About half of all new companies in America fail within the first five years, according to Entrepreneur, and that number increases to 70 percent after 10 years. That’s why entrepreneurs need to take certain precautions and steps before they open their doors for business. With that in mind, following are some key reasons why most startups fizzle out before they reach their tenth anniversary.
Lack of a Market Need
In a recent study, “no market need” was cited as the most common reasons people went out of business, according to Forbes. This problem often stems from a lack of marketing research. When consumer products companies introduce new products, for example, they often spend a year or more selling their fruit swirl pastries or laundry detergents in designated test cities. This gives them a gauge on how the items sell and whether there’s room in the market for another product. Entrepreneurs who are just starting out should also study competitors’ sales before introducing their products, making sure there’s enough demand for another player.
Run Out of Money
Another reason startups failed was because the owners ran out of money. In many cases, it can take new companies two or three years to turn a profit, according to Chron.com. This suggests a business owner should at least have a couple years or more worth of salary handy to make it to the profitability stage. Another option is starting the business part time while holding down a day job.
Ignoring Customers’ Needs
Customers are the life blood of any business. When companies fail to identify and meet their needs, they can’t expect to succeed. One way entrepreneurs can stay on top of customers’ preferences is by garnering constant feedback from them. This can include everything from phone, email or snail-mail surveys to in-store focus groups. A company, for example, may be missing the mark with respect to the flavors consumers want in their flavored waters. But with a little research, they can make the necessary changes and dramatically increase their sales.
Many businesses fail because they aren’t reaching enough target customers with their marketing efforts. This often becomes a problem when companies use television or media that reaches too wide of an audience. In today’s marketplace, companies need to be where customers can find them — and that’s the internet. Therefore, one way to get in front of customers is to hire or outsource a search engine optimization specialist to maximum online exposure. They have the ability to intersperse various keywords and meta tags to target those who are most likely to buy a company’s products.