Postmortem Analysis: Why Businesses Fail
It may seem grim, but there is no better thing to do for your business than understand why businesses fail. It is like knowing that cigarettes cause cancer, therefore we avoid smoking. Understanding what to avoid and knowing the mistakes and the pitfalls to watch out can be extremely helpful. Below we have gathered the three main items that you want to avoid all costs. You will want to know what they are, what they look like, and in what order they should be. These tips will teach you how you can spot the symptoms, how to avoid the maelstrom of disaster, and how to make sure that you never fall for these treacherous paths.
The Business Does Not Solve A Market Need
No matter what industry, in any niche, if they don’t solve a market need, they are going to fail. This is huge. If there’s only one thing that you learn and remember in your entire business life it should be this.
At its most basic, try and avoid these main things when deciding what your business is: what you want, what technology is doing, what your competition is doing or what the market is doing is currently doing. You shouldn’t start a business based purely on what you want, you should start a business based purely on what others need. As you should never start a business with what technology is, you should start a business with what technology needs.
Step 1: Start out by finding out what your niche market is. Who are the people within this market? You will want to talk to the people and understand their problems.
Step 2: What is a need these people have within their market? This is something that would create the desired situation, somewhere where they want to be.
Step 3: What time frame do they want this desired state to occur?
Step 4: What is blocking them?
Step 5: Repeat this with as many people as you can. Once you’ve identified a common, widespread, problem that exists among the people in your niche or most of the market, then congratulations, you have found yourself a market need.
No businesses live unless they solve a market problem. That is first and foremost the most important thing that you could possibly learn in business right there. It all comes down to knowing your market, finding a problem, and your business is the solution to that problem. Simple.
Lack Of Cash Flow
Cash is how much money you’ve got in your bank account that’s available. Not assets, not equity, and not credit cards. Just plain old cash. Cash is the only tool that actually does stuff. You want to really focus your business on cash. You want to think how you can create your business or change it, or engineer it so that it’s more cash efficient.
You want to think, you want to wrack your brain for ways in which you can make your business cash forward. How can you sell things to people and then pay for the expenses after you’ve already received the money? Think about it.
The second one is capital efficient, so think how you can make your company run in a more capital efficient way. Start by using contractors, home offices, and other ways to avoid overhead. But mainly avoid spending money before you make it. You’re always going to have to spend money before making it at the start, but try and concentrate on smarter ways to run your business, or ways to re-engineer your business model to save more money right from the get go. When you do that, you’re going to have way better cash flow and you’re going to have way better reserves of cash in your bank account. This in turn actually boosts your confidence, which allows you to go for bigger contracts, better deals, and much more.
Not to mention when you grow those reserves to a larger amount, the longer term you can think and the better decisions you can make because you are now looking at the long-term, not just the immediate future. You can be more aggressive, and place bigger bets on things. Especially the latter, in business, if you want to do well you need to be bold. Fortune does favor the bold as the old saying goes. This means that the people who are willing to step out and take a swing at things that most other people would just run away from, that’s how you get the real quantum leaps in your business. Not just by tinkering with small little things, but the big bets, the bold bets, that’s where the big jumps are. In order to take those you need to build up those reserves, and the way you build up those reserves is by being more capital efficient and having a cash forward business model.
A Pro Tip:
You want to have in your bank account enough money to cover more than one year of expenses for your business if it didn’t make any money. That’s just good planning. It is planning for things that are unforeseen, and it is planning for changes that might happen in the environment that you might need to react to. There will always be things that pop up that we’ve never planned for. That’s why it’s important to have those reserves.
You Need To Assemble A Killer Team
If you don’t hire a team at all your business is going to fail, however, that doesn’t mean if you hire a team that your business won’t fail. There is no reason for you to be a one-man show. There is a fairly good chance that your busy will get to the point where you can not take on the whole shebang yourself. It’s a really interesting multidimensional thing, building a team and managing a team, and really creating a good culture.
If you can establish your company as THE place to work, then you can set the bar really high for whom you hire. You need to make sure that the standards are very high, that people are working very hard. You want your team to be motivated about not only the product but the vision and the mission of the company. When you have that, you have it all.