— February 1, 2019
Starting a new business is always risky and intimidating. And, unfortunately, not every business will succeed. A significant part of being an entrepreneur is learning from your mistakes and growing from them.
According to one source, approximately 30% of new businesses fail during the first two years of opening. Chances are, you will experience failure at some point, in some capacity, as a business owner. So, what do you do when your business fails?
Reasons businesses fail
There are numerous reasons why businesses fail. Here are some of the most commons reasons why a startup may sink.
Lack of research
When you start your business, it is crucial to thoroughly investigate the market you are trying to enter. When trying to break into a market, you must research before you can further build your business.
Another source states the most common reason (42%) businesses fail is due to lack of market demand for their product or service.
Consider researching unmet or underserved needs and develop something new based off of gaps in the market. Rather than trying to enter a crowded market, think outside the box by researching unsaturated markets.
Weak business plan
How can you start a business if you don’t have a plan? One common mistake entrepreneurs make while starting their ventures is not creating a solid business plan. Your business plan should be realistic for your business and include possible problems and solutions for issues you may face.
Keep your business plan as clear and concise as possible. You don’t necessarily have to write a novel to create a good business plan.
Your business plan should include sections for your mission statement, market analysis, details about your product or service, and business goals.
Lack of capital
Many businesses start with little to no capital. Plan out your finances when you begin your venture. Start with enough money to keep you financially stable as you grow your business.
Lack of capital can scare off potential investors. It might show that your business is not able to pay bills or loans on time. Plan out your expenses when you start your business. Planning your finances early on may help you from struggling to raise capital later.
Poor marketing and internet presence
You have probably heard it before: location, location, location. You must focus on your internet location and marketing just as much as your physical business location.
The ability to virtually learn about your business’s product or service is essential for customers shopping and researching online. Create an enticing website that’s easy-to-use for potential customers. Market to customers and enhance your internet presence by using and posting regularly to social media platforms (e.g., Twitter and Facebook).
One colossal mistake some business owners make is not putting their customers’ needs first. Are you listening to your customers?
Businesses that lose touch with their customers are prone to failure. Keep an eye on customer trends and find out what people like about your product or service.
One way to communicate with your customers about their needs is reading and responding to positive and negative online reviews about your business. Or, you can have customers fill out questionnaires in-store or online for feedback.
Steps to starting over after failure
If you are planning on starting another business after yours fails, check out these steps to rebound and come back better than ever.
1. Redefine failure
Before starting my successful accounting and payroll company, Patriot Software, I had a few failed business attempts over the years. Or, as I like to call them, learning experiences.
From selling greeting cards door-to-door to starting up a computer maintenance company, I have experienced a lot of failure and rejection to get where I am today.
Entrepreneurs will experience both failures and successes. However, true entrepreneurs will not let failure stop them from getting up and trying again. Use failures as learning experiences to help build future (and hopefully successful!) businesses.
You must redefine what failure means to you. Instead of fearing failure, embrace it. Remember that failure is proof that you learned from your mistakes.
2. Reflect on why you failed
Once you look at failure as a learning opportunity, you can make the most out of your mistakes. Reflect on your mistakes and isolate the real reason why your business failed.
Ask yourself questions like, Did people need my product or service? Did I charge too much? Too little? Did I analyze the industry enough? Finding the answers to why you failed in the first place will put you in a better position for your next venture.
Take time to recover after your business fails. Give yourself a financial and mental break to relax before you start again. Take care of responsibilities, such as debts, before diving into another venture.
Focus on saving up capital to recover financially. Consider taking on a new job to earn more money and pay off any debts. The sooner you recover and take care of your responsibilities, the quicker you can consider launching your next business.
Remember, the recovery step does not have to last forever. Once you build yourself up, you will know when it’s time to try again.
4. Reevaluate your goals
Come up with a list of goals you would like to accomplish when you start your new business. Set measurable, realistic, and relevant goals with time frames.
As your venture grows, so will your goals. You might need to change your goals along the way as you plan, research the market, and evolve your business.
Use lessons learned from your failures to rebuild a stronger and better venture. Avoid repeating history and making the same mistakes. As you rebuild, expect to make mistakes and potentially fail again.
Consider writing down the mistakes you made from previous ventures and use those to construct your new venture. Spend time developing a solid business plan, thoroughly research market trends, and don’t be afraid to try new ideas.