We constantly hear about how the bulk of new businesses fail, but how often do we step back and look at the big picture of why?
Sure, there are obvious symptoms of failing businesses, including crowded competition and poorly planned products. Yet there’s so much more to why businesses fail than being in the seemingly wrong place at the wrong time.
In fact, the bulk of the reasons why companies go under can be tied to five specific factors. Below we’ve broken down what often stops budding companies in their tracks and what can be done to ultimately avoid these not-so-silent snafus.
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Failure to Assess Risk
Risk management and keeping up with different types of compliances is a necessary hurdle for big businesses today.
From avoiding legal trouble to costly compliance issues, having a pulse on such details of a company is crucial for long-term survival. Although monitoring these metrics is arguably easier than ever with the help of GRC solutions, risk and compliance issues are still the cause of many big business headaches.
Growth is certainly a positive for most companies, but growing too quickly can serve as a kiss of death. By bringing on too much talent at once, companies tend to create roles for the sake of it or hemorrhaging money on new positions that don’t make sense.
There’s a reason why lean startups today stress the need to do as much as you can with a small team, outsourcing here and there as deemed necessary.
On a similar note, expanding into new territories too quickly is one of the most common business growing pains. In an era of global eCommerce, for example, it’s easy to assume that a company can thrive in a new market without much of a problem.
Yet considering factors such as shipping costs, language barriers, and inventory issues, expansion is something that should never be an on-the-fly decision.
Imitation may be the sincerest form of flattery, but copycatting your competitors won’t do you any favors in the long run.
Think about the boom of social networks in the mid-2000s and how Facebook is the only name from that era still standing. Their initial resistance to ads and emphasis on personal relationships represented their unique selling proposition in the face of many spammy, bloated competitors.
Whether due to tone-deaf ads or spending far too much on the wrong channels, a disorganized marketing strategy can spell doom for a business trying to get off the ground. While there’s certainly a time and place for paid media, those with small budgets should instead focus on ‘free’ tactics (content marketing, word-of-mouth, networking) and spend wisely on channels with a proven ROI (Facebook ads, SEO, link-building).
How to Avoid These Common Business Mistakes
In short, steering clear of these errors boils down to three specific steps:
- Do your homework: businesses must spend ample time researching and gathering data before making significant financial decisions.
- Take advantage of tech: there are so many software solutions to help uncover marketing opportunities, assess risk, and clue business owners in on opportunities.
- Have a plan: setting goals consistently (think: financial milestones, etc.) can help businesses stay on course versus getting off-track
Even if you don’t see your business as being anywhere near these issues, at least keep them in the back of your mind. Small problems can quickly snowball into something bigger, so by knowing what to look out for; you can make more informed decisions in the meantime.