Why Most Startups Fail

Most people are limited, not by their abilities, but rather their fear of failure.?For entrepreneurs, this fear is valid, as the unpopular truth about startups is that statistically 9 out of 10 don’t succeed.?However, the reason why most startups fail can usually be traced to 3 main factors.

1.?????Lack of knowledge and experience

2.?????Lack of startup capital

3.?????Lack of marketing

Through our consulting services, we assist entrepreneurs with launching their startup businesses in a way that addresses these factors and gives them a much higher probability of succeeding.

Lack of Knowledge and Experience

All the consultants we have on staff are former CEOs with 20 to 30 years of experience owning and operating their own businesses, ranging from very large to medium-sized businesses in a variety of different industries and vertical markets.?Chances are, all the mistakes you’re about to make in your new business, we’ve already made, and can prevent you from making them which would undoubtedly save you both time and money.?Most likely more money than our fee.?

If there’s any reason why people are smarter today than they were 100 years ago is that we’ve had the luxury of learning from everyone who’s done things before us.?Many entrepreneurs get their dreams squashed by friends, family and neighbors they’ve shared their ideas with.?However, it’s never wise to take advise from someone who hasn’t done what you’re trying to do.?Furthermore, it’s always a lot easier to learn from other people’s mistakes than it is to learn from your own.

We’re in the business of providing information to our clients.?However, the information we provide isn’t the kind of information that is easily obtainable.?You may be able to find some information about starting a business in books, search engines and video but the information we provide to our clients comes from many years of experience running our own businesses, including countless hours of research, trial and error, meetings with employees, conversations with lawyers and learning from immeasurable losses that we’ve all incurred by the mistakes we’ve inadvertently made over time.?In addition, we’ve also had the luxury of helping many clients with mistakes they’ve made before coming to us.?Even though there are billions of people in the world, we all behave very similar and there are many commonalities in the mistakes we all make.?

Helping our clients sidestep a few landmines along the way is part of our process and sharing the knowledge and experience we have with our clients saves them the painstakingly grueling process of enduring it themselves with the stress, anxiety and risk that goes with trying to accomplish the monumental task of starting a business alone without any help.

Lake of Startup Capital

Many entrepreneurs struggle with financial projections and finances in general.?Some don’t even know how to determine how much money it’s going to cost to start their business.?Not only is it important to determine startup costs, but it’s also important to determine how much money it’s going to cost to operate your business until the business is generating enough revenue to support itself.?Figuring projected revenue can also be confusing because no one really knows how much money their startup business is going to make.

It's not uncommon for startups to end their first year at a loss.?It’s also not uncommon for startups to barely breakout even by the second year of operation.?If your startup business is making a profit by year 3, you should be grateful because that’s usually around the time that many startups are crashing and burning.?Mapping out projected revenue versus expenses after initial startup costs is imperative.?Not determining these financial projections is like going on a long road trip in a car that has a broken gas gauge.

After determining what it’s going to cost you to start your business and maintain it until it becomes profitable, then an entrepreneur must determine if they have enough money to execute their startup.?If not, one must determine if it’s possible for them to raise capital.?Many chose to go the “friends and family” route because your friends already know, trust and believe in you.?If borrowing money from friends and/or family is not an option, there are other possibilities.

Believe it or not, grants are available to entrepreneurs who want to start a business.?These grants are offered by organizations such as the Small Business Administration (SBA) and are given to applicants who qualify.??Qualifications are determined by the organization offering the grants and typically predicated on ethnicity and gender.?

If an entrepreneur doesn’t qualify for a startup grant, applying for a loan is the next logical possibility.?Unfortunately, the days of walking into your local bank and sitting down with the branch manager to discuss the possibility of taking out a loan to start your business are long gone.?Unless you’re already making between $5 to $10 million, your bank probably won’t even be interested in talking to you.?However, this mentality has spawned a new generation of lenders who have the risk tolerance for small business loans that are designed specifically for startup capital.?Over the years, we have developed relationships with such lenders in an effort to help our clients who are seeking startup capital.?Unlike grants, qualification requirements for small business loans are more predicated upon credit, personal income and assets.?

If an entrepreneur doesn’t qualify for a grant or small business loan, there are private investors who may be interested in your ideas.?Although, private investors require a great deal of coercing, including presentations, pitch decks and formal business plans that contain extensive market data, financial projections, breakeven analysis and an aggressive marketing plan that makes sense.?We often assist our clients with writing their business plans but it’s also important to know that many private investors seem to be more interested in tech and fintech startups these days.

Lack of Marketing

Seasoned business owners and CEOs know that if they only had $3 in their pocket, they would spend $2 on marketing.?Inexperienced entrepreneurs often miss the boat on this concept.?We see many clients who come to us after thinking long and hard about their product or service but very rarely does anyone think about how they’re going to let people know about their business. Very often entrepreneurs spend the majority of their startup capital on product development and leave hardly any money left over to inform potential customers that their product exists.

In addition to being a business consulting agency, we’re also a full-service, digital marketing agency which gives us the ability to help our clients with strategies such as SEO, social media marketing and blogging.?A multichannel marketing approach is invariably the most effective way to raise the level of awareness of your new business.?The reason for this is that your competitors have most likely taken a multichannel approach to their marketing and probably have been for years.?This means only having a small pay-per-click campaign probably isn’t enough to get the word out about your startup.

The greatest challenge many entrepreneurs have with marketing is that they’re just not marketing experts and therefore, knowing the best strategies to employ may not be within their wheelhouse.?Over the years, we’ve had more than enough time to determine what works and what doesn’t work for our clients, from a marketing perspective.?It’s very possible to waste a lot of money in marketing and not see a return on your investment.?Spending money on the wrong marketing strategies can put you out of business.?Unless an entrepreneur has direct knowledge and experience in marketing, this is one function that may be better left to outsourced professionals and subcontracted vendors that do.

Conclusion

It’s very conceivable to think that an entrepreneur can start a business without anyone’s help, but at what cost??With the odds being stacked against you, enlisting the help of a business consultant to guide you through the process of launching a startup business is a far more logical way to mitigate risk.?Mistakes in business cost time and money.?Hiring a business consultant also costs money but is typically much less than the cost of mistakes you can potentially make while trying to get a startup off the ground.

For more information about starting a business, call 1-800-619-3734 or visit www.IlluminationConsulting.com.

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