It is a well-known fact that a high percentage of businesses never survive beyond their first year. Unfortunately, most of those that failed fell prey to the same handful of problems which could have been avoided if enough time had been spent on research. Once you understand what the most common pitfalls might be, you can plan to circumvent them from the very beginning. In other words, if you want to survive your first year in business, here are some of the main reasons why so many new businesses fail and how you can avoid falling into the same traps.
1. Poor Cashflow
The number one reason why so many new businesses fail is due to poor cashflow. To put it bluntly, they simply run out of money. Most analysts know that the first year or two in business are all about survival. Once you get past that, you can focus on profitability. Until you are firmly in the black, it is vital that you have mapped out ways to raise money to inject into your startup.
You can get fast business loans, find investors if you want to eventually share the profits, or simply draw from your personal savings if you have any left after putting everything into your new business venture. Always plan ways to raise capital during the first year because chances are you will need it!
Another of the leading causes of new business failure is burnout. If there isn’t a budget for hiring employees, many entrepreneurs try to work long hours seven days a week. Not only does their health suffer but so too do their relationships and family life. There comes a point when the body and/or mind simply gives out. You can only do so much before every bone in your body screams out, “Enough!”
Knowing this, it’s important to plan for imminent burnout in advance. Why not at least bring a few family members or close friends aboard to help you through those hectic days of building a business up from the ground? Many will gladly help to see you make a success of it and others may pitch in if you give them a few shares in the company you’ve just formed. Either way, realize that you can’t do it all on your own, it isn’t humanly possible!
3. Insufficient Marketing
Finally, if no one knows your company exists, how can they do business with you? Too many entrepreneurs fail to recognize the massive power in marketing and so they fail to set aside a budget for that. From content marketing to paid ads on Google, and everything in between, it is necessary to get the word out that you are in business and what you do is better than anything else out there.
Once you have a basic idea of the most common reasons why so many businesses fail in the first year, it is easier to find ways to work around issues as they crop up. Being prepared is 90% of the battle, so go into your new venture well-prepared and you just might find that it is easier than you had thought to survive that frightening and stressful first year.