(As published in the Sunday Star Times, October 11, 2014: www.stuff.co.nz/
Sorry to be the bearer of bad news, but in business almost 50 per cent of new businesses fail within the first 5 years and about 70 per cent fail in first 10 years.
So that means that in 10 years’ time, of 100 businesses that started this year, only 30 will remain. So what happens to these businesses?
I could write a mini book trying to explain what I have seen go wrong for businesses, but there are a few standout recurring reasons. And most of them centre around cash flow.
Cashflow brings many businesses to their knees. To avoid this, spend more time managing your cashflow better – spend less money, bring in more dollars and balance the books, with some left over.
Be realistic about your cash forecasts and be really careful with the commitments to costs/assets you make. Cash is king, so treat it like royalty – with the right amount of reverence and respect.
Along similar lines, another classic problem for businesses (of any stage) is being laden with too many recurring costs. Push sales to the max but keep your costs bare.
Personally, I have a business with several associates but we don’t have an office. We could get one, but we don’t need one so I’d rather we stay virtual and hang with our clients at their hub rather than sit in palatial offices. Keep costs down. Also keep in mind that you need a decent amount of cash or other resources (like family support) behind you as it can be really lean in those early days.
Many start-ups keel over because they’ve misread the situation, thinking it would be so easy to succeed in the market they’ve targeted. Many people start a business without even having a proper plan and in some ways are just throwing a dart in the wind, hoping that it lands where they want.
Information is power; do your due diligence. Who else is in that market? How can you be different? Why does a customer need you? How are you really going to win customers? How many customers do you need to cover your costs? How can you grow? Remember that without customers there is no business.
Another issue is taking too long to make major decisions in your business. Being in business requires you to show guts, be a leader and face reality. Even if you’ve been in business for 15 years, you still have to make those hard decisions.
People can make or break your business, so work hard to employ the right ones. Find people who share your values, who are passionate about what you’re doing and who will be “intrepreneurial” in your business (the entrepreneur within your team). Find those with skills that complement yours. And always hire people that you see staying with the company as it grows. Make sure your website is a good one. One of the first things that potential customers will do is look at your website, even before meeting you in person. There is no excuse for a bad website, and the repercussions are far and wide – lost leads, lost conversions, lost sales, lost profit.
Finally, many new businesses fail because of poor business planning and strategy.