Why should you start a new business after one fails?
Even if you start with a fantastic business strategy, have a dedicated team, have lots of strategic plans, it’s quite hard to survive in the business markets.
According to the statistics, over 90% of business startups fail in the first 5 years, and it’s true. Dozens of businesses collapse in the first couple of years, not even a surprising part.
If you’re an entrepreneur, you need to accept the failures that arise in the business journey.
In this guide, you will learn why do businesses fail and need to start over again.
Table of Content
Owning a business means you need to have a unique mission statement and financial modeling. Establishing a successful business is every entrepreneur’s goal. And failures do come in the way.
Risks that Entrepreneurs face when Starting a Business
Every entrepreneur faces many challenges when starting a new business. To support business growth, lots of entrepreneurs have to put their careers at risk.
However, it is important to acknowledge where your competitive position is in the business and take the necessary steps to pick yourself up and target the market.
Here are some risks that an entrepreneur takes when starting a new business:
1) Economic and Financial Risks
To run a business successfully, entrepreneurs need to have a good sense of managing cash flow. It is one of the most information core values in establishing a brand.
You never know when your business will suffer from bankruptcy.
Any new business should have a financial plan because every decision can significantly impact your company’s financial position. So it’s essential to be careful with the investments you make.
2) Technology Risk
We are well known about the fact that new technologies are emerging day by day.
Every business has to face technological risks. To sustain in the business market, companies need to invest in new systems and processes. This will intimately affect the company’s bottom line.
One can fall from a top-level to the bottom if they lack in the technology field.
3) Market Risk
Running a business is not as the new market trends can affect your business strategy.
New trends tend to create a new business risk because a specific product might be famous for a couple of months and does not last long.
It’s better to do a swot analysis before you start a new business.
4) Competiton Risk
An entrepreneur should always be prepared and aware of their competitor’s strengths and weaknesses. If there’s no competition in the market, then there’s no demand for products and services.
Mostly new businesses have the risk to face competition from already established companies. Don’t worry! No company is immune forever.
Already established businesses also have a high chance of falling. In this case, to minimize the risk, you can do SWOT ANALYSIS to counter-attack the competition.
5) Environmental Risk
The risks that are not controlled by ourselves are environmental risks.
It can include natural disasters like earthquakes, floods, landslides, pandemic, etc. These risks can tremendously affect customer retention and resource allocation.
In this case, before you start, make sure to analyze the geographical locations when opening a business. It can also be controlled by the right business plan or insurance, depending on the situation.
6) Reputation Risk
As a starter, it’s tough to maintain the pride of your company. Business reputation is everything. Your customer’s expectations will be very high.
It’s a very initial stage when your business disappoints your customers. One wrong move can change the thoughts of customers towards your business.
The reputation of your business can be maintained by following a strategic direction.
Check out the article on how to build a brand. This guide will help you on how to preserve your business reputation and enhance your business strategy.
Reasons that Initiate a Business Fail
Your business fails when it’s not able to generate more revenue to cover the expenses and operations.
Your business needs to generate more cash flow daily and apply an adequate business strategy to meet the required goals.
If your business can’t generate cash flow of daily expenses, it is meant to fail.
Let’s discuss why most of the business fails:
1) Lack of Experience
You have to be well known about the fact that a lack of experience affects your business.
There are no shortcuts to be successful in business. Having a specific skill and good knowledge makes your business better.
You need to know your strengths and weaknesses. Learning new strategic management and growth strategies help you to determine either success or failure in life.
2) Inadequate Cash Flow
The most common reason businesses fail is not having sufficient investment for their business’s adjustments.
If you don’t have enough cash to cover your day to day expenses, then it means your business won’t survive. You need to have a sound knowledge of resource allocation and financial modeling.
3) Defective Leadership
As a business owner, your employees, clients will all look to reflect the business. To effectively lead your team, you must have the leadership skills so that your business keeps on running.
Make sure to have a clear mission statement and set specific goals to be easy to execute.
4) Poor Location
Your business location always plays a massive role in generating more customers. After all, a location where you decide to operate your business is where you put the money plant to grow.
Make sure to choose a location where your customers feel more convenient and comfortable. Keep in mind that a good location for your business can grow your business income more consistently.
5) Lack of Online Marketing
Every entrepreneur must be aware that online marketing is crucial for all businesses. In this modern era, don’t miss out on the marketing benefits to compete successfully.
If you want to invest in something important, then online marketing is the best option. If you would like to know more details, check out our marketing plan guide.
6) Poor Marketing Policy
What can go wrong when you have a poor marketing policy?
Be well known that without a proper marketing plan, your business will operate slow and harder to grow.
You have to face so many consequences when you don’t have the right marketing plan. Create a marketing plan before you jump into any decisions to increase your sales revenue.
How many Businesses Fail in the First Year?
It’s true that for the first couple of years, businesses are the hardest to survive. It’s even more challenging for the ones who are entirely new startups.
They lack business strategy experience, which tends to fail their new venture.
According to the Small Business Administration (SBA) Data, approximately 20% of startup businesses with employees fail in the first years.
A new business is like a newborn baby that needs care and commitment. It’s exciting, fun, a lot of work, and in the same way, it’s just a lot of work with a severe headache.
Before you operate your business on a functional level, it’s better to have your mindset that you will survive for at least 5 years in your business field.
It will be hard during the first 3 years, but you can gather many experiences, ups, and downs. Don’t open a business when you are not ready to bear all the problems in the first 3 years.
However, as you enter your fourth year, it seems a lot easy, and all the hard work you have done will seem to pay off.
Signs that Indicate a Business is Failing
We all start a business for many different reasons. But do you know your business objectives?
A sense of purpose in the business is essential; otherwise, you won’t stand out in business markets.
Launching a business seems simple, but managing that particular business for the long term is a challenge.
Most of the business fails without even knowing but here are some signs to consider seriously that your business is failing;
1) Low Sales Revenue
The first reason behind the failing business is due to low sales. If your sales drop off suddenly, then assume that your business is in a severe problem.
Try to figure out the problem of what went wrong. You can change your business strategy if there might be a problem in the sales sector that can be resolved by chance.
2) Nothing Unique
You have to have a point of differentiation. Do something interesting, something unique; otherwise, you’re not going to stand out.
It’s tough to gain customers. If they can buy products from any other company, then why would they choose you? You need to figure out how you can make your customers come to you by being different.
3) Customers aren’t Coming Back
One essential metric for a company is to find how many of your customers visit you back after using your products or services again and again.
Many entrepreneurs are focusing on financial modeling and sales revenue to get in the league of corporate level. Still, if you want success, you need to consider customer retention.
4) Employee Turnover
The next sign about your business’s failure is if your employees aren’t happy. You will spend a lot of time interviewing and training your new employees.
Always make sure to care for your employees’ well-being and try to make them happy with the good reviews about the work they have done for your business.
Managing teams properly should be your priority.
5) Not Focusing on Profit
Profit management should be checked because it’s your primary goal for doing business.
Don’t lose sight of profit margins because it’s what you need to focus on to get a competitive advantage.
So try to focus on the profit goal and always be updated for your business’s next projects.
6) No one’s talking about your Business
Your business is entirely quiet if your customers aren’t talking about your products or services. Ask all your customers for feedback and make them feel special and make sure to be connected with them.
Leaving feedback, engaging on social media is a great way to spend quality time with your customers to know their thoughts about your products and services.
What to do after a Business Failure?
If you want to choose the entrepreneurial path, then obviously there might be failures too waiting for you.
“Failure is a success if we learn from it.” — according to Malcolm Forbes.
Failure is the stepping stone to success. It’s a truth that we often make mistakes, but you won’t sharpen your skills without failures.
When you make mistakes again and again in the context of business, don’t wait for it. Start searching for a new business strategy.
Here are some points that you should do after business failure:
1) Try to Analyze the Failure
Make sure to find out the leading causes of failure by researching the business’s history.
Try to identify the root cause or key components of the failure. If possible, you fix some common mistakes and decisions you made for those causes.
It will be easy for the upcoming days and doesn’t hamper the future business journey if you understand this.
2) Keep your Finances in Order
It can be the most challenging part, but it’s an integral part of your business. You won’t be able to rely on your business anymore until and without stable financial modeling.
Try and spend some time analyzing all your expenses and pricing strategy after your business failure.
3) Attend the Meeting with other Entrepreneurs
It will be productive if you share your experiences with other entrepreneurs and make new strategy formulation. Attend more events and try to connect with more entrepreneurs on related platforms.
Identically, you will be able to learn new ways to deal with the problems that you’ve faced in your way.
4) Start to think about a new Business Strategy
Take some time to think about a new business plan. Not any business failure can or won’t stop you from starting your new business and following your dreams.
Keep moving on the right track with the experiences you have gained through your previous business and think of new growth strategies.
5) Takeout Time for Yourself
Losing a business is very critical and challenging. If you take a gap before starting a new venture, you will be well prepared for the upcoming business projects.
A couple of Netflix time-travel series, romantic dinner with your partner, drinks with live music in the background, family time, and a few leisure activities to ease your tiredness.
You can spend some time doing whatever you like to do. Don’t stress your mind, and you will be able to prepare yourself on your next plan.
Things to Consider when your Business is Slow
Sometimes work is slow, and it feels like the business is going down. Your companies might be slow for different reasons.
It might be either seasonal trends or lack of demand for the products and services. When your business is slow, take it as an opportunity and make time to think about what to do in the coming days.
Let’s get into some points what makes your business go slow:
1) Strategic Planning
Are you considering your targets?
If things work out as you have planned, then identify your long-term goals, mission, vision, and business objectives to evaluate your business goals.
2) Reach out to your Past Clients
One of the effective ways to run your business is to re-contact with your clients through different mediums and let them know that you are available for work.
3) Creating New Contents
It’s a good idea to create a content marketing strategy that delivers good results to uplift your business and gain a competitive advantage in the market.
It’s also a great way to engage your customers. It’s like a roadmap that tells you what you will create and your customer’s view about your products and services.
4) Have a Scheduled Plan
Take out time from your schedule to have a specific plan for the next day or week. By this, it will save a lot of your time, and you might never run out of ideas.
Without a proper plan, you might not be able to achieve what you want from the business.
5) Get a Business Partner
A business partner is not a necessity, but sometimes it’s better to have a business partner. Maybe your partner will influence you and do better in business.
Before you plan to partner with someone, a complete comprehensive research about the partnership process is a must. You may never know when you regret your decision.
You can spend some time doing whatever you like to do. Don’t stress your mind, and you will be able to prepare yourself on your next plan.
Mistakes to Avoid when a Business is Failing
As a business owner, I have experienced that a business needs a lot of dedication, time, money, effort, and working business strategy implementation.
There might be various reasons for business failures. It can be both internal and external factors.
1) Lack of Proper Management
Managing a business is extremely hard. Poor strategic management leads your business to collapse from the market.
Make sure not to lack finance, marketing, and customer retention skills, which leads to taking your business to the next level.
2) Learn from the Situation
The worst situation will teach you to learn and make a move.
Instead of getting stuck where you are, the important thing is to learn from the situation and move forward to achieve your goal and be at the top level.
3) Have a Good Customer Service
It’s another way to prevent your business from collapse and make sure that you are still in profit by maintaining good customer service.
Listen and address your customers’ concerns immediately so that customers won’t be disappointed.
4) Create a Business Plan
Having a business plan will effectively help you from business failure.
Your business plan should include sales and marketing strategies and be confirmed whether your business is in profit or loss.
Be sure that your plans include a sustainable long term strategy.
5) Learn from your Competitors
It’s kinda tough that there is competition in the business industry. It’s better to learn from your competitors, try and test every possible business strategy with a higher chance of succeeding in the sectors.
Take it as an opportunity rather than the competition because your competitor’s methods will surely help your business rise.
Business failure is not an indication of personal failure.
Every individual in the world has experienced business failures, and they rise again.
Despite best efforts, sometimes businesses do fail from their strategic direction.
There can be many ups and downs in the journey you have decided to walk, but if you don’t survive, you never get a chance to taste the success you worked so hard for.
The point is to keep moving and starting over and over again but never give up. Do something unique and extra so that your audiences stay beside you.
Remember, just because you failed today doesn’t mean you will fail every time.
What would you like to do when your business seems to fail?
Would you like to add some business strategies to overcome the failure?
Comment down below, and let’s connect with more ideas.