Why companies/business fail
According to Bloomberg, 8 out of 10 businesses fail within the first few months of their operations. One might assume the major reason for their failure is the lack of a brilliant idea. This is not necessarily the case as many of them have exceptional ideas. There are many aspects of a startup that, if not carefully considered, are deemed to cause a corporate disaster.
1. Failure to understand the market (customers)
The most successful businesses are customer-oriented. This means that whatever product/service they make is geared towards their consumers’ needs and wants. More specifically, these startups are based on solving a specific problem or demand in the market. To a successful entrepreneur, Problem & demand = Opportunity. The unsuccessful entrepreneurs perceive the exact opposite of this. They fail to understand the exact need they are addressing and therefore fail to design and implement an effective corporate strategy. Customers sense this; they sense it when their needs are not addressed; they sense it when a business’ product/service is not for them; they sense it when the business concerned is not customer-oriented. This, from a business’ point of view, is a recipe for corporate disaster. Therefore before starting a business, try to understand your target market because this can help you create value.
2. Wrong timing
Some ideas fail because of their wrong timing. You may be prepared for your idea but is the rest of world prepared? You may have the perfect business model but your target market may not be ready for your idea. In a business environment, there are so many external factors that determine the success of businesses. These factors are subject to change and can range from economic fluctuations to social factors. Such factors determine the readiness of your target market; they determine the correctness of the timing of your idea. A good example is electric cars, which were made decades ago but whose companies failed simply because the world was not ready for electric cars. Fast forward to the 21st century when Elon musk does not cease to amaze us with Tesla in the midst of a period with a great need of renewable energy to reduce environmental pollution. Tesla’s electronic cars may be as extraordinary as those 20 years ago but what separates this company is its perfect timing in a world that now desperately needs electronic cars. Do your research and refine your business' timing.
3. Poor team dynamics
Steve Jobs once said, “Great things in business are never done by one person, they’re done by a team of people”.
The most successful businesses and innovations are not products of a one man’s show. They are a product of a group of people or even generations’ dedication of time and effort. Having a team of people with a range of skills is better than investing a single skill by one person. These skills and minds if combined together make a recipe for success. However, this is only possible if the team members share the same vision for the business. Businesses succeed only if the parties involved are working towards the same goal. This is what separates a successful business from an unsuccessful one. A successful business attracts people with the same ideology and vision and together they work towards the exact same goal. An unsuccessful business, on the other hand, consists of individuals with no clear vision for the organization. The result is frequent misunderstandings and failed company objectives
4. Lack of planning
Planning is a crucial part of any business. An entrepreneur should therefore be a planning freak; they should know where their business currently is as well as how it should look like in few months and in 10 years. A proper plan is strategic; it examines the goals of the business and, most importantly, how those goals can be achieved. This plan is not an overview or a general idea of the business; it is a very detailed document showing exactly what its vision statement and how exactly it plans to achieve it. An unsuccessful business does not understand the value of a plan to its business; it relies on spontaneity and ‘gut instinct’ to increase its performance; it does not forecast the business’ position for the next few years and is therefore unprepared for crisis. Plan your business with every single detail you can think of.