15 Common Causes of Failure for Entrepreneurs
Every week we advise for business success, although we are all aware that there is no infallible recipe. This time we are going to focus on some of the most common mistakes made by new entrepreneurs that unfortunately tend to be causes of failure. Some of the obstacles caused by those poor decisions can be overcome. However, it is best to avoid taking them from the beginning.
- What frequent causes lead to the failure of businesses and entrepreneurs?
- Lack of experience in the sector
- A bad location
- The lack of a business plan
- Wasting too much time developing the product and strategy
- Start without sufficient capital
- Have no market
- Want to start big
- Excessive growth
- Insufficient advertising
- Being too lonely
- Quit too soon
- Surround yourself badly
- Not putting the customer first
- Not adapt
- Lack of compromise
What frequent causes lead to the failure of businesses and entrepreneurs?
Answering the question is a great help for anyone who wants to start a business. By simply reviewing the list of the most common causes of failure among entrepreneurs, you will be able to reflect on your project and identify possible areas for improvement. In this way, you will have an opportunity to better prepare and increase the chances of your business success. It is worth spending 5 minutes, don’t you think?
Lack of experience in the sector
Sometimes starting a business is a means of changing your lifestyle. But too drastic a change can be very damaging if you launch into a sector that you are unaware of. In business, things happen in a hurry, and you may not have time to learn from mistakes. Therefore, lack of experience is usually one of the main causes of failure among entrepreneurs.
A bad location
It is especially valid for any business with premises open to the public. Location is everything for a business. You can have the largest and best-conditioned place in the city, at a very cheap rental price, but if you are not in the right location, you will not be able to convince clients to come to visit you.
The lack of a business plan
Before starting, it is essential to know at least a few key facts about your project. Study the market, analyze the pricing policy, costs, profitability, and of course the necessary investment and financing. For that, it is essential to have a business plan. It is not a crystal ball that will predict the future, but it will help you better understand the key points and avoid many mistakes.
Wasting too much time developing the product and strategy
If going on an adventure without studying anything is detrimental, spending excessive time preparing is also detrimental. No product will ever be perfect, no strategy will be foolproof. Every day you wait to perform is given away to the competitors. It is much better to make a decision, make a mistake and correct it than to take a long time to decide. Slowness to act is one of the most frequent causes of failure among entrepreneurs.
Start without sufficient capital
Many entrepreneurs err on the side of optimism. They calculate financing needs a little above the initial investment and rely on the success of the company to finance themselves almost from the beginning. In reality, it is very common for things to take many months, even years, to generate enough cash. Too short an initial capital can doom a good project within a few months of its inception.
Have no market
Some entrepreneur candidates are looking for the perfect business idea, which no one has come up with yet. As we talked about in another article, they fear competition. This tendency to seek a market without competitors often leads to launching into a market that is not enough. The same goes for projects that focus too much on developing a product that they think is perfect but haven’t bothered to check with potential customers. Among the causes of failure, not having a market is one of the most serious for an entrepreneur, because, unless you drastically modify your value proposition, you will not get sales.
Want to start big
Starting a business is in itself a risk. Starting big is an unnecessary risk. Equipping yourself with second-hand equipment, renting instead of buying, starting with a lean staff, or opening a single center to test the concept are some of the precautionary statements that allow you to jump in and correct the company’s approach without committing too much capital. Wanting to act like a big company from the start will only make you more fragile.
It is not the most frequent case but unfortunately, it happens. Sometimes a business concept works so well that you feel compelled to develop it faster than is reasonable. Unfortunately, sometimes the business ends up dying, the victim of its success, almost always for treasury reasons.
The initial prudence in the expenses should not be excessive, and above all, you cannot forget to advertise. Some entrepreneurs are so confident in their product that they think customers will come alone. But even for businesses that operate with favorable word of mouth, you need to get noticed early on, thanks to advertising. Of course, you have to find the most efficient channel depending on the type of business.
Being too lonely
As Ray Kroc, the founder of McDonald’s said: “None of us is as good as all of us put together. ” In the case of a lonely entrepreneur, this phrase makes even more sense. Even if you run the project alone, you need support and advice. Starting a company is a long and difficult job, and being alone, it is difficult to stay motivated and make the right decisions.
Quit too soon
Persistence is critical for any business project. It has happened to many of us to think of throwing in the towel, and that the next day an important sale is made. Do not give up, because, in the end, the one who holds the longest has a good chance of winning the market. This is also why it is so important to start with sufficient capital. If the concept is good, it will end up reaping its rewards.
Surround yourself badly
If being too lonely is a problem, surrounding yourself badly is much worse. Let’s not forget that a group goes at the speed of the slowest of its members. That’s why you have to look for people who are better than you in the required skill areas and look for the right partner. Businesses are human organizations, and poor hiring or partnership decisions are among the most common causes of failure for entrepreneurs.
Not putting the customer first
If this list were ordered by factor importance, this should be the first. A company only lives for its customers. We have all heard a thousand times that ” the customer is always right ” and it is true. But let’s not get it wrong. This phrase does not mean as some think that we have to accept any whim of an abusive client, but that we have to listen to the client and always put their needs first because what they need is the reason for our company’s existence.
Completing the previous section, the logical consequence is that a company has to adapt. No matter how hard you have worked on strategy and product, a business starts when you face your customers. From this moment on, it will be necessary to listen to the comments of the buyers and adapt, to a process of continuous improvement. And of course, you not only have to adjust to customers but also analyze all the company’s processes and optimize them as time progresses.
Lack of compromise
Entrepreneurship is hard. It takes a lot of work. It causes a lot of stress. It forces you to get into areas that you do not like and that you do not know, to make difficult decisions, to endure. It cannot be undertaken halfway. That is why it takes dedication and total commitment. Many entrepreneurs don’t end up quitting too early.
These are, in my opinion, the most common mistakes and main causes of failure for entrepreneurs. Do you see any more? Feel free to share in the comment section.