It is a common phenomenon where a business flops after making some initial gains. Many initiatives end-up in failure before making an impression in industry. Others take more time than it would if the execution was sufficiently fitting. An idea can undeniably change life, but only when it is coupled with immaculate execution. Aspirants fail to forecast problems and try to solely face the challenges.
The review of some cases depicting small business struggling to survive reveals that the failure causes are repetitive. Simply put, ensuring the prevention of these problems can enable over 95% of businesses to sustain.
Most repetitive mistakes as shared next are also the most adverse ones.
Lack of identification of Challenges
The primary cause of failure is the deficit of exposure to industry. Inexperienced individuals underestimate the challenges since they usually consider the ideal scenarios and overlook worst cases. Once they put the boots on the ground, the circumstances become much more hostile. Exposure shortfall reflects in a number of ways.
- Some fledgling entrepreneurs misinterpret or entirely sideline the local and global corporate laws. This error results in issues like data breach and poor employee management.
- They invest largely on outlook of the business and fail to understand the significance of software efficiency. This problem indicates the inability to identify consumer needs.
- New businesses often struggle to develop a robust framework for customer relationship management unless an experienced manager supervises it.
Underestimating the Competition
A bumpy roller coaster is an appropriate metaphor to represent investment in already fiercely contested industry. Nevertheless, like most coaster rides, the challenges do not pose any serious threat as long as the entrepreneurs ensure adequate precautionary measures. However, the ride may end up in a catastrophic situation otherwise.
One of the small business struggles includes the lack of capital for investment. Appropriate spending of money does wonders as fairly new products and services manage to attract market share. However, relentless spending disregarding the consequences yields unintended results.
Karhoo – London-based cab startup – demonstrated promising business potential. The executives poured in a tremendous amount of money to subsidize the promotions to attract customers. The idea was correct, but the profligate executives fantasized the arrival of funding from investors. Unfortunately, the funding never arrived due to the trust deficit of investors. Karhoo had to cease the operation in a day. Later, Renault acquired the company.
Inexperienced businesspersons must know that the established companies will have deep roots in the customers. It should identify the weaknesses of existing enterprises and come up with innovative solutions.
Vague Business Model
A business gets off to a brilliant start but fails to sustain the market share in the long run. This problem is often the case in software application development industry. The principal cause is the absence of visionary leadership.
An entrepreneur may have a business instinct as well as a broad approach to view impending challenges. However, industrial experience is essential to preempt measures intended to avert looming dangers. Growing businesses require greater expertise. Otherwise, the progress will halt at some point and will lead up to depletion over time.
Targeting the wrong customers or irrelevant market also reflects an unclear strategy resulting in common pain points. Expecting to flourish in a market where the consumer needs drastically vary is unwise. Since the customers are primary drivers of companies, requirement analysis should prioritize to address their demands.
A large proportion of businesses fail to sustain owing to the lack of flexibility in the business model. The companies fail to keep a window of transformation to incorporate new technologies. Consequently, they fall out of favor of customers when a competitor introduces better services using technology.
Inappropriate Funding Acquisition Methods
Finding a unique idea ensures a considerable probability of success. Gathering the funding for its development and sustaining it is one of the pain points of small businesses. Most software apps business models do not require sizable money for development. However, they do need it for appropriate marketing.
Business aspirants struggle to win the trust of investors. Many investors refuse to put money despite initially showing consent – as in the case of Karhoo. Others are uncertain about the outcome and wait for the time when business starts to demonstrate considerable profits. Sponsors tend to trust more on the developers with previous successful experience.
Many individuals try to acquire funding through public campaigns. This strategy is evenly challenging as sponsorship from investors. Crowdfunding is almost impossible unless a business offers some noble cause. The sustainability of environment and helping the city administrations are some of the areas which may attract public funds.
However, research intended to find the success rates of crowdfunds for small businesses indicates that businesspersons find it intensely challenging to justify the funding. This daunting task follows from the fact that funding individuals will question the spending regardless of the amount they contribute.
Inefficient Human Resource Management
One of the major problems with startups during their initial couple of years is human resource management. Employees always carry a fear of job insecurity as a nascent business may shut down anytime. As soon as they develop some experience, the employees switch to another more stable company.
The role of resource managers is crucial in building confidence in the employees. They need to eliminate the doubts by demonstrating how the company would flourish in their presence. Moreover, they should also remind the employees about long-term rewards for loyalty with company.
Startups require experienced individuals to streamline the business. However, successful personnel in industry refrain from joining startups. This problem creates a major deadlock for the HR team and highlights chief employee pain points examples.
Identifying the major factors of failure serves as the gateway to rectify shortcomings. While identification is essential, it is pertinent to mention the appropriate alternatives. Small companies exhibit remarkable improvements if they replace some elements in their business model with more fitting ones.
The article mentioning success factors and alternative policies will be published soon. To get the article as soon as it is released, subscribe to the newsletter right now. Furthermore, if you intend to streamline your business with technology, contact us today.