As always, a good business has a really good business plan. As they say every minute you spend in planning saves you 10 minutes of execution.
A plan is not just a one course alternative though. Plan A is not enough. You need to have Plan B, C .... until Z if needed (like seriously).
Take a look at these billion dollar startups from 2004 to present: http://www.staff.com/blog/the-billion-dollar-startups/
These companies never reached their status without failing at some point. You just need to get back up and rethink your strategy to keep going.
Sometimes they forget to network with decision makers who can buy their products or services. The phone won't ring just because you launch your business. You have to consistently be proactive
Weak researching abilities.
Research is about information.
Information is key to decision making.
Most small business fail because they do not plan properly BEFORE they start.
They start with more overhead expenses than they need. Their expectations are not based in any research. Most have not done any research or planning of any kind. They do not seek advice from professional that have had business experience. They do not follow the advice that experienced professionals give.
They do not understand what is involved in running a business. This comes from over 30 years of business experience. The statistics are staggering for every business started this year 51% will fail within 5 year, 69% within 7years and after 10 years only 4% will still be around. If your dream is to own a business then take the time to ensure that it will survive. Be smart and do your best to plan and create a business that has a chance.
Most fail because they do not have a viable product. Typically this is a result of focusing on the solution and not the pain/gain of customers who are willing to pay a sufficient amount to solve the pain/ get the gain that makes the venture viable.
As Steve Blank says - "...no business plan survives first contact with customers". What he means is it's all just guess work until you get out there and test/validate.
Steve and many others use the Business Model Canvas as a single page tool/scorecard to quickly capture business ideas (hypothesis/guesses) and then as you validate those guesses capture changes.
I use the canvas with my clients and developed a tool to make it easy to share/update. You are welcome to try it out at http://bmfiddle.com - it is very easy to add items and you should consider a few different scenarios/models each on separate canvases. Once you've settled on one you can capture changes using the snapshot feature for later review.
So use a simple canvas to quickly capture, test and validate your ideas and iterate to a viable model.
Because they take three years to get going and note many people can stay in the game that long.
There are two primary reasons:
1. Failure to economically and quickly receive validation of your idea from your intended customer
The intended customer was never consulted as to their needs, wants and desires, relative to the product or service being offered.
2. Failure to Execute
The entrepreneur and/or the entrepreneur’s team failed to properly plan for and execute a program to deliver, market and sell that product to the customer, as promised.
How do you prevent your new business from failing?
First, you need to consult with your intended customers. You can do this by making the least expensive facsimile of your proposed product and take it to your intended customers for their input. So, instead of spending your time developing a “completed” version of your product, you will save that money until you have confirmed with a significant number of your potential customers that:
a. Your product solves an acknowledged problem (more quickly or less expensively than their current solution)
b. Your product meets their desires – so they want it now!
And, most importantly,
c. They would buy your product today, if it were available.
If you need to revise your product (and you probably will) due to significant customer reaction, you can easily do so – because you have not previously wasted all your time, effort and cash developing a finished product.
This process is repeated as often and as quickly as possible until you have a product idea or service that your customers would buy today.
Only after you have your product “validated” should you proceed to develop your Business and Strategic Plans.
Second, to solve ” failure to execute”, you will need to assess your and your team’s talents and skill sets.
This is required to determine what talents and skills are missing to competently execute the delivery, marketing and selling of what you will have to offer, so that you can augment them with players who will provide what is lacking.
Having a product that your customers will want and a team that can execute your vision are the best ways to assure that your great idea will become a viable and sustainable business.
In my observation there are only three for early stage:
1. You can't actually produce the product you thought you could
2. There's no demand for your product
3. You can't operate profitably
The trickiest risk of the three is demand - you simply cannot know if there's demand for a product until you try to sell it. Surveys and secondary research are useless.
This is displayed graphically here: http://arenaentrepreneurship.blogspot.com/2012/12/the-only-three-reasons-you-wont-succeed.html
The 16 Major Blunders that will Kill Your Business in 2013
Every person who works for someone else in today’s business world dreams about someday owning their own. This so-called “entrepreneurial itch” peaks during times of job-stress or unexpected home pressures that help make
up the adventure that we call life. Recent studies show that more than 50% of all workers are “unhappy” in their current job and long for a business to call their own.
The passion to start a business on your own is tempered by the natural fear factor of failure which grips the mind of every would-be entrepreneur. Nobody likes to fail ……….and fail you will if you don’t properly plan your
escape route from your “employee prison”.
After working with thousands of businesses over more than 30 years, I have identified what I call the “sweet sixteen” most common blunders made by entrepreneurs in starting their own businesses. Avoid these blunders, beat the odds, and go live your dream:
Blunder # 1: Choosing a type of Business that you do not Truly Like – but others make money in it. This is actually a lot more important than running out of money.
Blunder # 2: Failure to find your Niche. (eg: Selling an identical product or service that the large chain stores sell)
Blunder # 3: Underestimating the initial total Capital Investment required to get the
business off the ground.
Blunder # 4: Failure to have a Realistic Written Business Plan drawn up at startup with realistic sales projections.
Blunder # 5: Failure to set up a Workable Referral Network prior to opening the business- a free sales force for your business.This is crucial – don’t leave your current job without it.
Blunder # 6: Under-Pricing your product or service.
Blunder # 7: Lack of Outsourcing of some business functions to others…hire a clone quick!
Blunder # 8: Misclassifying Employees as Subcontractors
Blunder # 9: Insufficient time and funds spent on Marketing & Selling your product or service.
Blunder # 10: Under-Insuring and/or failure to incorporate or set up a LLC entity structure.
Blunder # 11: Physically Over-working- the all work / no play concept
Blunder # 12: Failure to inform people who care about you that your work hours and work habits will drastically change and obtaining their acceptance of the situation.
Blunder # 13: Spending too much on Equipment & Overhead.
Blunder # 14: Lack of knowledge of tax laws & local regulations.
Blunder #15: Extending too much credit to customers.
Blunder # 16: Lack of adequate Research of the industry and marketplace before starting up.
Avoid as many of these blunders as possible and remember to keep your hands out of your wallet until you finish all your homework. Then go out, take a deep breath, and show the world that you made the right choice!
1. pricing is based on costs or desired return, not on market demand, competitive pricing on long term volumes.
2. I find many "entrepreneurs" just aren't prepared to work hard, suffer hardship and be flexible to market forces.
No clue how to run a sustainable enterprise. No clear understanding of how to sell the product. Not protecting their IP.
In a word? "Home work"
Planning, researching etc. Remember also that the greatest ideas people are usually the worst planners and leaders of a business.
Lack of start up capital. Take the amount of money you project for start up and multiply it by 5 to 7 times.
Resourcing of materials.
Lack of committment or willingness to do the work necessary. It will take more time than you anticipate. Plan on 12 hour days.
Finding good help to support you as you expand.
The primary failure is a lack of reality and an excess of "Hopium" - because hope is not a strategy.
It's a result of selecting the wrong people on the team. People who lack the required skills in product/service development, fail to think strategically and pick too small a market to serve or a product and business model that can't add enough value to customers. They don't understand how hard the road is and how much money the business requires. Typically they've not put agreements and governance structures into place and so argue over "their share" and who deserves more (or less). They lose focus (if they ever had any) and run out of cash because they can't generate sales or raise capital and the game is up.
In my opinion there are three major reasons:|
A bad Idea
1. Prioritization of focus (dividing focus into sub focus)
3. Having numerous investors.
4. Lacking advertisement.
5. Not knowing the market or over-estimating the value of your product in the market.
6. Expanding too fast.
1. Money is the lifeblood of a business!
2. No business plan.
3. Product/service not relevant at price offered
1. To much on focus on the development of the ultimate product/service, while neglecting the necessary sales and marketing activities. This will result in cash flow problems.
2. Ability to follow expert advice.
3. Time consuming proces to obtain 2nd and 3rd round financing, while core processes will not get the necessary attention..
4. Lack of governance and reporting.
5. Too much of power in one hand/No delegation.
First and foremost - failure to recognize the need to have the business side of things run by someone with business experience. Time and again startup fail because an entrepreneur with a great product vision insists on running the business despite the lack of business skills and experience. This leads to poor decisions that doom the business.
Second, failure to understand what the market actually wants. Building what is cool or exciting is of little value if there is not a market need for that product. Take the vision and tailor it to what potential customers actually want/need.
In my experience (worked with a few hundred start-ups over the years), most start-ups fail because of structural issues. Bad agreements, centralized power, power in the wrong place, etc. Most entrepreneurs have been through at least one company with governance issues.