Small businesses are popping up in record numbers due to a growing realization that running a business is probably the only way to financial freedom. Financial gain from desk jobs are simply not keeping up with inflation and the devaluation of money, and is usually subject to the whims of a select few on top. However, according to Bloomberg, a whooping 80% of entrepreneurs fail within the first 18 months. To become a successful entrepreneur, you must have an attitude of learning from mistakes – hopefully, someone else's. And if this is the case, it follows that volumes of lessons can be drawn by the unfortunate 80%.
Here are our top 5:
1. Lack of capital
As the saying goes, “it takes money to make money.” Differences between capitalists and entrepreneurs notwithstanding, the latter would do well to do a fair amount of study as to just how much money you need to give yourself a fighting chance to make it to a break even point. Do not be fooled by a few exceptions – getting to said point could easily be two years down the road, probably as many as five. In the meantime, is your estimated capital enough to keep the business running? Does it cover all possible expenses? Is it enough to keep you fed and sheltered for that timeframe, even?
2. “What we have here is a failure to communicate”
This is a potentially huge problem in two ways.
The first problem is not being on the same page as your customers. “The customer is always right,” and if you do not know what your customers are right about, chances are, you'll be wrong. This is especially true in the modern world, where you have all the tools in social media to actually have deep and meaningful dialogue dialogues with each and every customer. This has also evolved the consumer base to demand nothing less than complete honesty and sincerity in all business deals and marketing campaigns. If you're in it for the money instead of for the customers, you'll soon be found out and torn down brick by perfidious brick. Speaking of which …
3. You're in it for the wrong reasons
If you're starting a business for reasons such as making a ton of money and not answering to any boss, you might be better off making minimum wage and getting shouted at the COO (child of the owner). Valid reasons for starting your own business include a passion for the product and service you aim to provide; dedication and perseverance to weather any challenges; a highly independent streak; and, as touched upon earlier, a sincere love for your customers, marked by honesty and integrity.
4. Poor management
StatisticBrain.com compiled research from Entrepreneur Weekly, the Small Business Development Center, Bradley University, and the University of Tennessee. It was found that the number one major cause of failure is (drum roll please), “incompetence,” which made up 46% of all failures. “Specific Pitfalls” enumerated were emotional pricing, living too high for the business, non-payment of taxes, no knowledge of pricing, lack of planning, no knowledge of financing, and problems with record-keeping. Google it, or better yet, ask for expert advice from established businesses in your area.
Networking with other businesses in the area can also greatly help in other ways. You can help market each other's products, even if in the same line of business. For example, if you own a burger joint and befriend a pizza place, you can give out each other's flyers and suggest each other to your own customers. No sane person will eat either burgers or pizza every single day anyway, so there's no real reason to compete with each other. People tend to go after sincerity in the small businesses that patronize, which is directly linked to a propensity to support local homegrown businesses that foster a sense of solid community and friendship.
5. No effective online presence
This is simply a mistake in today's world. Period.
Not convinced? Here are some quick stats:
– 77% of the population are internet users
– E-commerce sales were $ 165.4 billion in 2010 alone, which is expected to significantly increase each year
At the very minimum, you should have a site with all the usual information a customer may want to know. However, expand to social media and networking with other businesses, and watch your business explode.