According to recent statistics, just over 800,000 businesses start in the United States each year. As you can imagine, entrepreneurialism is alive and kicking in America, and it’s a nation filled with thinkers, dreamers, and doers.
Unfortunately, a sizeable percentage of all startup businesses fail within their first 12 months of operating. The startups that still exist after those crucial 12 months typically grow and become vastly successful enterprises.
As a potential entrepreneur, you’re likely reading this article today because you’re considering or are about to start a new business. But, you want to make sure that you do all you can to achieve business success.
With that in mind, here are 17 reasons why startup businesses fail in their first 12 months of operation so you can avoid making those same mistakes:
1. Inconsistent Branding
Any business, irrespective of what it sells, needs consistency in many areas. One such example is branding. As you know, some of the world’s leading brands are memorable because of factors like their logos, slogans, and typefaces used in their marketing.
Your branding must be consistent across all mediums, both online and offline. That way, your customers will recognize your brand easily. Avoid variations of logos and straplines; they can confuse your target audience.
2. Lack of Planning
Some of the world’s top brands started off life from humble beginnings. For example, Apple started in the garage of Steve Jobs’ family home. You might say that he was a visionary, and that’s the reason why Apple is a trillion-dollar company.
But, the primary reason why Apple has become a worldwide success is down to one simple factor: planning. In fact, planning is a fundamental aspect of any successful business.
3. Lack of Organization
As you can appreciate, it makes sense to keep your startup business organized. For instance, if you’re hiring part-time workers, you should use employee scheduling software to manage things like rota schedules and staff announcements.
You’d also organize your financial information and keep accurate records of your startup’s income and expenditure. If you don’t keep things organized from day one, you’ll find it hard to sort everything out at a later date.
4. Lack of Passion
The primary reason a person would start a new business is that they are passionate about what they want to offer. Plus, they’ve spotted gaps in the market that they feel their brand could fill.
If you decide to launch a business on impulse and your heart isn’t really into it, you will likely find that there won’t be a business to run soon. You should only ever start a new business if you’re 100% sure that you’re passionate about its aims and purpose.
5. Terrible Customer Service
When you start a business, your customers are the reason why it can exist. After all: there’s no point running a business if you don’t have anyone buying your products and services!
The trouble is, some startups become doomed to failure from day one because of one simple thing: terrible customer service. It’s crucial that you treat your customers like they are part of your family and not people that annoy you.
6. Using Dirty Tactics Against Rivals
There aren’t many industries or niches that a single brand completely dominates. As you can appreciate, most startup businesses have to compete with potentially thousands of other brands for a lucrative slice of the market share.
Most startups play nicely, and some may even work with competing brands to launch mutually beneficial products or services. However, a minority of startups resort to dirty tactics to discredit and eradicate their competition. Don’t be one of those businesses!
7. Hiring the Wrong Talent
Your employees are the most valuable assets in your business. They enable you to grow your brand and hopefully turn it into one of the best ones in your industry. Of course, that might not always happen, and the reason could be down to the people you’ve hired.
When scouting for new talent at your startup, you should take the time to research each candidate and shortlist only those you feel would be a good fit for your business and share your vision for the brand’s future.
8. Forgetting to Invest in Marketing
Entrepreneurs that start new businesses are keen to keep their costs down as much as possible. Some may try to carry out specific tasks or roles themselves to save money, while others may delay doing certain things until their startups hit particular milestones.
Regardless of the nature of your startup, one thing you should never do is forget to invest in your marketing. You need to promote your new business as much as possible and keep up the momentum. Otherwise, you’ll end up with little to no sales.
9. Bad Timing
Timing isn’t much of an issue for most startup businesses, but it can play a pivotal role in the success or failure of other startups. For example, a seasonal skiing business might depend on tourist bookings during the snowy season.
If you launch your business at the wrong time, you could end up potentially bankrupting yourself. That’s because you have to keep paying your regular expenses, irrespective of how long you must wait until you can start selling your products and services.
10. Poor-Quality Products
Businesses that sell physical goods will undoubtedly wish to attract one or more niches in their target market. For instance, some startups may want to sell their products to consumers at the budget end of the market.
However, if you sell poor-quality products to such an audience or any for that matter, you won’t have much brand credibility to salvage, let alone grow. That’s why you should always quality check and test products before you decide to sell them to your customers.
11. No Business Plan
Reason number two earlier in this article discussed lack of planning as a reason for startup failure. In a similar vein, forgetting to create and follow a business plan is also another ticket to failure for any startup business.
Some new entrepreneurs assume a business plan is only a requirement if they are looking for funding. Business plans are something even successful established companies use and refer to, as it ensures that a business is steering towards the right direction.
12. Not Having Enough Capital
If you quit your job to start the business of your dreams, you need money. Firstly, you need it to cover your personal expenses for potentially the next 12 months until your business breaks even. Secondly, you need capital to help your startup becoming self-sustainable.
It’s vitally important that you have enough money in the bank to cover your personal and business expenses. Otherwise, you will run out of capital and become forced to get a job, effectively shutting down your business.
13. Legal Action
It’s not an issue that happens very often with startup businesses, but some new brands end up facing legal action, which effectively shuts them down. The reason why they might end up getting sued could be down to using trademarked branding.
Some startups end up in court if they’ve copied a patented product or service to such an extent that it’s just a mirror image of an established one.
14. Lack of Market Research
Of course, legal action would be unlikely had all affected startup businesses conducted plenty of prior market research. Shockingly, a large proportion of startups don’t do enough market research to ensure their ideas are viable.
Market research might not seem like a “fun” thing to do. However, it’s necessary for a multitude of reasons. If market research isn’t your thing, consider paying someone else to do it on your behalf!
15. Failing to Define Target Markets
Most new entrepreneurs will have a fair idea of who is likely to buy their products and services. That knowledge helps them tailor their marketing efforts to attract consumers most likely to buy from their brands.
Don’t make the mistake of failing to define your target markets. Knowing that there is a demand for what you want to sell isn’t enough; you need to understand who will be your customer and why they want to buy from you.
16. Creating New Target Markets
As part of your market research, you need to identify which groups of consumers will buy from your business and why they have an interest in your products and services. One thing you should never do is create new target markets to suit what you wish to sell.
Doing so will almost certainly doom your startup business to fail because you have no idea whether your “hunch” will pay off!
17. Refusing to Adapt to Change
Lastly, you need to keep in mind that consumer-driven markets are subject to change at any given moment. Some markets, such as technology, change and evolve faster than others.
If you’re launching a business in a fast-paced market, you need to prepare yourself to adjust what you sell or how you run your business to meet the needs of your customers.