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New businesses are launching at an unprecedented rate. Approximately 660,000 new start-ups are being registered in the UK every year according to The Telegraph.Yet the same article exposes the sheer volume of how many new businesses fail. 20% don’t make it past their first year, and a staggering 60% go bust within their first three years.
And this isn’t so surprising when you take a closer look.
There’s no business plan
Having a great new idea and the enthusiasm to run with it is just the start of a successful business. It’s vital to not only have a sound product or service to take to market, but to also have a thought-through business plan that maps out your company objectives, how you’ll achieve them and how long they will take.
A business plan often contains details of goals, sales and other financials, marketing and more. Without this, most businesses flounder.
Think of it as a literal road map – if you don’t know where you’re going, how will you ever get there?
The minimum length of a business plan should be 12 months, and it’s recommended to review it regularly, adapting to any market changes.
There are cash flow problems
Becoming an entrepreneur is a financial risk, and not just due to potentially leaving paid employment.
You often have extensive setup costs, and cash flow – the speed that money is coming in versus how quickly it’s going out – is exceptionally tricky to get right, especially for those who don’t have a solid understanding of finance. Follow our tips on how to successfully manage this here.
Even with the best planning, you may experience regular curve balls if, say, you have late paying customers. This can not only affect the spending you had planned but even throw the future of your business into doubt.
They don’t understand business concepts
Aside from planning and financials there are many more areas business leaders must understand in order to succeed.
Skills such as leadership, delegation and strategic thinking are explored in this article. The list of skills and responsibilities new business owners face is long and quite often it all falls down to one person, which is an awful lot to balance at once.
As such, many new business leaders who don’t have access to incubator programmes like our own just can’t manage it. They either walk away or are forced to shut down.
They don’t value data
Data is everywhere, and we don’t just mean numbers in a spreadsheet. A common pitfall of new businesspeople is that they do not understand the value of data, even if it’s purely reviewing their website analytics.
By ignoring the data relating to your business, you not only miss out on potentially increasing sales, but also realising when something isn’t working how it should be. Data should form a core part of your business plan to ensure you understand your business and how to drive it forward.
Fortunately, there’s an abundance of data-related training courses and platforms to make this aspect much easier.
They don’t understand their marketplace
Many businesses that fail young simply don’t understand their marketplace and where they fit within it.
Marketing is a key aspect of any business plan. Leaders must not only know their own value proposition and unique selling points (USPs), but also understand and adapt to their competitors. They must keep their ear to the ground for changes in customer behaviour and perceptions as well as the wider world economy.
Even completing a simple SWOT analysis will help leaders better understand their position in the market.
There isn’t a disaster plan
You might think a disaster is unlikely, but in reality you have no control over many things that could impact your business. There are many “what if?” scenarios that could happen.
It’s therefore absolutely essential to have a plan in place that enables you to continue trading, or at least not lose everything you’ve worked for, in the case of the worst-case scenario.
A disaster or continuity plan is a thorough document, the details of which will vary dramatically depending on the industry to which your business belongs. This diagram from Tech Target demonstrates the different layers you will need to consider when creating your own disaster plan. We also explore the other types of business planning to understand to support your business longevity in this article.
With all of this in mind, it’s no surprise that most new businesses struggle. Address these areas in order to give your start-up the best chance. And don’t miss out on the updated version of this article, over at How to ensure your start-up succeeds in a post-pandemic world.
DCI is a fully-funded incubator programme for start-ups based in County Durham. We’re designed to teach you how to overcome every one of the hurdles that most new businesses fall at, giving you the best possible chances of success.
Interested? You can apply to be part of the next DCI programme now.
Apply for our next cohort now.
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