Are you an aspiring entrepreneur? Do you have a business idea that is unique and can break the market? Are you sure this new business plan can be converted into a long term successful enterprise?

Almost all entrepreneurs or family business owners today were once starting new and had no idea where to begin and how. There is no guarantee that your curated business plan will always convert into a fruitful decision. According to market statistics, approximately 10% of the new startups are said to fail in the first year itself[1]. In addition to that, it is calculated that almost half of the newly launched small businesses do not survive after the initial five years into the business. [2]

But the real question is why do these new businesses fail? There isn’t any one particular reason that causes the failure of a brand-new business plan or pushes the downfall of a new start up within the initial years of its set up. In most cases, the failure is the result of a combination of different factors, that when put together, do not stand the slightest chance of survival. Let us look at these factors in detail below to understand how to curb the failure of your new business plan and sustain it for a period of over 5-10 years minimum.

Top Reasons Why New Businesses Fail

Poor Capital Planning

The first thing required to set up a new business is capital. Without ample start-up capital, it can get tricky to support your business plan throughout. For instance, if you started your journey with a personal loan, you can go forward and explore options like a bank loan or support from venture capital or an angel investor.

However, if you are struggling to make the initial ends meet right after the launch of your business, it highlights two important aspects of your business plan. Firstly, your poor capital planning in terms of the investment required to start up. And secondly, it highlights the need for revamping your business strategy to better manage your finances, instead of falling into the cycle of borrowing and pressure of repayment.

Unclear Business Plan

One of the common reasons why new businesses fail is the lack of a clear business plan. Now, when we say clear, we do not mean a business plan that follows the format available on Google. Instead, a good and clear business plan is one that effectively defines your targets and goals along with highlighting the unique selling point for your project and showing how it stands out among the competitors.

Additionally, having clarity on the target audience or customer base, projected cash inflows and outflows, capital required and expected ROI, etc., is necessary for a defined business plan. The lack of any of these can easily limit the scope of planning and implementation for a successful business. Therefore, it is crucial to have a well-divided business plan with proper scaling of business growth to start your business journey on the right foot.

Not Delegating Work

A lot of entrepreneurs are independent to carry on their business plans for the initial months. However, one common mistake that leads to the failure of any new business is the lack of delegation or the recruitment of the wrong people. A successful business consists of highly dedicated people and a boss or leader to carry forward the intended business plan the right way.

The main idea is to manage your business well as a leader by delegating the nitty-gritty work requirements to the right group of people to see results. If you instead decide to take up all the responsibility and carry out all the tasks yourself, you are not investing your energy and time in the right area which is growth and survival. Instead, you are majorly caught up with the basics of business management with no team building on the side, resulting in an ultimate downfall.

Inflexibility & Low Adaptability

A minimum of 34% of the new businesses or start-ups fail poorly because of their lack of understanding of what is needed in the market from their business.[4] You can start a business plan with the idea of selling a specific design of a product but unless you open up to the need for adapting to the changing trends, you will not succeed as a business owner.

Constant innovation is one of the major reasons behind any business or company’s success. If you are not on the constant lookout for what is working in the market and what is not, your business will end up failing due to its lack of flexibility and adaptability to the changing needs of the customers. In addition to that, studying the market or industry you wish to set up your business in is not just an initial requirement but a constant effort to ensure you are up to date.

Poor Marketing Strategies

Planning for your business and executing your business plan is just the initial step. However, to keep your business from failing, it is important to make use of the correct and most appropriate marketing strategies that apply to your product or service category. According to market research, almost 22% of the businesses that failed in the last 2 years were not successful in implementing the right marketing strategies for their business category[5].

Today the types of marketing strategies that you can explore as a new business in the market are far too many. With social media ruling the world, and online sales being the fastest growing phenomenon, it is important to know how to increase and maintain your company’s online visibility from its inception. The need of the hour is targeting multiple channels of communication between your company and your target audience to maximise the results of your marketing strategies.

Final Takeaways

To come up with a business plan is the stepping stone to converting your idea into a successful business. However, as new entrepreneurs entering the world of business and management, it is necessary to divide your focus into all important aspects required to keep a business sustainable and reduce failure possibility. The top focus areas should be curating a well-defined business plan, choosing the right marketing strategy, planning and projecting capital requirements, delegating with the right team members and openness to adapt to the changing trends.

It seems like a lot to do, but when you distribute it step by step, you will realise all of these are interdependent. Even if you start by focusing on one aspect alone, you will successfully see a positive change in your daily business activities and will successfully survive in the market for a longer period.

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[1] https://explodingtopics.com/blog/startup-failure-stats#startup-failure-rate-stats

[2] https://www.lightspeedhq.com/blog/why-small-businesses-fail/

[3] https://explodingtopics.com/blog/startup-failure-stats#startup-failure-rate-stats

[4] https://explodingtopics.com/blog/startup-failure-stats#startup-failure-rate-stats

[5] https://explodingtopics.com/blog/startup-failure-stats#startup-failure-rate-stats