5 Reasons Why New Businesses Fail


If you are in the midst of starting a new business, you have probably been reminded on more than one occasion that around 50% of new enterprises fail within their first year of trading. This seems to be the common statistic that is branded around amongst new entrepreneurs and to stop you falling into that group, we’ve put together some of the biggest reasons why a lot of these companies cease trading after such a small amount of time.

Of course, consciously avoiding these mistakes isn’t going to guarantee that you’ll reap immediate success. However, if you can bear them in mind, you will increase your chances of staying afloat tremendously.

5 Reasons Why New Businesses Fail

Not Performing Market Research

One of the common misconceptions in business is that if you think you have a great idea, everyone else must think that too. Unfortunately, this isn’t always the case and this is why decent market research is essential. Whether it’s stood in the local shopping centre questioning potential customers about your business idea, or outsourcing a specialist market research company to do this for you – ask the questions before ploughing your money into your enterprise.

Don’t Plan to make an Immediate Profit

Considering all of the costs that are involved in the initial stages of a new business, don’t expect to coin huge profits immediately. This means that you will have to budget for these shortcomings and you may have to rely on some savings or another income stream to survive on.

Avoid Spending Money at All Costs

With most new businesses relying on some sort of loan during the early days, it initially feels as though there is a bottomless pit of money to invest. It’s tempting to splash out on the latest EPOS system, the best furniture and glossy magazine advertisements but really isn’t affordable in most cases. Instead, aim to save money wherever you possibly can and it might even be advisable to acquire a specialist marketing agency, where you can set a definite budget and allow them to do the work for you. Local ones are usually the easiest and if you happen to reside in East Anglia, the marketing agency Suffolk has is regarded as one of the best.

Don’t make Excuses for Hiring Employees

This is similar to the above and while it may feel a little more prestigious being the boss, don’t be fooled into think you need to delegate everything. You should be concentrating on cutting costs at every opportunity in the early stages in a bid to boost your profit margins as much as possible. While you may simply think that you need to cover their basic wage, don’t forget that you’ll need to consider the insurance and tax costs that are associated with a workforce.

Do you Really need Large Premises?

Armed with that big loan, it’s not uncommon for a lot of small business owners to rent out the largest local premises and take out a five year lease. While not all new businesses will be able to work from home, at least try and find a suitably sized building and negotiate with the landlord. With the economic climate poor to say the least, many are happy to consider rent-free periods in some cases, while you may be able to reap other bonuses if you preach your case well enough.

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