Many businesses start as passion projects as we feel a strong desire to make an impact on our world by having a business that supports what we love to do. Others are just tired of the corporate rat race and want to be “be their own boss”. Be it a passion project or I can do this better project, when the rubber hits the road of your business ideas there are many real word challenges that need to be faced. Some will show up right away, others will haunt at a future date.
Most business start ups face a similar set of big and small challenges that often get in the way of success. New business owners venture from the known and often secure reality of a steady job to embracing a high level of uncertainty and a giant learning curve presented by start up business venture.
During the first 5 years 50% of new businesses will fail and a whopping 66% will fail in the first 10 years. Many of these business failures can be traced back to a lack of accurate and detailed planning at the start of the business building process.
Here are 10 common reasons new businesses fail:
1. Starting for the Wrong Reasons
2. Insufficient Capital
3. Improper Planning
4. Poor Management
5. Failure to Market + Sell
6. Expand to Quickly
7. Lack of Differentiation
8. Unwilling to Delegate
9. Unprofitable Business Model
10. Not Knowing your Competition
One way to avoid many of the potential business pitfalls is to include an honest S.W.O.T. analysis as part of your business planning. This deep dive into the various categories of your business idea can provide amazing insights and an “unfiltered” view of the opportunity at hand. It can help guide current and future KEY decisions that could determine the success or failure of your business venture.
Strengths (internal, positive factors)
What do you bring to this business that is unique, do you have special knowledge or experience? (Tangibles and intangibles)
1. I have many years of experience in the field
2. I am hardworking and disciplined
3. I have unique skills and experience
4. I have a large network or existing customers
5. I have money to invest in my ideas
Weaknesses (internal, negative factors)
What are some of the things about you that might get in the way of your success?
1. I have never owned a business before, not sure what to expect
2. I do not have a lot of start up capital
3. I do not have a lot of time as I have a very busy life
4. I struggle with technology
5. I have trouble with discipline
Opportunities (external, positive factors)
What is happening in the marketplace that provides an opening for your business idea?
1. Emerging trend for my idea
2. A shortage of people doing what I do.
3. I have a better/more efficient way to do something
4. People are doing more business online
5. People are more open and aware to what I have to offer
Threats (external, negative factors)
What will jump up and stop your business from succeeding?
1. Change of market focus
2. Heavy reliance on other platforms (i.e. Amazon)
3. Lots of competitors 4. Time sensitive opportunity
5. Unhappy customers, poor reviews
Take a good hard look at the top 10 reasons businesses fail, 66% percent in 10 years is not the best odds. Being brutally honest about the internal and external factors that will impact your business might take a bit of the shine off of your business idea and feel like work, but it will be well worth the effort.
Don't know how to start? Download our SWOT template and start filling your answer for each quadrant.
Need help taking a deeper dive into analyzing your business ideas? We can help!
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