Starting your own company can be an exciting career move. The first year of business will feature countless obstacles to overcome and valuable lessons to learn. These moments can help create a solid base from which the company can grow in the years to come.
The industries thriving in Canada currently include energy and technology. Both of these industries are rising in demand due to their services. Technology is continuously advancing, shaping how we live our lives and how companies conduct business. Unsurprisingly, the industry is thriving, and more start-ups are trying to leave their mark in the sector.
With energy, sustainability has become a buzzword used by countless companies. Businesses want to create a greener and more sustainable business to help reduce their carbon footprint. It also meets the increasing demand from consumers wanting to work with sustainable businesses. Employees, investors, and governments are also demanding sustainable companies.
Businesses that choose to operate either within these thriving industries or other sectors will likely encounter a few challenges along the way. Running a business is never easy, and it can require an individual to put a lot of time and effort into keeping their start-up afloat.
Despite putting all of their best efforts into the business, some will only live a short lifespan. Some of the reasons for these short years in operation are common mistakes that could have easily been avoidable.
Common Reasons Start-Ups Fail
Running a business will mean that you are constantly learning. It could be gaining greater insight into the industry you operate within, effectively communicating with others and finding innovative ways to improve and sell your products or services.
There will most likely be obstacles that block a business from reaching its goal. Many companies will be able to overcome these hurdles. They will use these moments as lessons learned that they could reflect on in future when making decisions. However, an unfortunate number of start-ups will fall at these hurdles. It could leave them to end what they had anticipated would be an exciting journey.
These are a few of the most common reasons why start-ups often fail within the first year or two of being in business.
- Lack Of Research – During the planning and preparation stages of business, research is vital. Conducting research into the market to see if there is a demand or a gap for the project or service you aim to sell. A high portion of start-ups that fail do so due to a lack of research in the beginning. They could not see if there was a demand for the product or service they had planned to market. When they launched their business, there was very little or no interest in selling. This could have been easily avoided should they have conducted thorough market research.
- Fierce Competition – Start-ups who choose to enter an industry in high demand for a specific product or service will most likely have competition. Some of the competition within the industry will likely have a well-established client base that adores and trusts that business. The loyal following will unlikely be willing to switch to another company. Any new customers will be drawn more to the well-established company over the new starter. Due to this high competition, some start-ups often struggle with competing.
- Limited Funds – A common reason start-ups fail is that they run out of funds. Funds enable the business to remain in operation. Managers must understand how much the company has remaining and if they have enough to help them reach their company milestone. Many start-ups will fail to raise more cash to help the business grow, and others will spend more than they can afford. The result is closing their start-up after a year, sometimes two of being in operation.
- Wrong Team – A company that thrives will likely have a strong workforce supporting them. There will be a team of talented individuals working together to accomplish the company’s targets. The team will aim to reach these milestones whilst ensuring exceptional customer service. Their service can impress customers enough to return, inform peers, and leave positive reviews online to help attract potential customers. If team members cannot work together or communicate effectively, start-ups will struggle with success. The lack of communication combined with inadequate skills can also help to put the company in an unfortunate situation.
Ways To Increase Survival Rates
Surviving the first year of business is an honorable accomplishment. It showcases the company’s talent and success within its team, the innovative products or services being sold, and the wise decisions being made.
After its first year, the business’s accomplishments can be used to its advantage. If they need an investor, they can highlight their achievements following a year of business. They can highlight the predictions they have forecasted for similar success in the future.
Start-ups can apply ways and tactics to their business to help them increase their survival rates. These are just a few of those ways.
Have A Solid Business Plan
A business plan creates a foundation upon which the company is built. Without it, some start-ups will struggle with their progress and are unlikely to survive after their first year. Many will fail to realize how difficult it is for a start-up to attract customers. Consumers want to work with a reliable company. It is why they look online for reviews about a company and the experiences others have had. Start-ups do not have this support from previous customers, making it challenging to attract potential customers to the business.
Having a business plan establishes a base that the business can grow from. It asks questions about how the company will grow and what tactics will the team use to achieve this goal. Without it, it can be challenging for start-ups to map out how they intend the business to grow. As such, they might make decisions with little thought about the long-term impact it could have on the start-up, only considering the positive short-term perks.
Correctly Filing Taxes
Completing personal tax forms can be an overwhelming task for some. The thought of meeting ones for their start-up can be terrifying. If tax return forms are completed incorrectly, it can lead to unfavorable penalties. There are also penalties for sending back tax return forms after the deadline. Any of these penalties could hurt the business, some more extreme than others.
Start-ups need to ensure that they file out their forms correctly to avoid these unfortunate scenarios. If you ask yourself, ‘how much tax do I pay in Ontario for 2021’, use a tax calculator to help you with determining the costs. In addition to a tax calculator, utilize other resources that are available to you. For instance, consider seeking support and guidance from a professional accountant. The advice they can provide could prove valuable to your business when filing tax returns.
After the tax season has ended, your business could still seek the services and support of the accountant. They could offer helpful advice and guidance on what is possible regarding its growth. Having this support can reduce the risk of start-ups finding themselves in an unfortunate financial situation. It could be a situation that potentially leaves them to say goodbye to their start-up.
Learn From Mistakes
The sole purpose is to deliver a service or product that solves an issue for a customer. It provides them with a solution that they did not know existed. If happy with the answer, they will share it with others and encourage them to try it. The customer plays an influential role in the success of the company. Customers are what helps to keep the start-up running with their investments in the products or services. As such, the customer should come first.
Spend time speaking with customers, both current and potential. Ask them about what areas they are having issues with and use the feedback provided to refine your services or products. The input can also improve how the company communicates with customers.
In the first year, mistakes will be made along the way. You may find that the service or product is not working as well as you thought it would. The marketing campaigns are not as effective as you had hoped. If these occur, you may choose to change course. Learn from the lessons these unfavorable situations have taught you and start over. Using the knowledge and experience to do things differently and increase chances of survival.
The Bottom Line
Being able to say that your business has survived its first year is an accomplishment some former start-ups, unfortunately, cannot say. It is a difficult challenge to help a start-up grow. However, the rewards can motivate a start-up to continue pushing and accomplishing its goals.
Taking the time to carefully plan the future of the business, creating a solid foundation for the company to be built on can help increase the chances of your start-up surviving past the first year.