According to data from
various organizations such as Barcelona Activa, the Caixa XXI entrepreneurial
program, Start up Chile, among other organizations specialized in creating new
ventures, the failure rates of new companies worldwide are heartbreaking.
Despite the fact that the
figures vary slightly depending on the country, the statistical average says
that:
8 out of 10 new SMEs fail
before their 5th birthday. And only 1 in 10 manages to survive more than 10
years.
The truth is that it is the
most discouraging data for any entrepreneur or for any SME that is entering the
market.
Why Are The New Companies Failing?
The reasons why the failure
rate of new companies is so high varies totally:
The businessman blames the
closure of new companies on the crisis, the markets and the macroeconomic
environment: politics, legislation, official financing.
Management, business and
marketing experts believe that the reason for these figures is due to the lack
of planning and knowledge of entrepreneurs.
Obviously, and in our
opinion, the 2 visions have their part of reason. So we wanted to analyze the
reasons that, in our opinion, are the cause of most new businesses closing
their doors before they turn 5 years old.
That is why, whether you
are going to start your own company or if you have already started it, you will
surely be interested in knowing some of the most common and at the same time
most decisive mistakes made by the majority of failed entrepreneurs, SMEs and
Start Ups.
My idea is the best:
When we have an idea that
we think is great, we usually jump into thinking about how to develop it. But
many times we forget to analyze if that idea is unique or if there are 200 more
entrepreneurs who have already had that idea and are developing it.
Another common mistake of
entrepreneurs is to believe that our idea is good and that it will work only
because our friends and family like it. Our friends and family can help us in
decision making, but we must bear in mind that they are not objective, and that
they are probably not our objective or potential audience for our business.
So to convert an idea into
a successful business, the most advisable thing is to do a preliminary market
study, since it will help us optimize our resources and our efforts on those
ideas that are truly unique, original and that satisfy the real needs of our
potential consumers. In addition, this type of study will give us very
important guidelines for evaluating the profitability of our project.
Everything is in my head: Many entrepreneurs have great business ideas, but
they work intuitively and forget that this idea needs to be profitable. They
have the business project in their mind and obviate the importance of studying
it thoroughly and writing it down on paper and pencil.
To really analyze the
viability of the project. We must not forget that to calculate the viability
and profitability of an idea it is necessary to plan step by step everything
that has to do with the creation, development and implementation of that business.
The best way to “ensure” the viability and profitability of our
project is making a business plan, better known as business plan and their marketing
plans and communication plans on and off line. Without this type of business
outreach study, it is very likely that our project will end up increasing the
statistics of failure.
The story of the milkmaid:
On some occasions, when we
make our business plan, or company plan, we accidentally follow the story of
the milkmaid: we decide on an initial investment that we do not have, that we
are not sure that we will be able to obtain and that we do not know when we
will be able to amortize or monetize. It is very common to launch business
projects counting that “they will give me a credit of XX €”, that
“I can ask for a mortgage of XX €”, that “I can ask for a grant
or aid of XX €”, etc.
However, launching with
assumptions is a very dangerous exercise, because they do not always give us
the credit or subsidies that we have calculated. And if our entire project has
that injection of financing, it is very likely that we will fail. For this
reason, it is necessary to go with the lead and really have that internal and
external financing that is already secured. Searching for business angels can
also be a good option to boost the financing we need.
Undertaking with my enemy:
Another common mistake of
entrepreneurs, SMEs and Start-ups is through the choice of project partners.
From choosing a partner X only because it provides me with the necessary
capital, without taking into account that by making him a partner his opinion,
criteria, tastes and evaluations will mark the future of the project and that
it is very likely that our ideas and our way of doing will have to have your
approval and consent. Until dividing the company in equal parts without taking
into account that not all the partners will participate in the same way, will
contribute a work of similar value or that will be involved in the same way in
the decisions and actions of the company.
Our partners must share the
same vision and the same values and their participation in the company must
be subject to their contribution and involvement.
Being “Todoists”:
Many entrepreneurs, to
avoid allying with partners or to avoid external financing, decide to be
“Todoists” and do absolutely everything: from ideation, planning, and
implementation.. But pulling the popular proverb we find a great truth, and it
is that “he who embraces much, little presses.”
Therefore, it is very
important to know how to delegate and surround yourself with those people you
trust who complement our knowledge and capacity. The option of being a “todoist”
is usually linked to the budget and to very limited financing. But for this
reason, we can look for other options that allow us to delegate work to
professionals and, at the same time, do not suppose a great initial investment.
In these cases, we can always consider bartering jobs with other companies. Thus,
in addition to ensuring that we have the professional help necessary to launch
our work, we can create synergies, expand our portfolio of contacts, publicize
our business, etc.
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