Close to 90% of all small scale business start-ups fail within the first year. This is usually due to the business drawing in more costs than it gains, leading to losses which paralyse the business and cause a premature closure. Generally, the main goal of starting any business is to make money. However it takes more than a good idea and knowledge of industry within which you are conducting business, it also takes a bit of financial savvy plus the ability to look at the bigger picture. Here are some reasons why most business start-ups will not see the end of their first year.
Poor Management Skills
Most first-time business owners lack a management background and any general managerial skills. Any boss who is unable to plan the day to day operations will naturally result in disorder. If the business is to succeed, the entrepreneurs need to undergo training on how to properly operate a business. In addition, those who are unable to properly manage staff will find their team morale and productivity lacking and possibly even suffer from a high turnover of staff. Every successful business requires a stable, well focused team. In order to attain such a team management should instil respectful treatment, patience and understanding.
Lack of Useful Technology
Technology is a major factor in determining whether a business will succeed or fail. Small business are known to try to save some money by leaving technology out. This may be counter-productive as their competitors may be well equipped thus leaving the start-up business out in the cold. Unfortunately, when your business is starting out it is unlikely that you will receive any personal monetary benefits for a few years as all your profit will likely need to be pumped back into the business to secure its growth. Greedy business owners who are only in business for personal gain tend to fall into the category of failure within the first year.
As mentioned previously, the first couple of years of new businesses require funds to keep the business running. Before any profits are made the funding must come from somewhere. There are many grants provided by the UK Government which are set to encourage and support small business owners and local entrepreneurs. Preparation and keen research is key to funding.
Failure to Prepare and Research
Before you can start a business, you need to be aware of what you are getting yourself into and properly identify your target market and identify the costs. If research is not properly done, then success will be impossible.
Unwillingness to Ask or Bring in Help
Most first-time business owners have the ‘I can do it all’ attitude which makes them not to seek help especially in matters concerning management and technology. They view asking for help as a failure but it is what drives them out of business. Having an ally or mentor within your industry, or even simply a veteran business owner will help you avoid the pitfalls of starting out and could save you a lot of time and frustration.
Most business owners think that they will start making huge profits right after starting their operations. They don’t give the business time to mature enough to be able to generate income for them. This leads to frustration and most of them give up even if they were on the right course.