The digital age is an outstanding time to start a business. All it takes is one great idea, and you can quite actually change the world. Companies like Uber and Amazon have done so, just from the creation of one idea.
While it seems very simple to execute that idea, there is so much more involved in the process of starting a business than just an idea. There is always the possibility of the business going under for a variety of different reasons.
Joseph W. Murray, Executive Vice President and Director of Business and Estate Planning at MassMutual Greater Philadelphia says that the reasons that businesses fail in their start-up year comes down to two major, yet basic things: A lack of preparation and a lack of capital.
A Lack of Preparation
There are a ton of ways that businesses that fail can have a lack of preparation, according to Murray.
The first way that a business is bound to fail is if the owner of the business is in it for the wrong reasons. If someone wants to be their own boss just because they think they can do it better than their last company and really does not have a passion for what they are starting, it will be very hard to be successful.
“They need to believe in it and be able to fight for it,” Murray said.
After that, planning for the business is the next step in the line of failure. Potential business owners should be doing market surveys, market research and other background research before even talking about money. There needs to be a knowledge that the area the business would live in would be able to support it.
The new business has to have a unique selling point, Murray went on the say. People have to want to come and get your product or service over what they have been using. Owners need to know who they’re competing against for business. That goes hand in hand with advertising the business. As Murray put it, “if you’re doing well, you should be advertising. If you’re doing poorly, you NEED to be advertising.”
Say the business is successful for the first six or seven months. Many businesses feel the need to expand. That can be just as bad as any of the things mentioned previously, because going into more debt after getting lucky for six months can be a nail in a coffin for a young company.
A Lack of Capital
This reason is much simpler than preparation. A new business should anticipate having funds to cover the bills for a full year, if not two, Murray said. It takes a long time to get customers to give you their money, and even longer for them to give you your money on time. If customers are not paying, the bills do not stop coming, so you can get in a hole very quickly.
One way to avoid falling into any of these pitfalls is to consult a small business expert like the associates at MassMutual Greater Philadelphia. MassMutual is a proud sponsor of the 2017 Stellar Start Up Awards, in which startups who have done things the right way are recognized for their successes. You can join representatives from MassMutual Greater Philadelphia at the event on Sept. 12 at the Franklin Institute.
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