Building up a business from scratch is not an easy fit. And there are many reasons why a business fails. In this research we’ll look at a few common reaons:
- Lack of a Solid Business Plan
- Lack of Emotional Attachment to the Project
- Lack of funds
- Lack of customer focus
- Failure to Get the Pricing and Discounts Right
- Lack of an HR Strategy
Lacking a Solid Business Plan
You don’t need complex documents. A one-page business plan is more than enough!
As the clichรฉ goes, โyou donโt plan to fail, but you just fail to plan,โ many ventures are founded without a firm business model in place to start with.
Experts point out that one does not have to have a set-in-stone plan running into several pages. But since the business itself is expected to be online and adaptable by nature, one has to put down some framework of the primary objectives and execute on them. In that respect, the OKR framework is very helpful:ย
It could start by saying what the product or service the business plans to make or offer, and the current scenario in the market it is preparing to enter. The top cited reason, why startups fail, is because their idea falls short of filling a market need. Business owners should outline the need for the product or the service and in what manner the business to be started will cater to that need/demand.
Finally, there can be a brief mention of how much money will be needed, when would the company start making profits and how many people may have to be recruited to accomplish the tasks. If you ask around, very few new businesses will be able to spell these out clearly.
Lack of Emotional Attachment to the Project
Any new business is a project, and many try and compare it to a new-born baby. As much as attention and focus need to be directed towards the business, the entrepreneur has to be quite possessive about the project, a kind of emotional attachment and the inner urge to see it beyond the standard ways of looking at a business.
This is being mentioned because a new business goes through many trials and challenges in the early days; arranging to fund could be a monumental task, getting the right people for critical functions and getting the marketing strategy right are all challenges that can affect any individual.
The owner of the online business has to have the determination and perseverance to survive through such turbulent times. The passion will only get them through. Those who do not possess these qualities often fail.
Lack of funds: โItโs About Money Honeyโ
Again, an oft-repeated clichรฉ. The fact is that when a new business is started, it sucks the maximum amount of funds.
Depending on the kind of business you have planned online, the revenue inflow may start after several months. Have you worked out your full financial needs and the sources they will be raised from and how the funds will be structured?
You can bet many businesses get it wrong. If this is allowed to go out of hand, it can rapidly slide down and take the venture to failure before you know it. Your financial management ought to be perfect. The ones who make the mistake of not taking this seriously will find it hard to succeed.
Lack of customer focus: Mind Your Customer
While the traditional businesses learned the hard way how important it is to keep the customersโ interests the top-most priority, the challenge is even more critical for the online businesses since the customer is unseen and, on many occasions, unheard.
It is essential that you build within your site a platform for your customers to let you know what they feel about your business, your products, and your service. If you are the business owner, you may not know that your product was delivered late to a customer or that they received the wrong product unless you encourage your customers to get back to you and inform you.
Online businesses make this mistake frequently and may realize very late that their customers have switched to other sites to do their transactions.
Failure to Get the Pricing and Discounts Right
This is a very frequently observed blunder by new businesses; either they are misguided by someone, or the business owner himself/herself has these pre-conceived notions of doling out too much to attract the customers and grow the revenue.
While as a strategy per se, this may not be wrong, it ought to be calibrated and executed based on in-depth research and knowing the consequences fully. The mistake businesses often commit is to give away too much too soon and then they are left with nothing to give. As a result, the customer could drop you like a hot brick.
Lack of an HR Strategy
Yet while achieving a long-term goal a business strategy set a vision, mission and value proposition that can be executed through several possible business models. When one of the drafted business models encounters the favor of the market that is when a business strategy becomes successful!
People constitute a vital part of a startup.
But many online businesses make the mistake of either over-hiring, then finding difficult to pay employees their salaries when things get tough, or under-hiring, leaving out critical functions which can have a negative impact on specific processes. It can even end up being the reason for the downfall of the organization.
Thatโs why itโs crucial for business owners to establish an effective strategy for managing their teams. Itโs also necessary for entrepreneurs to follow recommended guidelines for how to pay employees during the startup stage.
There may be many other mistakes that online businesses commit that lead to their failure.
In any eventuality, lessons are learned and some of the mistakes may not be made again. The need is definitely for the businesses to learn from the mistakes of others and not their own. There are enough recorded case studies of why an online business failed, and it takes some effort to learn how to avoid them to embrace success.
Key takeaway
As we’ve seen throughout this article when starting an online business, there are several things you can do and several ways to make it work.
- Lack of a Solid Business Plan
- Lack of Emotional Attachment to the Project
- Lack of funds
- Lack of customer focus
- Failure to Get the Pricing and Discounts Right
- Lack of an HR Strategy
If you take the time to focus on avoiding these sixย critical pitfalls that can break your online business from the start you’re already half the way to build a successful venture!
Key highlights
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Lack of a Solid Business Plan: Many startups fail to create a clear and concise business plan outlining their product or service, target market, financial projections, and key objectives. Having a well-defined business plan helps provide direction and focus for the business.
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Lack of Emotional Attachment to the Project: Successful entrepreneurs often have a strong emotional attachment to their projects. A new business requires determination, perseverance, and passion to overcome challenges and setbacks. Lack of emotional investment can lead to a lack of resilience when facing difficulties.
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Lack of Funds: Insufficient funds or improper financial management can quickly lead to business failure. New businesses typically require a substantial amount of capital to cover operational expenses before revenue starts flowing in. Having a clear understanding of financial needs and sources of funding is crucial.
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Lack of Customer Focus: Online businesses need to prioritize customer satisfaction and feedback. Failing to engage with customers, gather insights, and address their needs can result in customer attrition and a negative reputation. Building a platform for customer communication is essential.
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Failure to Get Pricing and Discounts Right: Incorrect pricing strategies, such as offering excessive discounts too soon, can erode profits and devalue the product or service. A well-researched pricing strategy aligned with the business model is necessary to ensure profitability.
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Lack of an HR Strategy: Human resources play a critical role in the success of any startup. Over-hiring or under-hiring can disrupt operations and impact processes. Establishing a well-defined HR strategy and team management approach is essential.
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Learning from Mistakes: Online businesses should learn from the mistakes of others to avoid common pitfalls. Studying case studies and adopting best practices can help prevent errors that lead to failure.
Now that you know what mistakes to avoid, do you need some ideas to get started? Below a list of 12ย ideas that require little investment and carry a high profit-margin:
- Become a blogger
- Become an online instructor
- Become a professional photographer
- Become a ghostwriter
- Become a Chatbots maker
- Become an affiliateย marketer
- Become a career coach, resume writer or LinkedIn profile writerย
- Become a business development contractor
- Become an infopreneurย
- Become a websites flipperย
- Become an SEO consultant
- Become a contractor headhunter
Do you still need more ideas? Below a list of 26 ideas!ย
- 1. Affiliate Marketing
- 2. Infoproducts
- 3. Email marketingย
- 4. Google AdSense
- 5. Consulting
- 6. Branded stories
- 7. Paid reviews
- 8. Banner Ads
- 9. Sponsored Blog Posts
- 10. Members Only Content
- 11. Paid Business Directory
- 12. Become a Coach
- 13. Accept Donations
- 14. Charge For โPremiumโ Content
- 15. Sell Your Blog
- 16. Build your SaaS
- 17. Speaking Gigs
- 18. Create & Sell Your Product
- 19. Write Tutorials & Guides
- 20. Live Workshops
- 21. Find Sponsors For An Event
- 22. Generate โleadsโ for other companies
- 23. Create a job board
- 24. Advertise pages
- 25. Host paid webinars
- 26. Writing Gigs
Connected Business Frameworks
Failure Mode And Effects Analysis
Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porterโs Five Forces, Porterโs Generic Strategies, Porterโs Five Forces, PESTEL Analysis, SWOT, Porterโs Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF
Main Free Guides:
Great article! I think the most important think in the business is emotional attachment. If you don’t have feeling for your business than it won’t work.
thank you! And great point. Emotional attachment is critical!