Many people dream of starting their own business. Some people open it. And just a few retain and develop. Why? A company may have an idea, a product, and sometimes even its first customers. However, after 6-12 months, there is a slowdown. And most often the reason is system errors that go unnoticed at the start. What is important to pay attention to in order not to fail?
1. Financial unpreparedness
The most fatal mistake is the lack of sufficient capital. New businesses face a shortage of working capital in the first months. The reasons are different: inflated sales expectations, underestimation of rental costs, salaries, taxes and purchase of materials. In practice, income at the start is usually less than expenses, especially if the business is opened with borrowed funds. If its profitability is equal to or lower than the loan rate, then the startup is initially doomed. When entrepreneurs don’t take this into account, they save on critical things or hope to “live up to the first profit.” The result is predictable: a cash gap and the inability to continue working.
2. Lack of market and customer needs analysis
Creating a product for yourself rather than for the market is one of the most common mistakes. Many people are guided by personal preferences, dreams, and misconceptions, without checking whether there is real demand, what is the niche capacity, and what competitors are doing and how? As a result, the product turns out to be in little demand, gets lost among the rest, sales fall, and the entrepreneur begins to wonder why customers don’t come. A business without understanding the audience turns into a set of actions without a goal: the product is there, but there are no people willing to pay for it.
3. Unrealistic expectations
Very often, entrepreneurs believe that success will come quickly: in three months, there will be sales, in six months — profit, in a year — scaling. The “successful success” broadcast on social media only fuels this misconception. The reality is much more complicated. At the start, you have to adjust the product, test sales channels, attract customers, and train the team. Inflated expectations force an entrepreneur to rush, make hasty decisions, reduce critical expenses, or change strategy too quickly. All this leads to stress, demotivation and loss of focus, which significantly reduces the chances of survival.
4. Inability to adapt
The market is constantly changing: new laws, competitors, price fluctuations, technologies. Entrepreneurs who are too confident in their strategy, in principle, do not take into account the factor of variability, do not have alternative strategies, ignore feedback and continue to do the same, taking risks and falling into traps. For example, a sharp increase in rent or an Internet outage is enough to disrupt the company’s operations. The appearance of a strong dumping competitor has the same effect. As a result, there is a drop in sales or loss of customers, as a result, the business sinks in competitiveness. Adaptation at the start is not a sign of weakness, but a necessity for survival.
5. Problems with management and organization
At the start, a business rarely has a clear management system, especially if the entrepreneur is a beginner: there are no distributed roles, areas of responsibility are not divided, and processes have not yet been debugged. Entrepreneurs are trying to control everything themselves, while employees are just learning. Mistakes accumulate: deadlines are missed, customers receive poor service, and important tasks remain unfulfilled. By the end of the first year, the entrepreneur realizes that he himself does not have time to “live” in his business, and the company is functioning poorly. This leads to demotivation, not to mention physical fatigue. It is clear why there is now a tendency to return from entrepreneurship to hiring.
6. Ineffective marketing
Many people think that if the product is good, the customer will come by himself, it’s enough to create a page on social networks or on a geoservice. In practice, this is an illusion. Without constant and expensive promotion, the business becomes invisible. Consumers don’t learn about the product, competitors occupy niches. At first, sales can be carried out “locally”, but the lack and inefficiency of promotion channels gradually leads to stagnation and loss of motivation among the team, which often causes closure.
7. External factors
The last item on the list, but not the last in importance. Over the past 3 years, our country has undergone truly tectonic changes in legislation related to doing business. And they often outlaw it. Economic fluctuations, legislative changes, supply disruptions, force majeure — all this can really hit a startup. Entrepreneurs who are not ready for changes lose control over the processes. Even a product with high demand will not be able to compensate for delays, interruptions or sudden expenses for a long time, as a result, the company finds itself on the verge of survival.
To summarize, the fatal mistakes that most often lead to business closure in the first year are:
- lack of finances;
- ignoring customer needs;
- unrealistic expectations.
The remaining errors act as aggravating factors. They may not kill the business right away, but combined with the three main ones, they become the final straw.
In reality, a successful startup is not only about ideas and passion, but also about systematic work, market understanding, discipline and willingness to endure difficulties. The first 12 months are a test of strength. Those who understand where the weak points are, go through it and move into a new state. They will have to survive 3 years.
By Liana Davidyan, entrepreneur, business mentor, co-owner and Director of Avroraclinic Dental and Beauty clinic