90% of new businesses fail within the first five years. Contrary to what you may believe, most of the failures are not because of faulty products.
The reasons that many businesses fail have to do with a host of other issues, hurdles that every new business must face. Here are a few of those issues spelled out and how your company can face those challenges successfully.
Budgeting properly for the initial advertising campaigns
Your initial ad campaigns may not bring in the money to make your company solvent. This is not something to be afraid of; on Silicon Valley, this is par for the course.
It is expected that successful companies will require many rounds of funding in order to get into the black. Amazon has yet to turn a profit!
The initial ad campaigns are to raise awareness and create buzz for the brand. The challenge is to keep the business afloat while there is no money coming in. This requires a good relationship with your banker or other investors. It also requires proper budgeting that lowers your cost per conversion.
Keep budgets low, but let your financial partners know exactly what you need. Planning is more important than being cheap for no reason.
Finding the right partnerships
Unless you are doing all of your manufacturing, post-production, marketing and distribution in house, you will need other partnerships in order to make your business successful.
Finding the right partners can be just as challenging as coming up with the initial idea for your business. You may have to go through a few bad eggs before you find the people whom you can really trust.
You will need to do a great deal of research into the backgrounds of businesses that you need. You also need to ignore the solicitations of businesses that you do not need.
As soon as word hits the street that you have a line of credit with a reputable financial institution, there will be a line of businesses who will be trying to take that money from you. Say no three times as much as you say yes – this is the general rule of creating partnerships for yourself.
Creating the proper infrastructure
Perhaps the most important aspect of your business in its initial stages is finding the right team. You will need a management team that sticks through the tough times.
You will need a technical team that can handle being overloaded with work. You will need an administrative team that can organize files and financial records. For most small business startups, these three aspects of business will all fall on the same heads.
In short, you need people who are willing to give up outside activities and lots of sleep in order to handle all of the monotonous aspects of a new business. These people will also need to work incredibly well together, as they will be spending a great deal of time in the same room if the business is to work.
There will need to be decisions made on financing, taxes, hardware, health insurance, marketing, promotion and everything else that a business needs in order to operate.