We Aussies are great at starting new businesses, and these new businesses account for a significant part of our countries economic growth.
“Australian startup firms less than 2 years old were responsible for driving the 1.6m net new jobs created between 2003–2014, while on a net basis, large firms made a little contribution” – Dept. of Industry, Innovation and Science, 2016
1. Starting a business for the wrong reasons
The fact that you are reading this article almost guarantees that you have thought about starting a business or are on your way to starting one. The first and the most important question to ask yourself before you do is- why in the world am I starting a new business? Here are some reasons for starting a business that are destined for a painful end.
- You want to make some easy money.
- You want to spend less time working and more time doing other things.
- You are trying to ride a trend.
- You like the sound of being a business owner.
Ideally you want your motivations for starting a business to work as a force that will propel you through the twists and turns of the business world. Here are some reasons to start a business that will drastically increase your odds of success.
- You are passionate about the service or product that your startup will deliver.
- You will not be phased by failure. Your motivation is to try your best in bringing your vision to life.
- Through comprehensive market research and analysis, you have identified the need for the product or service your startup will deliver.
- You have extensive experience in the field and have relevant contacts to get your business off the ground.
2. Bad planning and execution
This might be the single biggest killer of Australian startup dreams. A study done by the Australian Centre for Business Growth found that 12% of all Australian startups fail because of bad planning and execution.
Here are some common mistakes founders make in the planning and execution of their ideas.
- Lack of market research. There is no market for your product or service.
- Do not account for changing needs. The world around us is continuously changing, and so are the needs of our potential customer.
- Not having a detailed business strategy.
3. Most Australian startups run out of money
Running out of money has resulted in countless potentially great businesses closing down before their true potential was ever realised. A staggering number of founders don’t clearly understand the funds it will need for them to sustain their business until it starts turning out a profit.
The Australian Centre for Business Growth study found that 14% of startups fail due to poor financial management. Find the right government grant or a venture capital firm can be the difference between your business running out of money or not.
4. Poor management skills
Managing a business requires a lot more than passion, and this reality comes as a rude awakening to a lot of founders.
“A lack of marketing, finance and business management skills is frequently associated with start-up failure in Australia and overseas. It seems entrepreneurs either do not have the opportunity to acquire these skills for themselves or lack the networks and expertise to attract these vital skills to their business.” Colin McLeod, University of Melbourne
Many startup founders have little or no experience in managing people and customers and are unable to cope as the business expands. A critical skill every founder needs to have is to realise that they are struggling with the management side of things and to seek help.
5. Australian startups that grow too fast
When entrepreneurs start a business, the last thing in their mind is the problem of over-expansion. How could growing to fast ever be a problem? Well, it is in fact one of the leading reasons why businesses fail.
As the business grows, so do overheads, the need for more staff, the need for better management and the need for better financial planning. Growth comes with exponentially higher levels of complexities, and many businesses fail to cope with them. Here are some tips that can help a startup deal with the problem of growing too fast:
- Do not expand just for the sake of expansion. Ensure there is a genuine need and demand for growth.
- Identify what you need to meet the changing needs.
- Get help. Through training and development and if required by hiring qualified and experienced staff. Although you want to ensure the growth is sustainable before investing too heavily on new staff.
6. External factors
If 2020 has taught us anything, then it is the impact of external factors on business. A pandemic, developments in your locality, changes in government policies, geopolitical changes, there can be many such external factors that can have a significant impact on your business, and as an entrepreneur, it is up to you to adapt to these changes.
There are many examples of Australian businesses that have adapted and made the most of the COVID 19 lockdown. Still, there are ten times as many examples of businesses that failed to adapt and perished because of it.
7. Bad marketing
Last but definitely not the least important reason why Australian startups fail is due to bad marketing. Unless you can effectively market your business, everything else you do will fail to have any impact on the growth of your business.
87% of Australians use the internet, and almost all of them use it on a daily basis, while 57% of small business in Australia don’t even have a website. Marketing your business on the internet is the leading and the most effective way to promote a business.
While most new entrepreneurs understand the importance of digital marketing, they usually end up spending exorbitant amounts of money on ineffective marketing strategies. The key is to find efficient and cost-effective marketing strategies that work for your business.
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