5 lessons for start up business owners
There are few barriers to starting up a business nowadays, but making it a success is far from a certainty.
Building a business is something that takes guts, determination and a thick skin. Competition is fierce and profits can be scarce. Here are five lessons you can learn from others to ensure your business doesn't become another start-up failure statistic.
1. Failure to understand the market
One of the major reasons why some start-ups fail is because there is little or no market for their product or service. It could be that there is just not enough of a compelling reason for a buyer to commit to purchasing, or it may be that your timing is completely wrong. Joost, a peer-to-peer on demand video player, had funding of $45million but failed because they tried to solve a current problem with "yesterday's solution".
Modify Watches was a start-up business that failed because it "didn't have a narrow focus". According to them, if they were to do it again they would "be great at something small – then expand".
2. Relationship breakdowns between management
As tempting as it might be, it's impossible for the founder of a business to carry out every task on their own – this is why it's vital to have the right team supporting you. The co-founder of Pixloo.com had an unstable relationship with his business partner; they disagreed over the direction of the company and how funds should be raised. In the end they sold their company "for pennies" because they found they could no longer work together. Start-ups should ensure that anyone working alongside them has the same focus, the same goals, and the same amount of passion.
3. Failure to discuss ideas with others and listen to feedback
Many start-ups fail because they don't talk to others about their concept before they launch it. Go to networking events and speak to mentors and peers to get an honest opinion on your product or service. "Especially in the early days, you need to be your own worst critic", says the founder of Dinnr, a failed start-up business. Question everything and look for any gaps in your business model.
4. A flawed business model
Another common reason for failure in the start-up world is that entrepreneurs are too optimistic about how easy it is to attract customers. An eye-catching website and product or service can acquire customers to begin with, but after that your cost of acquiring a customer must be less than the lifetime value of a customer in order to succeed.
5. Running out of money
Start-ups can't grow or operate without revenue, and building a business means numerous expenses along the way. Many start-ups find that they soon run out of money, so you should aim to pitch to hundreds of investors in order to receive financial support. Start-ups should be aware that this fundraising process can eat up a lot of time.
One of the biggest lessons to learn is that if your start-up does fail, you must spend time understanding what went wrong. You can then look to your next venture knowing you have improved your odds of making it.
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