If you are not going to do anything about it!
Not only that starting a business is hard, it is also risky! “50 percent of new business fail”, “you have to burn through 4 business, for the 5th one to succeed!”, these statistics are now so common, they are almost proverbs in a world of business.
Ironically, they are not true anymore. A study by Ormsby Street found that small business survival rates are as high as 91 percent after one year of trading, but after five years just four in ten small businesses will still be trading. So, owning a business is still risky and there are plenty more reasons why a business can fail. In this unpredictable business environment, it can be hard to not only ensure market need but to predict demand.
To help you avoid the same mistakes we looked at the latest research to find out in which areas business fail most often.
In a recent self-reported study by CB Insights, approximately 10 percent of failed start-up entrepreneurs surveyed attributed their failure at least partially to a “pivot gone bad,” while 7 percent attributed it partially to a failure to adapt. Bad hire or bad decisions can drain resources and money as well as leave employees frustrated by a lack of progress, and this can easily spiral into overall lack of productivity, staff or management burn out and so on…
Similarly, 42 percent of businesses cite a lack of market need as a reason for start-up failure. This can all be attributed to the lack of adaptability and flexibility that your business planning needs in the current environment.
It’s a generally accepted that growth means good, but it is only so if it is done at the right time. In fact, if your business planning did not consider scalability it might be pretty damaging. If you are hiring too many people too quickly, if you are spending too much on marketing, you will burn through your resources and will be able to maintain it.
Startup Genome Report based on data from 3200+ high growth global technology start-ups found that more than 90% of start-ups fail, due primarily to self-destruction rather than competition. 70 percent of all the failed start-ups attempted to scale prematurely and burned through their resources too fast.
Failing to plan is planning to fail. If you don’t know where you are going, you will never get there. Having a comprehensive and actionable strategy allows you to create engagement, alignment, and ownership within your organization. It’s a clear roadmap that shows where you’ve been, where you are, and where you’re going next and how can you make your business scalable. The report by CB Insights found that 17 percent of start-ups failed due to business planning and issues with a revenue model. Many cited staying wedded to a single channel or failing to find ways to make money at scale left investors hesitant and founders unable to capitalize on any traction gained.
No performance data or analytics
Every business, at every level, can and should collect and analyse performance data these days – whether it’s the conversion rate of your website or counting the number of people who only enter your shop compared to those who buy. You need to look at overall business performance to help your managers reach their departmental goals and enable them to make better decisions.
Unfortunately, numerous large, once – successful companies have failed in recent years due to the lack of analytics and adequate performance management. Giants like Blockbuster and Toys’r’Us have fallen from the great height because they failed to make appropriate, informed and smart business decisions when it was necessary.
With cloud-based CPM software, like ProForecast businesses can greatly simplify their rolling forecasts, streamline their budget cycle, and reduce human error. With multi-dimensional forecasting abilities, businesses will have greater control over their budgets while experiencing increased visibility and control over the what-if scenarios that drive business decision making.
Poor Financial Management
Oh, the pain of the business! A classic statistic by SmallBizTrends.com states that 40% of small businesses make a profit, 30% come out even, and the remaining 30% lose money.
Unfortunately, many business owners struggle to estimate how much money they will need, and they are forced to close before they have had a fair chance to succeed. It is imperative to ascertain how much money your business will require and acquire appropriately. A solid cash flow forecast and a financial plan is a foundation for a good business future.