Issue 3, Article 1, Week 2, Jun 20145 Pitfalls of Business Start-ups Failures
Approximately 75% of the business start-ups failed within the first 3 years of their business (Business Journal, 2012). What exactly are the reasons for the failure of a start-up?
1. Vague or Complicated Vision
It seems that one of the greatest reasons why business start-ups fail is because the leader came out with a vague or complicated vision which made them lose the direction of their company as the business grows. One of the entrepreneurs that I talked to told me this: "You are suddenly very lost about the direction of your company as the vision that you set up is so vague you are not so sure what you want your company to be anymore".
It is very common for start-ups to come out with a vague vision and eventually improve and refine it until it is very clear for the company on where they will be in the future.
However, many business owners who have failed their businesses before, stated that their businesses did not work out because the vision was either too vague or too complicated. As such, when they are see opportunities they do not know how to assess it. They might end up with too many business deals that are not quite in the direction of where the company want to be and thus making the consumers confused about their positioning. Not knowing the vision implies that you do not know where you want to be. If you cannot see the end goal of the company, how can you develop strategies that gear you towards your goal?
Suggestions:
- Look at successful company's vision
- Sit down and think of where you want your company to be
2. Lack of Focus / Loss of Interest
A lot of the people think that starting a business is very easy and there are easy money to be made because they see an opportunity in making money (usually a one time off event). THAT means that they are starting up a business for the wrong reason! Eventually, they will start to lose interest when there is no business continuation and they will get distracted by other stuffs and hence wind up the business.
There are also another group of people that I have met who have a lot of ideas gushing through their head all the time. Before they succeed in one idea, they will move on to another idea and they will keep doing that. At the end of the day, every idea get started as a business but there is no continuation of the business as no effort is made to maintain the business!
Suggestions:
- THINK of continuation of business and how you can make money with your idea on a ongoing concern basis.
- Be passionate about what you are doing, you should not start a business just because you see easy money to be made.
3. Poor Capital Management
This is a very common problem. You wanted to expand your business but you have lack of capital but I guess lack of capital is not a very big issue. The biggest issue is when you do not know how to manage your capital!
I always believe that when you do not have enough capital, you can always raise it through bank loans, investors, venture capitalists, SPRING Singapore etc. However, if you expand too quickly and / or did not do any capital budgeting (hence overspending before the cash-flow comes in), then your business will face serious cash flow problems leading to liquidation.
Suggestions:
- Budget for your capital
- Plan your cash flow
- Do not over expand
- Consider all expenses involved, you can take reference from similar businesses' cash-flow budgeting
4. Lack of Planning
5. Poor Execution
Some people that I have met told me that they are always eager to jump into a business idea without much planning. While I believed that over planning might be counter productive, not planning is doomed to fail. If you do not have any planning or whatsoever when you start a business and you try to make changes as you go along, you will waste a lot of money and time trying to alter the business. Certain level of planning is required to start a business keeping in mind that you have to be fluid and adaptable as the environment changes.
Suggestions:
- Write a business plan
- Ask yourself what-if scenario questions
This is one of the key issues that most businesses face. They have an awesome idea and a seemingly perfect vision for the business. HOWEVER, they lack the "how" tool for their business. They have little ideas on HOW to get started, HOW to get the resources, HOW to market to the people etc etc
At the end of the day, the business fails because the execution was poorly carried out.
Suggestions:
- Hire someone who can help you to execute your ideas
- Ask around for resources
About Valerie Chai
I am the founder of starCresto Education Group (starCresto).
starCresto was founded in year 2000 and has expanded over the years from tuition to tuition agency to enrichment courses to mentoring. I am born in a poor family and I guess that gave me a lot of drive to succeed and get out of poverty cycle and most importantly, the rat race that so many people are stuck in. I believe strongly in human capital and talent management.
The business journey has not been all that smooth sailing with great lessons learnt from mistakes made. With all these learning, I live by my three rules in life now:
1. Think strategically
2. Behave optimistically
3. Execute courageously
2. Behave optimistically
3. Execute courageously
Share with me your experience as well!
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