We know reading this title will “Break Your Heart” and maybe you will have that strange and daunting feeling to increase the possibility of your success. Starting an online business has no guarantee of success, period! But that’s how running an online business is like, right? You have read all the success stories of entrepreneurs and it felt so great that you took action to set-up your own Online Business. Woohoo!! And then, there you are reading this piece – it means you are missing that kink in your master plan or maybe you want to identify the main reasons of online business failure before starting your business.
According to research conducted by Bloomberg after the failure post-mortem of the companies, it states that 8 out of 10 companies fail within the first 18 months. That’s a whopping burn rate of 80 percent or simply we can say that a new business has 1 in 5 chances to survive in less than two years. That’s pretty depressing! While as an entrepreneur when you study how businesses succeed, you should also learn about the darker sides of online businesses failure. Surely, you don’t fail until you totally give up. Remember Henry Ford? His first two automotive efforts turned out to be a failure. We see him as an innovator who knew what might look like failure to some is a real innovation. But then you have to hit the road just one time. That’s it!
Why most of the Businesses Fail?
Business failure is a harsh reality. You could fail 10 times and reinitiate your business 11 times. If at any of the next attempt you made it happen, you didn’t actually fail because you didn’t give up. There are some specific reasons why businesses are failing. You build successful business strategies, statistics but if you fail to realize some crucial things or just overlook or push aside certain things, YOU’RE GONNA FAIL. Let’s put together a summary of mistakes entrepreneurs or business owners typically make in running an online business; where do they go wrong and most importantly, how can YOU avoid making these fatal mistakes? So if you don’t want to be a part of the 80 percent category there are some ways to combat it.
- Reason #1 – You have no Customers because there is no market need
According to CB Insights, tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 1 reason for business failure, noted in 42% of cases. It is far simpler: the companies didn’t solve a big enough problem.
This is like self-evident. Let’s get to the basics. Even though it feels obvious, it is not! And, let me warn you this is HUGE. Businesses fail all the time because they are trying to solve a problem that nobody really cares about. If you put your product or service out there and nobody buys it, there’s a good chance you should look for a more important problem to solve. If no one wants your product or service your company isn’t going to succeed. Simple, right! Also, a lot of people, go into business with a different or a wrong perception, they see a business and they are like, “Oh, this is awesome, I can do it too.” Seriously! Remember, for every $137 billion company like Amazon, there are countless number of frivolous online businesses that never make it.
The Fix – Just think about this, you receive a service or product that totally blows your mind. And, what you are going to do next is to recommend the product to your network, “word of mouth”, you see. Why? Because you found it useful, something that is delivering value. It’s all about VALUE.
First, find a Market. What is your market? Don’t say, “Um, everyone.” That’s not your market. You need to identify the group, the cluster of people whom you will be helping. The second thing is Need. What do people need? What are people looking for? Whether it is a market of recruiters searching for a perfect candidate or a super easy tool for accountants, your product or service should be able to universally serve with a scalable solution. Remember, you must be having great technology, data, expertise or reputation but your technology should solve the pain points of your target market; ultimately making their lives easier. It is always about delivering VALUE to market that will eventually pay you like spades in future.
- Reason #2 – You are not listening to your Customers
An amazing thing happens when an entrepreneur sees a potential opportunity in the market and addresses the need with a new idea of a product or a service. But things don’t go well when you don’t have a complete understanding of your customer which is actually crucial to your product and company’s success. Businesses fail when they neglect to stay in touch with their target audience, their customers and don’t understand what they need and the feedback they offer. How do you know if the problem you solve is important enough? Have you been listening?
The Fix – Customers are the final arbiters and will tell you what they really think about your product or service. Remember, there’s a reason why “the customer is always right,” because without customers you don’t have a business. Listen to your customers, like for real. Walk 1,000 miles in the shoes of your customer. Your customer is the key. Don’t just pay lip service and even 280 characters of your tweet won’t count. Make real conversation with real customers. This is one of the most important ways to avoid online business failure.
- Reason #3 – You are not able to compete in the market
Your competition is not always startups; there are large companies too that are incubating ideas. In fact, you need to look out more on the giant ones. When the competition is fierce especially in lucrative markets where the stakes are high, companies get out-competed in the race. Sure, you may have the first-mover advantage but second-mover advantage can allow companies to quickly incorporate what you have validated and sink your ship in a blink.
The Fix – Let’s take an example of Nokia, there was a time when the company ruled. Nokia failed when the smartphones took over the market. The company was much behind in terms of functionalities and innovation and was the one to enter late in the market. Whether a giant company or small startup, you have a competitor for your business to watch out. You need to be different, innovative and ahead of your competition in every aspect. You need to find ways and stay in business.
- Reason #4 – You have no Marketing Strategy
It is vital that a business puts ample efforts into marketing at the bootstrapping stage. No matter how great and useful your product or service is, it will gracefully fail if no one knows about it or is not able to find the customers. Poor and inefficient marketing has always been one of the major causes of online business failure.
The Fix – While you don’t always need a fully dedicated professional PR team to market your offerings but you need to make the target audience aware of the product or service existence in one or the other way. The goal of marketing is to connect your business’ value to the right customer. Start marketing and advertising your products or services online with social media marketing, content writing & marketing, email marketing campaigns or print media whatever suits your business well.
- Reason #5 – You are not being able to decide on Product Pricing
Finding a balance between the selling price and cost of the product is a real challenge and tipping to either of the sides can be disastrous for a company. Businesses always suffer between pricing good enough to maintain positive margins and covering all the operating costs, while also to price low enough to lure customers.
The Fix – You need to find out that sweet spot of not too expensive and not too cheap price for your product while simultaneously maintaining the healthy margins. How do you do this? First, know your customers, figure out the segment you are targeting. Second, know your costs, your revenue target, your competition most importantly. Do keep track of outside factors that will impact the demand for your product in the future.
- Reason #6 – You are not optimizing your conversions
Optimizing conversions is not only about more clicks, more money, more growth. It is so much more than that. Most of the entrepreneurs and business owners forget to address this important aspect of business success. With the implementation of several other strategies and techniques to target and drive customers optimizing your web pages for conversions can impact so many other areas of your marketing. Entrepreneurs and business owners should understand that you can always get more traffic but you can thrive only when you are able to capitalize on the existing traffic. And, this is where most businesses fail.
The Fix – For a sustainable business and positive ROI ensure that you start optimizing conversions at early stages of business. Remember the reason you are optimizing conversion rates is to provide a better experience to your users who will ultimately be your customers. Ensure that you follow fundamentals to optimize your conversion rate with creating a powerful lead magnet, by increasing organic traffic with search engine optimization, A/B testing for your web pages according to demographics, conversion funnel, and other digital marketing activities. The better you do it, the more potential you have at churning a profit. Now is the time to get your website conversion rate optimized!
The Final Fix to avoid Online Business Failure
While there can be several other reasons for business failures like no business plan or model, losing the focus, product misfit, not having the right team and resources however according to industry experts and entrepreneurs the above-mentioned remains to be the main reasons for a business exiting the market.
No matter what, don’t let the fear of failure stop you from trying anything. Despite talking about reasons of failure we will leave you with the words of Thomas J. Watson – “If you want to increase your success rate, double your failure rate.”, a planned and continually improved approach will help you stay afloat in the competition.