Starting a small business? You’re in good company. Two hundred thousand small businesses start in the UK every year. But don’t get too comfortable. 60% of these businesses will have failed within three years.
Are we saying you’re going to be amongst them? No, we’re not, because you’ve found this blog.
Did you know the majority of businesses all fail for the same reasons? It’s true! There are a few common pitfalls that trip up thousands of startup companies every single year.
These business-killers aren’t going to be revelations; they aren’t hidden dangers lurking in the shadows waiting to pounce. No, they’re obvious threats. But too many wide-eyed entrepreneurs are often so blinded by excitement for their new idea, looking up to the sky for bigger and better opportunities, that they fail to see the gaping-maw opening up beneath them, threatening to swallow them whole.
This is not going to be your story because awareness is power. Mint Formations is going to open your mind and prepare you for a bright future.
Together, we can learn from the mistakes of the past. We can use what we know about the failures of those who went before you to build sustainable and reliable businesses that stand the test of time.
Today we look at major small business mistakes, and how to dodge these bullets.
Small Business Mistake #1: Underestimating the Power of Experience
Age is a killer, but not in the way you might think.
It’s a simple fact that failure rates of businesses owned by those under 30 are higher than those of later years.
In a study reported on by Inc, it seems people in their 50s establish most major successful businesses. An individual in their 50s starting a new company is 2.8 times more likely to succeed in business than a 25-year old.
This isn’t ageism — it’s purely down to experience.
It’s not because the individual is older and therefore somehow intrinsically wiser, but simply because they’ve had more years on this planet to experience things, to see how their chosen industry works, and to build networks they can leverage for business opportunities. They’ve got a better sense of balance and perspective drawn from decades of extra time.
The study points to ideas vs execution. While both individuals might have the same idea, experience wins out in the execution and keeps the new business afloat.
Does this mean if you’re young, you can’t succeed in business?
No, absolutely not! However, you should be willing to consider consulting with industry experts and those who’ve been around longer to experience more. Take onboard advice and listen to the wise counsel of those with experience. This is particularly prudent for leadership decisions, such as hiring and firing and building your team.
Never discredit your ideas because of your age. But don’t assume just because you’ve got a good idea and five years of industry experience under your belt that you can do it better than somebody with 30 more.
One of the most damaging small business mistakes people make is not asking for help and getting support from experienced members of their industry. From advice on business plans and products to marketing and consumer acquisition, there is immeasurable value in learning from others.
Small Business Mistake #2: Developing a Passion Project Nobody Wants
There is no data available on the percentage of businesses started not as profit builders but as passion projects. Yet from our industry experience as UK limited company formation specialists — and purely from an anecdotal perspective — the figure is quite high.
Passion project businesses are great for two reasons:
- They fulfil life ambitions and make people happy
- Because you love them, you’re driven to make them succeed, which increases longevity.
However, there is a potentially big problem here, and a classic small business mistake that thousands make — which means the small business is a dead duck before it even hits the water.
The most common reason small businesses fail is that business owners invest in a product or service the market just does not want.
- There are so many factors involved in this failure:
- The product is too expensive for the market.
- The business niche is already oversaturated.
- The product is just a bad concept.
- There are better alternatives to your offering available already.
According to CB Insights, 42% of failed businesses listed a lack of consumer interest as their primary reason for closure. Before you start up any business, be it a passion project or a profit-building machine, you need to know the market exists for whatever you want to sell.
There are plenty of ways to find out if starting your business is going to result in a product or service people want to consume. You can do customer research, you can look at consumer demand of competitors, and you can talk to those already working in the niche.
This big small business mistake arises because you assume that because you love your small business concept, customers will love it, too. You need to find out whether or not people will buy before you invest in a company — because if you don’t do your research, you may find your money is completely wasted.
And on the subject of watching money…