Why Do Some Startups Fail Within 2 Years?

Year after year, some like-minded individuals are brought together by their entrepreneurial spirit to amass some capital and kickstart their business. Thousands of such businesses are incubated, but not many survive past the infancy period of the business. Within one to two years, many businesses go bust and fold up, only to remind us the fragility of the survival of businesses in general.

There are various factors that account for the phenomenon, such as the business model or the style of business management. Would-be entrepreneurs have an obligation to foresee the challenges they may face and examine how they can circumvent these pitfalls. By studying successful and unsuccessful businesses, a potential business owner can conceptualize and develop a business plan on the dos and the don’ts of running a business.

The Lack of Empirical Advantage

There are one too many entrepreneurs who faced failure due to their stark inexperience in running a profitable business. The absence of valuable experience deprives many new business owners the crucial sensibilities and tactics of navigating a company to success. They commit errors that an experienced businessman could have avoided.

However, budding entrepreneurs need not be disenchanted by their lack of experience in running a business. By reaching out to mentors such as successful and experienced businessmen, one can avert the demise of their business by learning about the tricks of the trade. Finding a suitable mentor should not be very difficult; there are many businessmen who are eager to pass down the knowledge and understanding of the business field that they have gathered from going through the school of hard knocks. Although it is very handy to rely on the guidance provided by a mentor, an entrepreneur should exercise care not to be overly dependent on the mentor to grow the business. Remember, there should not be a greater expert about your business than you.

Incompetent Management Style

There are a few categories of incompetent management. Some crummy business management stems from poor financial wisdom, such as the misappropriation of capital. Some other lackluster management derives from substandard employment choices, like hiring unsuitable staff. Fundamentally, shoddy management of a company can be attributed to the shortcoming of the entrepreneur to have an outlook of how the business should flourish over time.

Such a dearth of foresight can critically handicap the company from being adaptable in an ever-volatile market. It can also disorient the employees when the company is disorganized in its direction. To eschew defeat, entrepreneurs must subject their newly formed companies to constant supervision and provide steady leadership over their staffs.

Failure to Anticipate

“Failing to plan is planning to fail” is a popular quote that is very apt for new businesses. The energy and enthusiasm present in entrepreneurs at the outset of their new businesses can sometimes cloud the vision and propel their companies into decline. Entrepreneurs must ensure that ample time is dedicated to the proper planning in initiating the business.

In other words, a business plan is non-negotiable. A good business plan will address all the various facets of the business, such as:

What are the financial costs of running the business?
How can I market the product or service?
What is my revenue model?

Once again, a pragmatic perspective is essential when penning a business plan. It should ideally reflect the strategy for the ascension of the company at least over the next five years. “One of the main reasons why companies flop is because they do not plan sufficiently before incorporation”, affirmed Ms. Cheryl Lee, Operations Manager of SingaporeCompanyIncorporation.sg.