More than half of new businesses fail during the first two years of incorporation. Not all of the 50% of businesses need to fail. The failure of the business can always be attributed to key factors that determine the success of a new start-up.
Let’s us go through the biggest mistakes that start-ups can make.
- Poor Management Skill
The key person in a company is the boss whom is also the Managing Director. As the name suggests, there should be a distinctive CEO who will make management decisions and direct the company towards its goal. Perhaps, a company has two founders and may be have conflicts on matters such as which direction the company should go towards. Not only does this affect morale among the staff, this also affects the planning and resources of the company. When such problem arises, the CEO who lacks experience may not have the capability resolve the issue and let the business slip towards failure.
How to solve poor management skills?
Learn from a mentor. Frequent visits to online business seminars or networking sessions to listen how other business owners overcome the pain points. Examine successful business in the same industry as you to find out how the best practices you can apply to your business.
- Lack of Key Unique Selling Point
Selecting a vendor is a time consuming and daunting task for procurement manager. A strong unique selling proposition lets you to stand apart from competitors and actively focus your energy on creating things that cater to your ideal group of customers. A weak USP can ruin conversion rates and pushes the customers to your competitors. A clear, strong, and customer-focused USP will do just the opposite — boost conversions and satisfy customers. Identify what makes you unique and stand out from the crowd. It’s going to be something simple yet creates a lasting impression. Your ultimate deliverable must have some unique quality to gain traction in a competitive market and keep your customers coming back.
How to build a Unique Selling Point?
Before you can even start building a unique selling point, you need to know who you are targeting. Do not try to please all customers as there is no size fits all solution in any company. It makes more sense to capture the attention of a defined group of customers that would most likely NEED your product. Next, identify what it is about your solution that solves your customer’s problem. Bring your customers attention to how their problems will be solved when they engage with you. The Unique Selling point that you identify here will be one of the primary reasons why your customers will choose you instead of a competitor.
- Lack of Customer-Centric Culture
Customers do not want your products or services. They are looking for a solution for their current situation. Some companies define their Unique Selling Points but do not consider the Customer’s problem. Think about this in a problem-solving context, consider the following:
- What is my customer facing in their day-to-day business?
- How can my product/services solve their problem(s)?
- How kind of factor does my customer consider when selecting the right vendor?
- Why did my prospective customers choose my competitors?
- Did my competitors manage to solve all their pain points?
How to be Customer Centric Services?
Develop a customized service package that no one else in your industry is using. You can present it as a strong value proposition that attracts attention and interest to your targeted group. If this is not enough, create a bold statement and a visually impact image of your company to differentiate yourself in order to beat your competitors. Your customers will recognise your uniqueness that is linked to the solution. You will begin building market awareness in a competitive market and converting them into paid customers in no time. By creating an Elevator Pitch to explain how your business can solve their problems would steer your company in the right direction.
- Poor Financial Management
As an accountant with 20 years of experience, I have to stress the importance of sound financial management in start-up companies. Managing start-up finances properly from the start isn’t as scary as you might have thought. With the help of technology and Cloud Accountants, you save a ton of stress when you start managing it right. Start-ups that pay attention to financial management at an early stage are data-driven, lean and make intelligent business decisions on time.
Maintaining financial stability requires knowing these 4 essential reports namely:
- Income Statement
- Cash flow statement
- Statement of shareholders’ equity
- Balance sheet
How to avoid Poor Financial Management?
Your time and money are precious, so you want to ensure your resources are spent effectively. You should take this same attitude with your business’s financial health. Do what you do best by spending less of your day overseeing bills and payroll, you’ll free up valuable time that can be redirected back into managing and growing your business.
At start-up stage, you need to be agile. When you outsource your accounting, you can expect to minimize large investments in human resources, technology, and infrastructure and maximize your production, thereby giving an opportunity to scale and react to change more quickly.
- Dangers of Over Expansion
Once your business becomes profitable, your next goal is probably to see it grow. If that growth comes too fast, though, you could run into some unexpected problems.
Disadvantage of Over Expansion
- Shortage of Working Capital to meet daily expenses. As you push for higher sales, expect monthly expenses to grow and possibly exceed your monthly revenuesas it takes time for customers to pay.
- Compromised qualityasincreasing your production output may lead to a decline in quality, which can lead to loss of customers or sales.
- Operational inefficiency because of uncontrolled expansion will cost your company time, money and other resources.
- Human Capital risks due to lack of capable manpower to meet the growing needs of the business. Old staff who are given extra workmay not be able to accept the increased workload. Their morale could dropand their productivity could decrease or they could leave your business.
How to avoid the growing pains of Over Expansion?
- Set growth goals based on your capability not opportunity. Unlike the large retailer who has had to place unqualified people into leadership positions and hire people who don’t fit its culture just to ensure its new stores are staffed.
- Keep up with customer payments religiously. Ensure that your administrative has real time information and make payment from customers as easy as possible.
- Monitor monthly margin erosion as operating costs increase. A mistake that many business owners make is to focus on measuring revenueinstead of net profitCommission should be based on net profit and not turnover as operating cost will increase.
- Grow your business by training your people first. Before expansion, staff should be well trained to cope with increased workload. With proper training on the best practice, this will boost productivityand allowed work-life balance to the staffs.
- Document business processesvia Standard Operating Procedures is the basic of every business. Creating a foundation for growth and ensuring that new employees follow the same process with confidence.
With all this information in hand, you should be more aware on the shortcomings of businesses who fail due to any or all the reasons above and do your best in avoiding such mistakes. Growing a business is akin to taking care of a plant. Where you will need to consider it’s needs and be disciplined enough to follow through on your commitments as a business owner. Do not worry about making mistakes as one of the key aspects of inner growth is to learn from your mistakes and reflect on how to overcome problems to build towards a better future.