Failing business: mistakes, growth zones and prevention strategies

A company or startup can “burn out” at almost any stage of its development. However, this can not only be prevented, but also endure certain advantages, if this has already happened. After all, failure is a growth zone.

Key mistakes in project development

Business can face many barriers, but among them there are three main ones: poor risk assessment, low adaptation to changes and poor niche choice.

  • Insufficient risk assessment

Business risk is a company’s exposure to factors that will reduce its profits or lead to collapse. If something can prevent a project from making money or achieving its goals, this is a business risk. Threats can be high prices for materials needed for production, increased competition or changes in legislation. This can be managed with a well-planned risk management strategy.

Some of the potential consequences of ignoring risk assessment and management are lawsuits, catastrophic financial losses, damaged reputations, failure to succeed, high turnover, customer dissatisfaction and missed opportunities. Operational risk management should be seen not just as due diligence and compliance, but also as creating value in the company. If done correctly, risk assessment and management can become a path to additional opportunities and new profits.

  • Low level of change readiness

Market fluctuations, economic booms and downturns affect business. It is important to stay abreast of trends and plan for a possible downturn. Creating a cash reserve, and building good relationships with your current (and possible future) lenders will be an important step in meeting working capital needs. They will provide your project with the flexibility to withstand any economic shocks, because the best time to find finance is when you don’t need money.

Also, even when a crisis occurs, you should not cut the marketing budget – this is the engine of your progress. How will new customers know about your company and services if you stop advertising? Continuing to advertise in difficult times will establish the project as a true leader, showing current customers they are in good hands and giving potential partners the confidence to do business with you.

  • Failed niches

The reality is that most projects fail to find a market niche. Without proper market opportunities, your project will never be able to attract customers or make a profit. For a business to be successful, it needs to have a clearly defined area and be sure of its relevance. When looking for market opportunities, it is worth focusing on three key elements: targeted customer segmentation, value proposition, and competitive advantage.

Target customer segmentation involves understanding who your customers are and what their needs are. This will help determine the right audience for the project and develop a plan to meet its needs. After that, you can develop a value proposition that will help you stand out from the competitors. It should show how your product or service meets the needs of target customers and does it better than competitors. The latter forms a competitive advantage. It can include a unique offering or an innovative pricing model. And, before launching a new business, it is important to devote time to market research and analysis. This will help find suitable opportunities and achieve long-term success.

Why failed projects are useful

Failure is a zone of growth. If your project is a failure, then it is worth learning more about the field and the experience of other entrepreneurs running a similar business. This will allow you to find new business methods, industry trends. For example, if you ran a project and it crashed, you can review competitors’ marketing campaigns to explore possible alternatives.

It is equally important to develop yourself and raise good employees. The learning cycle is necessary to develop new skills through practice and experience, so you can fail – this is the zone of your growth. An unsuccessful project can provide an opportunity to build this cycle, since you can analyze the reasons for your failure, learn from them, and then use this experience in the next project. Creating a learning cycle requires accepting your mistakes and how they have affected the whole business, given that failure is part of the process. You also need to believe that next time you can succeed.

Strategies to prevent failed projects

When developing a project, it is important to have clear goals and an action plan. Resources play a significant role too: human, financial, public ones. What strategies will succeed:

  • Take a proactive approach

Managers and supervisors gain skills and knowledge for an ongoing project from their past experience after years of work. If you have just started to develop a project, then you should have an experienced mentor with you so that you can discuss your problems and get advice. Unsuitable skills can lead to huge losses and delayed results, while poor communication, improper work planning and incorrect risk management can lead to project failure.

  • Plan all stages

Planning is the most important stage of all projects, but in most cases it is not given due attention. Before launching, it is extremely important to understand how you are going to work on the project, what will be its strategy, stages of development, goals and possible risks. If you do the right planning, it will increase the likelihood of success.

  • Manage project objectives

Never rely on understanding, verbal agreement and memory when making any decisions. Each of them should be documented in the same way as actions and results: before launch, during and after implementation. This will help to regulate work better, assessing risks and quickly correcting errors.

  • Seek improvement and analyze

When developing a project, you need to analyze the current status of work, identify problems. Never let your business take its course – it needs continuous control, and you need readiness to make crisis decisions. Often, the chances of success of a project can only be increased by reducing the likelihood of its failure.

By Bers Dzhambulatov, founder of the Misty ecosystem

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