Many people believe that half of all new businesses fail within the first year. This is not necessarily true according to the U.S. Bureau of Labor Statistics. According to the BLS, approximately 20% of new businesses fail within the first two years.
This is compared with 45% in the first five years and 65% in the first ten years. Only 25% of new businesses survive for more than 15 years.
These statistics don’t change much and have been consistent since 1990. 1 Although the odds are higher than most people believe, many businesses are still closing every year in the United States.
According to the BLS in March 2019, 774,725 entrepreneurs opened new businesses. According to the BLS, 774,725 new businesses were started by entrepreneurs in the year ending March 2019. We will discuss the most common mistakes startups make and how you can avoid them.
6 Best Reasons Why New Businesses Fail
1. The Market is not being investigated
You have always wanted to start a real estate agency. But you are blinded by the fact that there is a down market for housing and it is very difficult to get into the area you desire. This is just one example. This is just one example.
Instead of trying to push your product or services into a market, you need to identify an unmet need or opening in the market. It is much easier to satisfy a demand than it is to create one and convince people to spend money on it.
2. Business Plan Problems
A solid and realistic plan will be the foundation of a successful company. The plan will detail your business’s goals and how you can achieve them. It also includes possible problems and solutions.
It will determine if the business has a need through research and surveys, it will calculate the inputs and costs required for the business, and it’ll outline the strategies and timelines that must be followed.
You must stick to your plan once you have it. You are setting yourself up for failure if you increase your spending or change your strategies. Stick with your business plan unless you find it to be wildly inaccurate.
It’s better to fix the problem and then stick with your business plan. Your business will be more costly if you make more mistakes and your chances of failing are greater.
3. Too little financing
You shouldn’t ask for another loan if you’ve started a business and it’s not working out. You can start your business with enough money to last until you have a profitable business.
You might not be able to grow your business if you try to stretch your finances too early. However, you will still have plenty of cash to repay.
4. Bad location, internet presence, and marketing
If your business depends on location for footfall, a bad location is obvious. A poor Internet presence is just as dangerous. Your company’s location online and social media presence can be as important as its physical location in a shopping area.
People will find you online if they have a need for your services. If not, then the next step is to make sure that your business is visible and available.
This is similar to marketing. Marketing must reach people. Make sure your marketing is targeted at the right audience. For an Internet business, big billboards might not be the best option.
However, online advertising may not work for a heavy-construction company. If there is a need, ensure you reach the people who are most likely to be interested in your product or service.
5. Restricted Rigid
Don’t get complacent after you have done all the work, created your business, and built a customer base. You may not be able to fulfill every need. You can monitor the market to determine when your business plan may need to be modified.
You will have plenty of time to adapt your strategy to remain competitive by staying on top of key trends. You need only look at Blockbuster video or the music industry to see that even highly successful industries can go through huge changes.
6. Expansion Too Rapid
Once your business has been established, you can expand. However, you should treat expansion as if you are starting over. You must be familiar with the markets and areas you will be expanding your business’ reach.
You should be as familiar with the new products and services as your existing business to expand your business’s scope and focus.
If a company expands too quickly and fails to plan and research properly, it can lead to financial ruin.
The bottom line
Despite the fact that business failure rates are around 20% in the first two years, this doesn’t mean you should give up. You can avoid many of these pitfalls by planning well and being flexible.
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