7 Ways Businesses Can Fail From the Beginning

Throughout the past 12 years of entrepreneurship, I have seen many fellow entrepreneur's businesses start and fail. Launching The Female Network earlier this year, I sat down to think about the patterns that I had observed in these failed ventures so as to help our clients avoid these pitfalls. This blog article looks at the 7 most common issues I've seen in the pre-launch stages of businesses that contribute to their eventual demise.

1) Not Doing Any Market Research:

Many businesses failed because they didn't look at market demand, their competition and the opportunity for growth before they launched their business. Due diligence is essential in minimising risk when starting a business and so should always be carried out.

a) Market Demand

There are lots of ways to test for market demand: Social Media, Kickstarter, markets, or simply talking with your ideal customer. Yet most new entrepreneurs fail to do any testing. I always recommend spending a day in a coffee shop and offering to buy strangers a coffee to sit and talk to you about your idea and to get objective feedback.

I recently spent time with a female entrepreneur who had an idea for a product. She made a prototype, filmed a TikTok video and, before sharing her TikTok, published a website. 

In a few hours, she made £5000 in sales and had to shut down the site because she had no idea how she would produce the product. Obviously she had to cancel the sales orders but what she did had confirmed that people wanted what her business had to sell, and this invaluable market research was free. We can often be inherently bias about our ideas, and this can be the downfall of a business. Make sure other people are on the same page about your idea as you are and you will save yourself a whole lot of time and money in the long-run.

b) Competitive analysis

Who is your competition? What do they offer that people want? Are you offering something different? Figuring out your competitive differentiator is crucial to a business's success. Without it, you are just a small fish in a big pond of already established businesses that have the competitive advantage.

c) Growth opportunities

Having foresight about how you're going to grow, drives where you will spend your time and money. If you can't come up with a growth opportunity, chances are the business is going to stagnate at best, and fail at worst. 

2) Not Aligning with Your Own Strengths

It's pretty typical for humans to not be very good at things we hate doing and vice versa. It is hard enough starting a business, don't make it harder by relying on a business model that requires skills you hate doing or are naturally not good at doing. This will just lead to quick burnout and eventual failure. Create a business model that requires the skills that you are best at, and where you can't do this, be sure to have a team from the outset that can do these tasks so you can focus on your strengths.

3) Going it Alone

Which leads me onto the next point. The businesses I have seen fail most readily are those where the founder goes it alone. Even if it's a small business, having someone to bounce ideas off, carry some of the load and bring a different skill set to proceedings can be the difference between success and failure. I have seen this particularly amongst female startups. We as women are so often used to being superhuman, constantly juggling work, families, household, that we enter entrepreneurship in the same way. The problem is, we still have to juggle these things when we start a business, which takes up even more of our time in the early stages. This can lead to quick burnout. Having someone to go on the journey with you ensures a less stressful experience and a greater chance of business success.

4) Insufficient Capital

Research shows that 38% of businesses fail because they run out of cash and 20% fail in the first year. New entrepreneurs often fail to factor in how long it will take to start earning the sort of money they need to stay afloat. Crunching the numbers before launch will help avoid running out of capital early on. As a good rule of thumb, factor twice as much as you have originally accounted for. If it's a still a good deal after this, you can be reassured the business is worth starting.

5) Launching Without a Financial Model

Which leads me onto the next point. NEVER launch a business without a financial model. There is no surer way to guarantee failure. I'm continually shocked by how many entrepreneurs willingly spend thousands of pounds to launch a new business without a budget or cash flow projection. Building a financial model forces you to identify the key assumptions that drive the financial success of a business. It's okay that many of those assumptions are going to be wrong; you adjust as you go along. But at least you'll have the foundations in place to ensure you aren't driving blind from the outset.

6) Ineffective marketing or sales

I'm a big believer in planning for how a business is going to get customers - understanding who the customer is, what else they need, and where to find more of them.  This will involve having clear sales and marketing strategies in place before launch. It won't always go to plan after launch, so pivot where needed. But focusing on customer acquisition should be the main priority for a new business, the rest, such as operational issues, should follow.

7) Investing Your Time Poorly

One critical mistake often made by entrepreneurs is investing their time poorly, allocating it to tasks that yield minimal returns or that don't align with their core objectives. Time is a precious resource when running a business and juggling other responsibilities, so mismanagement of it can stifle growth and lead to quick burnout. Engaging in activities that do not contribute to business development, such as excessive concern about social media posts and administrative tasks can drain valuable time and energy that could be better utilised elsewhere. The key is prioritising activities that directly impact revenue generation, innovation or strategic planning. So get a list going of the most important tasks that need completing and give yourself a a time frame to complete them in. You are always better off doing 4-5 hours of solid work then a day of dipping in and out of tasks.

At the end of the day, you can dramatically increase your chances of business success with a little bit of due diligence and some intentionality in your planning and focus. New female entrepreneurs who do that go on to do great things.