By Rebecca D’Souza
According to recent statistics from CityAM.com, an incredible 11,000 business are launched every hour and $1,532 is invested by venture capitalists every second in the US alone. It’s never been a more exciting time to start your own business. SMEs and start-ups are slowly taking over the world, and the international market is being flooded with innovative products and services we never knew we needed.
However, there’s another important figure that no startup should ignore: 90% – the percentage of startups that fail within the first year.
So, whether your business model is going to change the world like Uber or Airbnb, help people eat better like HelloFresh or just allow users to take more flattering selfies like Instagram, it’s important to learn from the mistakes of those who have gone before you – so you can join the ranks of the 845,000 successful startups that are already based here in the UK, rather than finding yourself in the company of the 60 or more businesses that have failed in the time since you started reading this article.
Make Something That People Want
The number one reason startups fail is because nobody wants what they’re selling. It may sound obvious, but considering that a lack of market is touted as the reason for 42% of all startup failures, it might be worth taking Steve Jobs view that “people don’t know what they want until you show it to them,” with a pinch of salt. Do your research, and make sure the time is right for your million-dollar idea, or you may find yourself writing a failure post-mortem sooner than you’d have hoped.
Louise Howlett, Commercial Director of award-winning heating company, RA Brown, agrees that a detailed and extensively researched plan is the key to success. “When I started developing the heat pump installation side of our business with my husband, Richard, we knew from our research that the renewable sector was going to be an upcoming area of growth,” she says. In order to give their company a competitive edge they needed a retail presence, which meant finding the right location to accommodate both their office and a showroom. This was a big investment at a time when the economic crisis was at its height but the directors entered into it confidently having done their homework. “There was no room for error – the timing had to be right and every step carefully planned but it was a risk that paid off,” adds Howlett.
Don’t Redesign The Wheel
If your product or service already exists, think carefully about whether there’s sufficient demand for more of the same. Superior competition makes up 19% of startup failure. If what you’re providing with your business is better than your competitors, go ahead. But if you’re planning to take on an already saturated markets such as streaming services or lift shares, do your research before pouring time and money into a project that might be outdone by something that’s already a household name.
Pick The Right People
23% of failure post-mortems cite hiring the wrong people as a major reason for their downfall. An enormous number of startups are born out of lightbulb moments with a group of friends – but it’s important to make sure you’re going into business with people who know what they’re doing. Investing in the best people for the job is more important than holding back from critiquing a friend’s performance in order to protect their feelings. That being said, it’s also important to trust the team with which you’re working. Your startup team are going to be with you through good times, but also the bad. Ensure that they know what they’re getting themselves into, but most importantly, make sure they understand what it is you’re here to do.
Ensure You’ve Got The Capital
Financial problems make up over a quarter of startup failures at 29%. It doesn’t matter how you achieve it, be it through investment, personal savings or a business loan – but make sure you have the funds to realise your business from start to finish. Adam Hoeksema, Co-Founder of ProjectionHub, notes that most startup owners don’t take home a pay check for the first year they’re in business. “If you need a pay check each month at this point in your life,” writes Hoeksema on his blog, “then you probably shouldn’t risk starting a new business right now.”
Be Involved In Every Aspect of Your Business
Entrepreneur and regular contributor to Forbes magazine Neil Patel emphasises the importance of business founders understanding every aspect of their business, even if they have a strong and competent team surrounding them. Startups cannot segment their responsibilities, and it’s the CEO’s job to make sure they’re picking up the slack, especially in a small team where roles can regularly overlap. Don’t ignore anything, implores Patel. “Successful entrepreneurs work on their business, not in their business,” he wrote on forbes.com last year.
Launching a business can be a daunting prospect, but it shouldn’t deter you if you’ve done sufficient research and have confidence in your product. Practical business advice is useful, but it doesn’t count for everything. Brent Ginna, founder of EverTrue, stresses that the most important thing any founder can do is remember this: “While mentor feedback is extremely valuable, we ultimately need to make key decisions ourselves.” So, go forth and build your businesses to be part of the other 10%. Believe in your ability, believe in your product and most importantly, trust your instinct. It’s gotten you this far”, she says.
ABOUT THE AUTHOR
Rebecca D’Souza is a freelance writer covering all aspects of business, including online marketing and PR.