1: The Narrow Niche
If you come across an idea that appeals because nobody else is doing it, let those alarm bells ring. Ask, first and foremost, why nobody else is doing it – there is probably a very good reason.
One of the lessons the inexperienced start up business manager learns in this instance is that investigating the market is all-important. In-depth research is needed, market research and financial research, in order to discover if your seemingly gold-plated niche really is worth it. The fact that nobody else is in the market is not a driving factor; the fact that there is not a market after all is.
Everyone wants to keep costs to a minimum, but a start up business needs the amount of money it needs – it really is that simple. Cutting corners in the first instance is not a good idea as it leaves you open to problems of under-investment. If you are looking to launch you need as much exposure as you can get, for instance, and cutting back on promotion is something that happens too often.
Understand exactly how much you need, and when, and expect to have to invest more, not less. This is your future, not a weekend project.
3: Underestimating competition
Look at any market and you will find there is competition there; if there’s not, see point number one, and ask why. Many start ups take the view that if there is already a market there will be guaranteed business. This overlooks the factor that customers tend to be loyal. If you’ve been shopping at one store for ten years, you are not going to change allegiance to a new store unless they offer something you want, and that doesn’t mean just an introductory offer, but an ongoing reason to remain.
Too many businesses fail because they launch in a market that is already fully saturated, without considering why customers are going to switch their business to the new kid on the block. If there is no reason to move next door, customers are unlikely to do so.
4: Lack of Interest
Many businesses are set up by people who see dollar signs before their eyes. Unfortunately, many of these overlook the fact that it takes hard work to run a business, and if that hard work – relentless, strenuous and time-consuming – is put into something that is not enjoyed by the proprietor the chance of failure is much higher than the norm.
Those who do not enjoy their work tend not to put all the effort into it that they need, and this leads to increasing disinterest and a lack of commitment. It’s a common reason for failure, and always will be.
5: Spread it too thin
As we have mentioned the narrow niche – too narrow, in this context – it is worth looking at another common reason for failure of start ups, this being the companies that try to take on too much at once. Expansion is all very well, but when you first start up you are looking to take a foothold in the market, and trying to do everything at once is a serious problem.
Take your time to secure your space in the first section of the market, and then add to it by bringing in little elements over time. Planning is the key, and it is all too often overlooked.