Unfortunately, it is quite common for new businesses to fail within the first couple of years of operation. By the time year 5 comes around, only 50% of small businesses will have survived, with this dropping off to 33% after 10 years. Whilst we don’t want this to put you off starting up your own business, it is important that you know the facts before you begin a new venture.
We have compiled a list of the four most common reasons that businesses fail, so you know what to look out for:
1. No demand for your product or service
You need to have a service or product in mind in order to start a business, but that isn’t all you need. It is important to ensure there is demand for what you intend to sell, and carrying out market research is essential. There are a few ways that you can determine whether there is a market out there for your product or service:
- Talk to your target audience, who will be potential customers and understand their problems and needs. Does your product or service provide a solution?
- Conduct thorough market analysis – surveys are great for this.
- Subscribe to industry newsletters to make sure you fully understand the market you are about to enter.
2. Cashflow problems
The best advice we can give you here is to hire a professional accountant from the start. While you may think that it is an extra cost in the early stages of your business when profits will be low, you will be grateful for this support later on. Unsustainable growth will mean that your business won’t be able to stay profitable, and if you don’t have enough sales then your cash flow will be negatively affected.
If you have the correct guidance and support from the start, you won’t fall into any of the cashflow pitfalls that are hard to get out of. Keeping your business financially stable from the start is key here.
3. Underestimating the admin side of the business
We have touched on this already in previous blogs, but you will soon realise that running a business isn’t just about selling your product or service. You will be required to wear several different hats, which you may have no experience of – think HR, marketing, sales, design, administration.
Being a busy entrepreneur, it can be really tough juggling all of these different aspects, which is why we provide virtual office services as part of our packages. This means you have access to a virtual receptionist, mail handling and call answering. Giving you more time to focus on the elements of your business that bring in the pennies.
4. Choosing the wrong business partner
That isn’t to say that you need a business partner in order to launch a small business or start-up, it is just fairly common. Having the right team and support system around you can be the difference between having a successful business and having one that falls apart.
There are lots of different ways to find the right business partner, and you may well have someone in mind that you have been working alongside for several years. Another alternative if you need more funds to start the business is franchising. A franchise business will give you access to an experienced, successful team who are specialists within a certain industry. The initial investment figure will vary, so it is worth doing some research and finding the best solution for you.
Keeping Costs Low
We hope this has given you an insight into how to run a successful business, and remember in order to help cash flow you need to keep your overheads low. That is where virtual offices are the perfect solution. They provide you with a professional address and other admin services, for a very small monthly fee. If this is something you are interested in, please contact Venture Offices on 01205 809222.