There are times when we are so overwhelmed with all those new business ideas. It could be a unique service or an awesome product wherein we believe so much in its potential that we become blinded by the immense feeling of excitement to the point that we fail to be practical and logical when trying to materialize the idea. Without proper planning and study, that business is definitely destined to fail. Here is a list of common reasons why a business is bound to fail.
1. Diving in Without a (Business) Plan
Definitely you need a plan on how to implement and grow your business. In order for you to have a sound plan, you should be able to know your market first. A good feasibility study will allow you to look at different angles of your business preparing you for challenges you will be facing head on. Running a business without a plan is like sailing a ship heading to nowhere.
2. Starting Up for All the Wrong Reasons
If your main reason is just to get off the rat race, or make a lot of money and just wanting to be rich, then your motivation will not really help you last that long. I am not saying that wanting to earn money is a wrong reason, it is just that you are far better off when you do something which you are really passionate about. Doing something for money becomes work but if you do it out of love and passion, it becomes enjoyable. Passion will also allow your business to survive in times of struggles. When you are passionate with what you do, you won’t easily fall into the “ningas kugon“ trap – a Filipino term of starting things enthusiastically then quickly losing the enthusiasm soon after.
3. Setting Aside Zero Financial Buffer
When you start up a business, you should expect that you won’t be having profit in the early stages. It would even take at least 2 – 3 years to reach break even. So be sure to have enough money to let the business survive even if you are just running a service company. You may not need raw materials or products to purchase or sell but you still have some administrative expenses to shoulder.
4. Mixing Business Income/Expenses with Personal Expenditures
When your business profit is used to pay for your personal expenditures, then your business is doomed. Instead of letting the income roll over and re-investing it so that your business will grow, using your profit to settle your mortgage, fill your fridge, or sustain your lifestyle will quickly shorten the lifespan of your venture. The solution? Give yourself a salary and use that. Never make your business’s income personal.
5. Never Asking for Professional Help
You might be good at baking but you don’t know how to market your cake. Let’s face it, we need other people with experience and expertise to help us in other aspects so that the business will succeed. We would think that hiring professionals is costly. It is not. Trial and error is. That is what franchise business is also for. Though you pay royalties, you are in fact saving unnecessary costs due to your lack of experience.
6. Impulsive Decisions
You believe so much in your idea that you decide to open offices in every city without even conducting a feasibility study. You feel so sure that the product is a hit so you fill your inventory with thousands and not even considering the marketability.
7. Not Innovating
Your product may be in demand at first but consumer needs evolve. You will also be facing competitors who will do their best to create a better version of your product. A perfect example would be mobile phones. Nokia was previously a leading brand until Apple and Samsung provided a more innovative product. If you are not willing to adapt and innovate, then your business will be on the losing end.
8. Poor Marketing
According to Seth Godin, author of “Purple Cow“,
“If the company is failing, it is the fault of top-level management, and the problem is probably this: they’re running a company, not marketing a product.”
That is certainly true. And in his book, Seth emphasizes that getting the word out there, letting people know that your service or product exist is not even enough. An excellent marketing strategy goes beyond (product) presence and visibility. It should create the demand.
So for the aspiring entrepreneurs, may this list guide us and hopefully turn things around as we share our own insights on “How to Win in Business”.
[Note: This article is originally from Journeys of the Lost Monk. ]