the potential to provide utility to the customers, to add value to the market, to be different from others and thus having the right product is one of the pre requisites to succeed in the business.
Insufficient planning and weak management: Planning is required for every step of the business and insufficient planning may result into weakening of the business. Planning would be needed in areas like marketing, finance, hiring, promoting of the products or services, budgeting and of course having a well-defined mission and vision for the business. Managing the business requires ability to identify the problems and arrive at solutions. Understanding the needs of the markets and customers on a consistent basis is also needed. Making the best of the strengths and taking efforts to address the weakness is also needed in business.
Lack of capital and cash flow managed weakly: The base of any business may lie in the requirement of funds and here if proper estimation is not done then things could go for a toss. One has to have a fair idea as to how much capital may be needed for a start up and also to stay in the business. If funds are used up quickly, then this may cause issues for the start up. Also, proper understanding and management of cash flow is needed to perform well in the business.
Disagreement among co-founders and lack of leadership: A start-up would create wonders if the thoughts of all its cofounders are in same wavelength. But just in case, there arise any disagreement between the cofounders, then this may dampen the expansion and growth plans along with stealing the focus on the start-up. A start up needs strong leadership to have a direction towards the growth. Lack of leadership may end up lost direction for the start-up.
Location: At times a start-up may work just because is it at the right place and this brings out the significance of location for a start-up. On contrary to this, working selection of location may not attract customers and this simply means lack of sales.
Hurried expansion: At times if the start-up shows early signs of growth, then the business owner may undertake aggressive expansion plans without taking into consideration as to how this would be done in terms of capital and resources. For expansion adequate planning is needed.
Lack of communication with customers: A start-up is created to provide a product or a service to the customer and if there is no understanding or communication with the customers, then this could result in to business failure.
Apart from these there may be other reasons also which may result into failure of the start-ups. What is essential is to deal with the problems in business quickly to avoid failure.
