1) Starting the business with the wrong objectives
You should never start a business for the sole reason of making a lot of cash quickly. There is also a misconception that if you start your own business, you will get more time to spend with your family and that you will always answer to yourself. However, this is unlikely to be the case.
You should start a business because you've got a deep passion for what you want to do and strongly believe that your products and services will respond to the needs of the consumers. You should have a firm understanding of why your product is unique and why people will buy from you and not from your competitors.
2) Lack of proper planning
Success in business can be achieved by careful, systematic and strategic planning as well as hard work and determination. Most small businesses fail due to a lack of proper business planning. A good business plan needs to be realistic and accurate. It should contain all aspects of the business such as the unique selling proposition, competition, workforce needs, potential challenges and solutions, financial details and so on. You should prepare detailed and realistic estimates of revenues and costs for three years. Determine if it will all be worth the effort several years down the road before you invest your time and money and your friends and family's money.
3) Poor Management
Many studies indicate that poor management is the major cause of business failures. Most businesses often lack the proper expertise in vital areas such as marketing and sales, finance, human resources, procurement, production, etc. You need to put the right management team in place; a team that has the ability to study, plan, organize and control all aspects of business operations. Recruitment can be an onerous, expensive and time consuming task. If you have open or weak areas in your management team, consider the use of contractors/consultants to strengthen weak areas or fill vacancies. There are many benefits to using consultants both financial and effectiveness related.
4) Insufficient Capital
Most business owners tend to underestimate the amount of money required to run a business and end up operating with insufficient funds. Others may also expect unrealistic profits from the sales. Remember, the customer determines the price not you.Therefore, it is important to establish the actual amount of funds you will require to start and run your business. In the case of very early stage pre-revenue companies, it is important that the management team maintain their focus on the first release of a saleable first version of the product. You need revenue to survive. In my experience it always takes longer and requires more funds to do anything. Don't try to 'boil the ocean' with your first version of a product. Focus on getting those first cheques coming in the door. I have seen many CEOs doom their company to failure as they chase all opportunities that come their way. Instead of focusing and delivering high value to the segment that they initially targeted. They end up doing nothing well for a broader market.
5) Lack of a Proper Website
With the rapid increase of internet users today, you need to register a strong online presence to operate a business. In a recently released survey, (January 2012), Cisco found that 74 percent of consumers turn to the web to conduct research before making a purchase in store. The findings place a premium on digital content marketing campaigns that can help answer shoppers' questions and point them in the direction of a brand. At the start of a business, a professionally designed website is recommended to enable users to find you and get well acquainted with your products and services. Those of you that saw the movie "The Dirty Dozen" will likely remember the line spoken after the soldiers were inspected by a visiting officer: "Very pretty, General. Very pretty. But, can they fight?" Your Website has to make a good impression and look professional that's a given, but having a good looking website isn't enough. It also has to be functional and do its job of making the market aware of you and your products. Creating and maintaining a website is complex and time-consuming. Unless this is your strength and/or your line of business, get help!
6) Overexpansion
Overexpansion is often triggered by the failure of business owners to balance between success and how quickly a business can be expanded. To avoid this business failure, the expansion of a business should be gradual and steady. Many bankruptcy cases are often triggered by rapid expansion. Once you capture a solid customer base, use your success to set the right expansion pace.
I hope that this gives you some food for thought when evaluating your plans for your company regardless of where you are in the process.
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