Failure in starting a business is an experience shared by many people. So what are the reasons for failure in starting a business? Below are the common reasons why starting a business fails that I have carefully compiled for you. Let’s take a look.
? Common reasons for business failure
1. Shortage of funds.
Entrepreneurs underestimate financial needs, lack financial budgets, and are unable to effectively use funds in operations or production, making it difficult to create a surplus.
Many people do not consider the importance of working capital when starting a business, so they start a business rashly without sufficient working capital. As everyone knows, many people have to close their doors early because they do not have sufficient liquidity when their business is not going well after starting a business and they need to stick to it for a period of time. If an entrepreneur does not have sufficient liquidity to sustain operations for more than half a year when starting a business, it is best not to start a business easily.
2. Insufficient market information.
Including not truly understanding the potential market demand, incorrectly estimating the share, and unclear understanding of sales channels and competitors, etc.
Many entrepreneurs do not understand the business operations of their competitors, nor do they carefully analyze their competitors' business strategies. They do not know what measures and means their competitors will use to deal with them in the next step. Especially if you don't analyze the pros and cons of both parties and just act based on your own feelings, you will often suffer in the end.
3. There are too many defective products or the defective rate is too high.
Because there are too many defective products, or the defective rate is too high, the costs and losses are too high, and the products lack popularity at the beginning of the business, resulting in unsaleable products and a large amount of inventory accumulation.
4. Wrong strategy.
Improper corporate values, ineffective management and sales strategies, miscalculation of competitors, etc. This includes errors in entrepreneurial concepts and competitive strategies. Since these strategies are related to the life and death of an enterprise, therefore, This is also the most important reason for failure. Once entrepreneurs make major mistakes or accidents, they often lack coping experience and solutions. Therefore, for first-time entrepreneurs, a wrong strategy can be fatal.
5. The product elimination rate is too fast.
If the life cycle of the product is too short, or the product produced is not in line with the trend, the product will be eliminated soon after its launch. Such products that are not in line with the trend and are easy to be eliminated will become popular in a short time after starting a business. It is very likely to suffer the fate of failure.
Usually popular products aimed at young people generally have a short life span. Entrepreneurs must understand this rule. When a popular product becomes popular, you invest and want to get a share of the pie. Be especially careful as your new product may be on the market and it may no longer be popular.
6. Improper management.
Entrepreneurs lack management experience, change orders day by day, and often learn from their mistakes. However, this consumes a lot of company resources and cannot establish a reasonable, flexible and efficient system. For example, improper employment of personnel causes unnecessary internal friction; for example, loopholes in the financial system give employees opportunities to harm the public and private interests; for example, failure to pay attention to production safety leads to major casualties.
7. Start a business at the wrong time.
For example, if you open an air conditioner store in winter, your entrepreneurial career may suffer setbacks due to the off-season factors. Or, soon after starting a business, you are restricted by newly promulgated industry management regulations by the state and local governments, which makes it impossible to predict and envision, resulting in a waste of resources or the inability to operate.
8. Not understanding the relevant national regulations.
The state has stipulated that many industries cannot be operated by private owners. There are also some industries that were originally allowed to operate, but are affected by policy changes, and even an industry may be suspended indefinitely for rectification, etc. You must understand these clearly.
Opinions on failure in starting a business
1. Fairness, fairness, equity: Don’t worry about being few but worrying about injustice. Treat all those who believe in you fairly, whether they are the founding partners or the partners who joined later, or those who have already joined. Let the departing partner get what he deserves.
2. Can advance and retreat: allow capable people to enter at any time, allow people who want to retreat to retreat at any time, and allow unsuitable people to be laid off at any time to build an open team. Ask the canal where the clear water can come from;
3. Reflect the value and importance of each factor: not just money, but also time, patented technology, and connections? Diaosi entrepreneurial teams are often He has all the eighteen martial arts skills, but he has no money. Only by embodying and quantifying the value of each element can we encourage members to bring more resources to the company, and the more scarce and important resources are, the higher the weight given to them;
4. Reflect staged results: the company reaches a milestone Afterwards, the risk of starting a business is reduced, the risks taken by the partners in the early stage should be reflected, and the equity rewards should be in place;
5. There is a repurchase mechanism: it can solve the problem of absent shareholders (holding holders) People who have equity but do not participate in the company's operation and management), investors are not willing to see too many shareholders in the company;
6. Be operable and not too complicated;
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7. Contractualization and legalization will not cause unnecessary expenses (such as notary fees, taxes). Reasons for entrepreneurial failure
1. Wrong people
The most likely factor that leads to entrepreneurial failure is people.
The first is the founder. Before Xu Xiaoping decides to invest, he must consider the founder's abilities in three aspects: learning ability, work ability, and influence. Especially learning ability. If the founder does not have the ability to continuously learn and make continuous progress, it is difficult to imagine that the company he leads can grow rapidly. Didi Taxi-hailing started from 800,000 yuan and has reached the scale of tens of billions of dollars today. Didi investor Wang | Gang believes that the most fundamental reason is that founder Cheng Wei has strong learning ability and rapid progress. Zhang Lei, the managing partner of Hillhouse Capital, once said of Cheng Wei: "Every quarter I see him, he has made great progress. For such a person, what else can you do if you don't invest? You must invest."
The second is the partners. Xu Xiaoping once concluded that ZhenFund has invested in many projects. Looking back at the failed companies, most of them have the same characteristics, or the companies that are doing very hard have the same factor. That is, there is only one eldest among their founders, no second or third eldest, and no double-digit partners. This is a very painful lesson. A single tree cannot make a forest. This is true. No matter how capable you are, if no one helps you, you will definitely fail.
A team member again. Many start-up companies have no problems with their founders, partners, markets, and business models, but they still fail to develop rapidly, mostly because they hire mediocre people. The quality of your products and services depends on the people you hire? Developers, operations staff, sales staff, etc. If the company's core team is mediocre, then the products and services are destined to be mediocre.
2. Wrong goals
One of the most common mistakes ambitious entrepreneurs make is to set unrealistic goals. One of the reasons for this mistake is not doing what you are good at, but focusing on what has the greatest opportunity. Entrepreneurs should understand in which areas their resources are distributed, who they need to find after the project is launched, and what resources they need to utilize. Rather than hearsay, blind spots enter a blue ocean or even a red ocean.
The second reason is the lack of focus. Smart people will always want to try many new ideas, but a startup with limited resources cannot afford to try all new ideas. A good approach is to locate the needs of consumers, provide a market service, lock in a user group, innovate a compelling feature, and solve a real consumer need.
3. Wrong product
Facing a fully competitive and extremely complex market, as well as consumer psychology that is increasingly difficult to fathom, start-up companies will face huge challenges once their products are launched. .
If there are too many defective products or the defective rate is too high, it will easily lead to unsaleable products and hoarding. Such consumption will be difficult for start-up companies to bear; if the life cycle of the product is too short, the product will have to be sold out soon after it is launched. Encountering the risk of being eliminated, once a company fails to respond in time or operates ineffectively, the company will quickly fall into trouble; if your products or services fail to solve the specific needs of consumers, you will not be able to gain the favor of investors, regardless of your technology or What an amazing innovation.
4. Insufficient funds
What do entrepreneurs lack most? The answer given by quite a few people is money.
Indeed, if an entrepreneur underestimates financial needs, lacks financial budget, and cannot effectively use funds in operations or production, it will be difficult to create profits.
Money is needed to start, and even more money is needed to sustain it. In Jack Ma’s words, the two main reasons why entrepreneurs fail are not starting and not persisting. The prerequisite for persistence is sufficient funds. Many people do not consider the importance of working capital when starting a business, so they start a business rashly without sufficient working capital. As everyone knows, many people have to give up early because they do not have sufficient liquidity when their business is not going well after starting a business. If an entrepreneur does not have sufficient liquidity to sustain operations for more than half a year when starting a business, it is best not to start a business easily.
5. Lack of execution
For start-ups, good ideas are important, but good execution is even more important. Good ideas are easily copied by others, and you can't stop those who follow you, you can only keep accelerating your own pace. Strong and sustainable execution is an important driving force for enterprises to move forward.
Good execution includes not only implementing established plans, but also quickly responding to changes in market and consumer demands. In fact, you don’t have to pay too much attention to your original plan. Many successful companies completely change their original intention to start a business midway and start a new business plan. In most cases, the direction of the adjustment is determined by the consumers you serve.