There are thousands of small businesses which starts off in India every day but unfortunately, most of them forcefully close up their operations in a few months/years. I have tried to list 4 common reasons 'Why many of the small businesses have to shut down and how you can avoid them to be at a better place'.
1) Wisely choose your product/service
Many people make the mistake of thinking that because they have a good idea, they can execute it. In fact, you may have a terrific idea with extraordinary commercial potential, but you may be absolutely the wrong person to build the associated business. Jeff Bezos, the founder of Amazon.com put it this way: “One of the huge mistakes people make is trying to force an interest on themselves. If you're really interested in medicine, and you decide you're going to become an Internet entrepreneur because it looks like everybody else is doing well, then that's probably not going to work. You don't choose your passions, your passions choose you.”
Don't form the opinion of what business you want to do by looking at others. Don't fall prey to the limelight created by newspapers, social media, and the Internet about particular business segments when you are taking a decision about your business/product. Do what you love and will really change and bring up a positive change in the business world.
Many entrepreneurs start off their business ideas, build their products, dedicate 1-2 years and thousands of bucks in setting it up and then they lose up interest in their own product, so as to avoid such situation, question yourself whether you will be the consumer for your own product/service.
Analyze the market, look out whether speople will be ready to pay for your product because you will get thousands of people who will say, they liked your product, but whether they are ready to pay for it is really what's matter the most.
2) Choose up the right people
You may have a great business idea, but you need right people who can align and go ahead with those ideas.
Organization show recognizes each person's unique talents and the concerned person should be allowed to do what they love. Your people are your greatest strength, giving a job role to the people just based on educational qualification/degree will not going to build a strong foundation for you, assign the task for which they are passionate about, for which they gave hunger to learn.
Give people a role that makes them feel great, because “whenever you do something that makes you feel great, that releases energy, you have tapped into what you should be doing”.
3. Ready to outsource
Don't be ‘Jack of all trades, master of none'. You should handle the core function of your business (i.e which generate revenue), by outsourcing the remaining one.
Problem if you try to become great at every aspect of your business:
- You will lose focus, now and then, to the activities which might be easily looked up by someone else.
- You will require professionals from every field, which will boost up your expenses and increase your cash outflows in the early stage. (Not wisely spending up the money is one of the most common reasons why most business/startups fail in early stage)
Caution: If you are outsourcing a particular function to some third party vendor, it doesn't mean it is not important for your business success and stability. Outsourcing is preferable as you can get expertize service at a reasonable cost so you can do what you are best at. You should be well-connected with the service you have outsourced and ensure that you are getting the best out of it.
4. Manage your finance
Most small businesses/startups fail because they have no control over their finance. Start managing your finance from day 1 and keep a regular track on it.
Whether you know the answer to the following question, if no, find out today, so your business can see the future:
- What's your ROI?
- What's the cost to improve your product/service? Whether it's worth spending?
- What are the expenses which are going to incur in coming days and whether you have proper provision for the same?
Initially, don't spend on things which are not essential for your survival or can be postponed for some time.' Money saved today is earning for your tomorrow's survival'.
Most common spending on initial stage are on the following:
A. Office Space
Eg- I have taken an office (in the posh area) on rent from day 1 of my operations, even though I have no clients (or hardly few clients) and 1-2 employees, which I would have handled even from my home for first few months until there is sufficient increase in my operations.
Advertising brings you the business, correct? No, advertising helps to boost up your sales and creates new customer, when you have already established the brand for your product/service. Consumer, today, are smart enough, they enquire everything about you before they use your product/service, they won't rush to you just by looking at the advertisement.
There is nothing wrong in spending on advertising, but spending unnecessarily without any limit on ads and without keeping in mind who is your target consumer and market assuming it will give you a boost is craziness.
What's in your opinion is the most important tip while starting off with new business venture, please mention in the comment below.
The author is engaged in the business advisory to small businesses and startups and can be reached at firstname.lastname@example.org. The author is also engaged in guiding CA students and had personally guided more than 100 students till date and can be reached at email@example.com for the same.