Judy Sahay

Thought Leaders & Game Changers

3 biggest reasons why startups fail in their first year and how to avoid them.

Start Up Failure

Start Up Failure

Everyone knows how hard starting a new business venture can be, and for startups, it certainly seems that more companies are failing than succeeding. The first year of a business is crucial to its future success, but there are three primary problems that startups come up against when they first set out on their venture. A lack of vision, weak business strategy, and problems with cash flow can all halt a startup in its tracks, so learning how to navigate these tricky areas is integral to maintaining the livelihood of your business.

  1. Lack of cash flow

New businesses are expensive and the setup costs can certainly eat into your budget, so it’s likely that from the outset, most businesses are somewhat reliant on earning at least some profit. From the outset, it is important to stick to your budget, to make sure that you aren’t going overboard on any unnecessary expenses. Do your research before you take the plunge into your business to figure out what your startup will actually need, and look to see how you can cut costs from the first day.

As a startup, to promote actual business, you should spend a fair amount of time preparing your marketing strategy. No matter how good your product is, if people don’t know about it, you certainly won’t be making any money. This might be a matter of investing a bit of your budget into your marketing scheme, but it will pay off when your product actually starts selling and you can start turning a profit.

  1. Lack of vision

You might have had an idea for a business but if you can’t see where you want your startup to be in five years time, then you might need to reconsider your options. It is easy to get caught up in the excitement of starting your new venture, but that future-focus will be what keeps your business running. On your startup team, it’s important to have a realist who can actually foresee the real problems your business might face.

Again, like with your cash flow, the vision of your future company is dependent on thorough planning. It isn’t enough to just have a quick idea for a product. With the number of new startups and products that enter into the market on a daily basis, you need to be able to see where your business will end up. Keep on researching market trends and new products, and always make time for innovation and creativity. Those are the things that will keep you going and keep the future of your business in reach.

  1. Lack of strategy

The most important part of starting a business is developing a strategy, and a startup isn’t something you can just jump blindly into. If you decide to start a business without a strategy, then it’s highly likely that you are going to come up against problems like a lack of cash flow and a lack of vision further down the track.

One of the most important ways of avoiding a lack of strategy (and its subsequent problems) is by building the right team. Having capable people in every area of your team is going to make it easier to focus on the goals you need to reach, and business-savvy members will certainly be able to offer the guidance you need to keep your business on track. Again, planning is what will save the day, and if you are finding your business floundering, it’s worth stepping away from the helm to really figure out the nuts and bolts of your business.

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