Entrepreneurship is a really complex subject. If entrepreneurs do not always do their best, they are more likely to fail. Research has shown that more than 10% of all new investments do not go beyond the second year, and unfortunately entrepreneurs fail. Many others will fail in the years to come. In this article, we discuss 8 reasons for the failure of entrepreneurship and entrepreneurs. These reasons include financing, human resources, financial problems, operational reasons, and peaking too soon or too late. All of these reasons stem from mismanagement of investment and business.
In addition, another issue that arises is the lack of attention to detail. Sometimes paying attention to the bigger picture causes entrepreneurs and managers to turn a blind eye to details. On the other hand, some of them are too focused on the details and neglect the general goals.
Problem with financing
The first of the reasons for entrepreneurial failure is related to financing. As you know, new ventures and startups need funding at all stages of their life cycle. Entrepreneurs, therefore, must ensure that venture capitalists and financial institutions support them and continue their assistance throughout the process.
Many entrepreneurs face major problems at this stage. Because an idea that seemed good at first fails to generate revenue or attract investors. This causes risky investors to give up and withdraw their investment and support. Apart from this, some other managers and startups start with a limited initial capital and do not anticipate a continuous cash flow for themselves. As a result, after a few months of operation, they run into major funding problems and their entrepreneurship fails.
Problems with employees
The second reason for the failure of entrepreneurship is related to the recruitment and recruitment of employees. Entrepreneurs do not usually start with the right human resources and employees, and it takes some time to find the right people to succeed. Therefore, in the early days of investing, they do not have enough resources. This is one of the main problems in startup environments these days. On the other hand, hiring multiple employees can also create problems. The large number of employees will increase costs and deplete financial resources. Managing them is also time consuming and makes entrepreneurs unaware of dealing with technical issues related to this business.
Another problem for employees is the unwillingness of experienced and professional people to participate in new entrepreneurial and startup environments. Startups are not as hot as they used to be, and many others are reluctant to take the risk of joining a new startup.
Liquidity crisis
The third reason for the failure of entrepreneurship and investment is monetary and financial issues. This liquidity crisis is due to the lack of attention of entrepreneurs to the imbalance between accounts payable and accounts receivable.
In addition, many investors adjust their budgets based on potential future earnings. This means that if these revenues are not realized, they will face budget deficits and crises. The next reason that can lead to a liquidity crisis in startup environments is the bankruptcy or financial problems of the venture capitalist companies that supported them. Reducing the financial resources of these companies causes them to stop supporting some projects.
However, investors can defer some of the payables to the future. But issues such as running costs, staff salaries, or supplier costs cannot be postponed. Failure to pay these items can lead to mistrust and eventually lead to the closure of the collection.
Operational mismanagement
The fourth reason for the failure of entrepreneurship and start-ups is related to the operational and executive aspect; Where the entrepreneur fails in effective, efficient and purposeful business management. For example, many entrepreneurs often do not engage with the core facts of running a business and leave it to others to focus on the bigger picture and goals themselves. This can be the starting point for operational mismanagement crises. Although we do not recommend that entrepreneurs and investors themselves take responsibility for management, some involvement in day-to-day affairs is absolutely essential.
Investors in the first few years of starting a business need to manage or at least oversee it. This will prevent misunderstandings and misconceptions of the business goals and ideas.
Many large investors make this mistake. They devalue involvement in matters such as work planning, administration, running, or human resources, and try to devote their time to more important matters. This issue and negligence can cause deep crises in the collection and lead to investment failure.
Of course, resistance to delegation can also be another reason for entrepreneurial failure. Some investors and entrepreneurs believe that they must run their own business. If you feel that someone else can do it better than you, never resist choosing him or her and delegating authority. As you progress, you will usually need to inject new strengths and ideas into your team.
Peaking too soon or too late
The last option from the list of reasons for entrepreneurial failure is that some investments peak too soon and some peak too late, which in both cases leads to a loss of success curve. That is, the right combination of ideation, dealing with the idea and realizing it, and ultimately achieving the goals.
For example, some entrepreneurship peaks very quickly. That is, they misread market signals and think the market is ready to offer products and win them. This can lead to burnout and fatigue. Because they expect the idea to progress and be welcomed, but do not receive good feedback. On the other hand, some entrepreneurship and startups reach their peak too late. These businesses make mistakes in scheduling their products and services. That is, they do not do this when they have to offer their main products. In either case, managers must ensure that the timing of the brainstorming and marketing is well-defined and well-defined.
Not knowing the market
Who are your customers? Do you know your competitors? Who is your target market that you think is willing to pay for your services or products? Entrepreneurs should be able to have a detailed and complete answer to all these questions and many more. Starting and managing a successful business requires sufficient and accurate knowledge of the market. If you do not know your customers well, if you do not know what they need and are willing to pay for goods and services, you will be doomed to failure.
Take a big bite
Another reason for entrepreneurial failure is ambition. The thought of going through a hundred years in one night will only lead to failure. Even the largest companies today, such as Google and Amazon, started from scratch and progressed over time. Ambitiousness does not in turn lead to the failure of your investment, but these irrational and ambitious ideas indicate that one or more of the above will not be well received and you will get into trouble. You probably do not know the market and competitors, you fail in financing or estimating future earnings, and you may make mistakes in scheduling your services.
Wrong or inadequate marketing
What good is a web site if it simply “blends in” with everything else out there? Your business needs to be known and people need to know about the benefits of using your services. If you can not reach your audience, the rest will be of no value and you will not succeed.
Proper marketing policies and practices are essential for all businesses. Of all the marketing methods, word of mouth (Word of Mouth) is the least expensive and most effective. Studies show that people have the most confidence in the advice of friends and relatives. However, other marketing tools naturally have their advantages. For example, verbal advertising, although highly effective, is limited in number. On the other hand, digital and internet advertising let a lot more people know about your collection and services.
Marketing activities cover a large portion of your costs; Therefore, you need to be very careful when adopting these policies and campaigns.