Business Education

Entrepreneurs Avoid the Top Mistakes that Put New Companies Out of Business

Starting a new business is an exciting venture, but it’s important to be aware of the risks involved. According to research, about 20% of new businesses fail in their first year, and about 50% fail within five years. While there are many factors that can contribute to business failure, some are more common than others.

Big Mistakes New Entrepreneurs should Avoid

The numbers above aren’t the only ones that are out there. Other studies reveal the new business failure rate is as high as 75% (depending on how “failure” is defined.) However, most findings agree fewer than half will survive long enough to celebrate their fifth year in business.

…being an entrepreneur and founding a successful startup is difficult. It’s a long and difficult road, and you will make mistakes, regardless of how hard you try not to. In fact, there are a few common mistakes that entrepreneurs make, especially during their first time attempting to start a business. Thankfully, the key to mitigating risk from those mistakes, and hopefully avoiding them altogether, is understanding as much about them as possible. —Forbes.com

What’s more, of the less than half that do make it to their fifth year, a mere 33% of those entities will go on to celebrate their tenth year in business. So, let’s take some time to explore the most common reasons new businesses go broke and how entrepreneurs can avoid failing.

Lack of Market Research

One of the most common reasons new businesses fail is a lack of market research. It’s important to understand the needs of your target audience, as well as the competition, in order to create a successful business. Entrepreneurs who skip this step may find that their product or service is not in demand, or that they are unable to compete with established businesses in the industry.

To avoid this mistake, conduct thorough market research before launching your business. This may involve surveys, focus groups, or other methods of gathering feedback from potential customers. By understanding the needs of your target audience and the competition, you can create a business that is more likely to succeed.

Poor Financial Planning

Another common reason new businesses fail is poor financial planning. Entrepreneurs may underestimate the costs involved in starting and running a business or fail to secure adequate funding to cover these costs. Additionally, some entrepreneurs may overspend on non-essential items, such as fancy office spaces or unnecessary equipment.

To avoid this miscalculation, create a detailed business plan that includes financial projections and a budget. This can help you estimate the costs involved in starting and running your business, as well as identify potential sources of funding. It’s also important to keep track of your expenses and income and to adjust your budget as needed.

Lack of Marketing and Branding

Even if your product or service is high-quality, it’s important to effectively market and brand your business. Entrepreneurs who fail to do so may find that they are unable to attract customers or establish themselves as a reputable business.

To avoid this blunder, create a marketing plan that includes branding, advertising, and other promotional efforts. This may involve creating a logo and website, networking with potential customers and industry professionals, and investing in online and offline advertising.

Poor Management

Effective management is key to the success of any business. Entrepreneurs who lack management experience may struggle to make important decisions, delegate tasks, or create a positive company culture. Additionally, entrepreneurs who try to do everything themselves may become overwhelmed and burned out, which can negatively impact the business.

To avoid these missteps, hire experienced managers and delegate tasks effectively. It’s also important to create a positive company culture that promotes productivity, teamwork, and employee satisfaction.

Inflexibility

Finally, entrepreneurs who are unwilling or unable to adapt to changing market conditions may struggle to keep their businesses afloat. This may involve being unwilling to pivot the business model, invest in new technologies, or adjust pricing and marketing strategies.

To avoid this foil, remain open-minded and adaptable. This may involve regularly monitoring market conditions, soliciting feedback from customers, and being willing to make changes when necessary.

As we all know, starting a new business is a risky endeavor, but by avoiding common mistakes and implementing effective strategies, entrepreneurs can increase their chances of success.

What other mistakes would you include and warn entrepreneurs about? Please take a few brief moments to share your experiences and more so others can benefit from your input!

Interested in learning more about business? Then just visit Waters Business Consulting Group.

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Easy Ways to Build Up Retained Business Earnings

June 23, 2021 No Comments

The U.S. Bureau of Labor Statistics estimates about one-third of new businesses fail in their first two years of operation. Approximately half go out of business within the first five years. Banking statistics reveal around 82 percent fail due to cash flow issues. Those are grim and stark figures. But, these unfortunate circumstances can be avoided by building up a business emergency fund in the form of retained earnings. Top Reasons to Save Retained Earnings There are several benefits to saving retained earnings in any business, no matter how small. (But more particularly, for medium to large sized organizations.) Obviously the most important is for emergency situations. It could be a natural disaster, a pandemic, a sizable dip in the economy. Regardless, emergencies do happen and your business will benefit from having savings in-place. Retained earnings reflect the amount of net income a business has left over after dividends have been paid to shareholders. Anything that affects net income, such as operating expenses, depreciation, and cost of goods sold, will affect the statement of retained earnings. —The Blueprint, a Motley Fool Service Another advantage of having retained earnings ready-to-go is for opportunity buys. Your business might have the good fortune of being able to purchase inventory and/or equipment in bulk at a substantial discount. Or, there might well be a circumstance where cash becomes temporarily tight. Retained earnings are an ideal source of capital that can later be replenished. Clever Ways to Save Retained Business Earnings It’s not always easy (or simple) to put aside money within a business that isn’t specifically for something like inventory, equipment, materials, et cetera. But, there are ways to save retained earnings for your business — it just takes a substantial amount of discipline and patience. Here are some effective ways to save retained business earnings: Make it simple. Rather than trying to save money in a business checking account and “pad” the balance, open a dedicated account, such as a money market (since it earns interest) and that will provide more incentive to set money aside. This way, you’ll largely avoid the temptation to spend what you’ve ostensibly saved. Automate savings. Once you have a money market account to save retained earnings, set up automatic deposits to go into that account on a regularly scheduled basis. After a time, it won’t be such a big deal and you’ll grow accustomed to it. Take advantage of discounts. If you’re planning on a big purchase and have a budget set for the expense, take some time to find the same item at a discount. Or, broaden your search to find something similar but less expensive. Then, take the difference you save and put it in retained earnings. Sell off old or unused items. You’ve probably bought one or more things in the past that you rarely use or have grown out-of-date. So, go through your assets and find prime candidates to sell off and then put the money into retained earnings. Take advantage of higher revenue. Whenever business is good, it’s a good idea to put some money aside for a rainy day. While many business owners do this, it’s only sporadic. But, making this a priority and a habit will help to beef up retained earnings. What other suggestions do you have for building up retained business earnings? Please take a brief moment to leave a comment and share your thoughts and experiences so others can benefit from your strategies. Interested in learning more about business? Then just visit Waters Business Consulting Group.

How to Deal with Employee Ghosting

July 15, 2018 No Comments

Employee ghosting is a scary situation. It’s spooky because it’s so awkward and strange. If you haven’t heard about employee ghosting, you’re certainly not alone. Although, it’s a trend which appears like it’s on the rise. Basically, this is a workplace phenomenon born from personal relationships in this day and age or IRL. (That’s In Real Life — BTW or By the Way.) And, it’s possible you might just face this particular scenario. So, it’s best to err on the side of caution and take proactive measures to limit the fallout. Employee Ghosting Explained Before we get to how to deal with it, let’s first explain employee ghosting. It’s simply when an established team member, a new employee, or a fresh hire doesn’t show up, without notice or any forewarning. It’s actually a practice that’s been present in the dating world for quite some time. One person simply up and disappears, without any indication. Poof. All communications are cut off, all of a sudden. In fields ranging from food service to finance, recruiters and hiring managers say a tightening job market and a sustained labor shortage have contributed to a surge in professionals abruptly cutting off contact and turning silent–the type of behavior more often associated with online dating than office life. —Inc.com This has found its way into the professional workplace. And, it raises a number of concerns. Of course, the first is being a person short. Then, there’s the matter of reconciling or trying to make sense of a nonsensical move. Moreover, it makes your team members wonder just what the ghost knows they don’t yet know themselves. In other words, just what reason could cause a person to up and disappear? How to Deal with Employee Ghosting Now, let’s get to dealing with employee ghosting. After all, if it does happen, you certainly don’t want to be caught totally off guard. Here are some helpful suggestions for how to deal with employee ghosting: Create a backup plan. At some point, you’re going to deal with a sudden change that comes out of nowhere. So, it’s best to have a plan in-place. Get with one or more team members and create a backup plan that’s reasonable and actionable so it can be implemented, if necessary. Be prepared to reward. Of course, if someone doesn’t show up, someone else will have to shoulder the load. Which means they’ll have to work more. Make it worthwhile by rewarding them appropriately. A gift card, an extra paid day off, or a bigger bonus. Create a high trust culture. When employees call in sick or they are late, handle this professionally and according to your policy with consistency, but don’t make a mountain out of a mole hill. The same is true with employee mistakes. Be careful to react negatively or to belittle an employee who has made an honest mistake because these negative acts cause employees to not disclose the truth and hide their mistakes … even not showing up for work for fear of retribution. A safe and healthy work environment with open communication helps to foster high trust in the work place. Formulate a way forward. You can’t just rely on a temporary stop-gap solution because it isn’t tenable. You’ll need to formulate a plan for how to transition and proceed in a way that isn’t too interruptive. Stay calm and breathe deep. It’s an unfortunate situation and an uncomfortable one, just like when you have to tell your employees you’ve fired someone. But, you can make it past the setback. Start by remaining calm. Take a deep breath and handle it coolly. Have you experienced this strange trend? How do you deal with it? Or, what other suggestions do you have? Please share your thoughts by commenting! Interested in learning more about business? Then just visit Waters Business Consulting Group.

The Pros and Cons of Hiring Remote Workers

May 17, 2019 No Comments

Hiring remote contractors or employees, like anything else, has its pros and cons. It’s a difficult decision, particularly if you haven’t done it before. When you need more hands on deck, you might wonder if it’s really necessary to bring in a full-time person into the workplace. With all it entails, it’s a big leap, no matter how many times you’ve done it before. So, what about hiring someone to work remotely? What are the pros and cons of hiring remote employees? Let’s take a quick look. Remote Staff Cons Hiring remotely can mean having to make a few adjustments, including time differences. You might find a great fit in a candidate who lives in another time zone. Sometimes, even an hour or two can make a huge difference. Hiring remote employees can be an efficient and cost-effective way to solve problems for small businesses. For many business owners, knowing the benefits of remote hires can open up a variety of benefits, from cost savings to efficiency. —On Deck.com Another possible stumbling stone is communications. Yes, today’s technology makes it far more easy to communicate over just about any distance. But, it still has it limitations, no question at all. Then, there’s the challenge of training. This might well prove the most difficult obstacle to hiring a remote employee or contractor. Remote Employee Pros Of course, there are some very good reasons to hire a remote staff member. Here are a few benefits to hiring a remote worker: Reduced cost. This can’t be understated. When you hire remotely — especially for a contract position — you’ll get the benefit of saving money on labor. A remote contractor can save money in the form of health care and other benefits. Plus, remote contractors might accept a little less in the way of compensation for their own convenience of not having to commute. Skill-set access. Sometimes, it’s just too costly to hunt down the right person with a needed skill-set in your location. (That person might not even be available or live in your area.) In situations like these, needing a particular set of skills, a remote employee could be a great fit. Time advantages. What works one way can work another. Someone who lives in a time zone that’s a couple or few hours ahead of you can serve as a big benefit to getting a head start. He or she can produce what’s needed and do so before you even get into the office. Less office drama. One thing most people don’t think about when it comes to the benefits of hiring remotely is that it doesn’t add to any office politics. Someone who isn’t physically on-site won’t feed into the gossip, which is another advantage. What other points would you add to these? Please share your thoughts and experiences by commenting! Interested in learning more about business? Then just visit Waters Business Consulting Group.