CEO’s and entrepreneurs are one of the most optimistic beings. They are always full of creative ideas and passion, but this can, unfortunately, lead to many false assumptions and mindsets. You have to be sure you’re not just optimistic about your business idea, but realistic too. If you want to succeed overall in business, taking notes of the Red Flags of a failing business is seriously needed instead of holding on to hope and optimism.
Here are 8 of such red flags that your startup idea will fail
This is about the biggest reason for StartUp failure in Nigeria. This man sees the next man thriving in a business, a month after he starts the same business at times in a location close to the man he copied from.
I have seen many startups follow this same path and many have under few months gone under. They either start a business because they see similar businesses succeeding or make drastic changes in their business model because they see someone else using the same.
One business’s success should not be a reason for you to start up the same. Entrepreneurship is a lot more complex than just adopt a “copy and paste” approach. There are many other factors such as timing, product/founder fit, capital, and a whole bunch, all of these contribute to the success or otherwise of businesses.
People usually talk about a unique point of difference. But that isn’t enough. You have to offer a unique solution to a specific or generic problem.
If you must offer the same service or sell the same product as some other industry players, you’ve got to have what will make your product or service desirable.
It is not so much about how well you do or how unique your style is, it is about how the solution you provide helps the customer uniquely.
Is my solution faster? Is my product more effective? Are my machines more efficient? Compared to my competition, am I giving customers something better? Right there in these questions are your unique selling points.
Choosing an idea that sounds good or a line of business you`re most passionate about will not necessarily convert to good financials.
Some things are inherently more valuable to people and they may not be what you are passionate about. People will only pay for what they want or desire to have and nothing can change their spending behavior, not even a good marketing strategy.
If it’s not what people want and are willing to pay for it won’t matter the amount of time you invest in creating it, it won’t bring in financial returns
You’ve got to decide against offering some products if they lack financial return. It’s great to work on what you love, but if you can’t get an adequate return for your time, it means the activity won’t scale. And if that’s true then you won’t be able to grow the business.
Except you have target clients in mind who are ready to patronize you immediately, in my opinion starting out with a niche could be a disastrous move because of the usual smallness of such niches.
If the niche market is large enough though you could go that route. Otherwise, don’t.
I much prefer the idea of operating in a large market to start with and has the business continues to experience growth, you could then start moving into a niche and subsequently own it.
Picking a market or a niche that is too small at startup can result in an outright failure of the business. But more likely, it will result in a business that quickly hits a ceiling and achieves moderate success.
All business depends heavily on the ability to sell products or render service, get paid and meet financial and non-financial obligations in order to reload inventories, expand and grow. Within this interdependent chain are factors, which by themselves, threaten your ability as a business to meet future obligations which consequently lead to business failure.
To build up your working capital, your current assets must be greater than your current liabilities but in cases where you work with customers who are slow payers or only pay in cycles of say 3 months and you still pay bills, some even recurring, you could wind up with a cash flow situation that is unsustainable over time.
Having several months of cash available to you to fund those gaps in funding would be ideal for your business. When you lack the ability to access funding resources like those traditionally provided by banks, your business suffers and that can consequently make your startup idea fail.
This mistake happens to people who think because they are entrepreneurs they can start whatever business they like. But they forget that there needs to be a fit between them and the business. This could manifest itself in a bunch of ways:
– You offer something in a field you don’t have expertise in.
– You offer something that doesn’t suit your current audience.
– offer something that contradicts what you are known for.
It’s cool to branch out, but it takes a long time to convince people that you are an expert. If you are known to be an expert in something, it will be much easier for you to start a business in that field than something new.
Every business has a different way of generating clients and customers. If the model of your marketing strategy is going out and meeting businesses on-site and delivering them a proposal and you personally suck at doing that, then there is a problem already.
Especially because you are pretty much the chief marketing officer of your business, make sure that your person and personality suit the marketing style fit for your business.
If your style and the way the business needs to find customers are out of sync, you’ll have a problem.
I think every entrepreneur at one stage or another has fallen into this state. Entrepreneurs are just inherently BAD at working on things they don’t enjoy.
I’ve made this mistake a few times myself. If you start a business that has you doing work that you don’t enjoy, you’ll only be able to put up with it for so long. If you can scale quickly enough to replace yourself, that will be great. But if not, you’re screwed.
With me, it doesn’t take long to get bored with something, and I sense a lot of entrepreneurs are the same. So make sure for your next idea, you can see yourself grinding it out day in day out for the long haul.
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