What even is time? The past year has felt like one never ending day. One day you wake up in sweatpants to work in your home office and then just ten months later you and your sweatpants are in the same spot, like nothing has changed. Just like the movie Groundhog Day, if you spend every day doing the same thing, you will never see the changes you crave in your business and in your life. According to the U.S. Department of Labor Statistics, about 20% of small businesses fail within their first year. Those who do not learn from their poor business choices, are doomed to repeat them. We compiled a list of reasons that businesses fail so you can learn from these mistakes before they happen to your business.
Lack of Demand for Your Product:
Almost half of all start up businesses fail because there is no market for their products or services. Without proper market research before your business begins, you will have no chance of succeeding in your business. Your business needs more than just a “good idea” to get off the ground. If customers and clients do not find value in your business, there is no value in your business. According to Investopedia, It’s a lot easier to satisfy a need rather than create one and convince people that they should spend money on it”.
Business Plan Issues:
Many aspiring entrepreneurs know what kind of business they would like to run, but lack the foundational skills required to create and properly execute a solid business plan. As a result, countless entrepreneurs fail to sustain their business past one year.
The components to an effective business plan, according to Business Know-How, are:
- Description of the business, vision, goals, and keys to success
- Market analysis
- Workforce needs
- Potential problems and solutions
- Financial: capital equipment and supply list, balance sheet, income statement, and cash flow analysis, sales and expense forecast
- Competitive analysis
- Marketing, advertising, and promotional activities
- Budgeting and managing company growth
Human Capital Concerns:
Even if you have a great business plan and a product that customers need, your business will still fail if you do not have the correct team in place. According to Lending Tree, “Considering that 23% of those whose businesses failed have cited having the wrong team as a major factor, it’s important to think carefully about who you’re turning to as you build your venture”. Investing in your human capital with proper leadership management training is one of the best things you can do to improve your chance of business success. At EPI we invest in our employees with professional development, leadership training, and opportunities for growth within the company.
No Exit Plan in Place:
One of the worst mistakes a business owner can make is failing to have an exit plan in place. Exit Planning is simply good business strategy. Without a proper exit plan, owners are not prepared for their life after business. Even if an owner is not anticipating an exit soon, a good exit plan builds value in a business that greatly increases the profitability during a sale. According to our State of Owner Readiness Survey, 99% of owners said it was important to have a transition strategy yet 79% have no written plan, 48% have no plan at all, and 94% have no written third act plan. Roughly 50% of exits are not voluntary so it is crucial to have an exit plan in case one of the 5 D’s impacts your business. The 5 D’s are: Death, Disability, Divorce, Distress, and Disagreement.
The best way to make noticeable and positive changes in your business is to work hard to minimize risks, build value in your business and your employees, and prepare a comprehensive exit plan. This Groundhog’s Day don’t sink into a repetitive pattern of negative business practices. Make constructive improvements to your business so you are not doomed to repeat the same mistakes over and over.