Turning an idea or lifelong passion into a business is the dream of countless people, especially in this renewed age of entrepreneurial endeavor. Tragically, nearly 90% of startups fail in the first few years of operation, leaving many owners to ask the ultimate question of “why?” In this post we will be going over some of the most common pitfalls that cause startups to fail, and the necessary steps to avoid them.
Lack of Planning
By far the most commonly cited reason for a startup failing is a simple lack of planning. Prospective business owners go into an endeavor with high hopes and an oversimplified view of what a “day in the life” of the business would look like, which is why they often get blindsided by the harsh and often unpleasant realities of being an entrepreneur. Project tracking, goal setting, reporting systems, and other mundane but vital aspects of day-to-day operations are woefully neglected from the outset, and only tend to get more difficult to resolve the longer they go unattended to. Then, inevitably, they get stuck in a cycle of confusion, over/underreaction, and end up in the same place they started, with only wasted time and frustration to show for their efforts. In order to avoid this, it is of the utmost importance to thoroughly plan out exactly what you expect from your efforts in the business. Having a clear business plan as well as a detailed personal vision plan will help guide you through the uncertain or difficult times of the business, while keeping you organized and motivated throughout the process.
Human Resources (HR)
The success of any business, no matter what industry or specialization, is ultimately reliant on the people within it. Unfortunately, many startups are too vague in their expectations for new hires and often don’t have any kind of training structure for new employees, leading to burnout and high turnover rates. Another reason for the prevalence of this issue is a lack of clear expectations from new hires, as business owners don’t have a clear understanding of what certain positions “should” be doing and have a tendency to tack on extraneous tasks to workers who may not be qualified to do them. An easy way to avoid this is to be as detailed as possible in the job description for positions as well as thoroughly explaining the responsibilities of the job to candidates so they understand exactly what is expected of them.
This pitfall tends to be the culmination of the previous two, as lack of planning and poor HR structure invariably leads to poor management. If there isn’t a defined structure for the business to begin with, even the most competent managers will have a difficult time staying organized and keeping the team on track. After all, with no structure and no defined goals, there isn’t even a “track” to begin with! By having a clear structure and reporting system, the manager can organize the team much more effectively and ensure that all workers are staying on task and making clear, measurable progress on their respective projects. However, the most important aspect of management is leadership. Even with detailed, robust structures in place management teams can still fail if the wrong people are in the wrong positions. The solution for this is to ensure that those in charge of your team understand how to effectively motivate, assist and lead your team in day-to-day operations and in times of uncertainty. Having a working interview for management positions is ideal as it gives candidates the ability to show off their traits before entering into a contract and allows you to effectively gauge their leadership style, including whether or not they’re the right fit for your company.
Starting a business is always fraught with difficulty and unexpected hiccups, but that doesn’t mean it’s impossible! By staying structured, organized, and focused from the beginning you can avoid these pitfalls and stand out from other entrepreneurs right from the get-go. If you’re thinking of starting your own business, or even experiencing these issues yourself, don’t hesitate to reach out to our team of experts. We will be more than happy to guide you through every step of the structuring process and set the foundation for your long-term success.
About A&E Advisory
A&E Advisory helps small businesses to midsize enterprises regain profitability, organization, and discover new levels of success. We are a boutique business advisory firm assisting both new startups and established companies.
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