Most Business Startups Fail—Will Yours?

Many people have ideas for making money. They may decide to start a business so they can sell products and services that appeal to a large population. While starting a business can be an exciting venture, it is also one that requires a lot of hard work, patience and, well, money.

Let’s face it, to make money, you need to spend money. Almost all businesses require employees, equipment, special licenses, patents and other expenses. The costs can end up in the tens or even hundreds of thousands before your product even hits the market.

Then you worry: will you ever get your money back? Some companies do, some don’t. In fact, about half of all businesses fail within five years. If your startup is venture-backed, the odds are against you even more, with 75% failing.

While these do not seem like favorable odds, there is still a chance you could succeed. You just have to be aware of the warning signs that your startup is failing and take the right course of action. In some cases, you may be able to turn things around. In others, it may be wise to just jump ship, cut your losses and brainstorm a better business idea.

Is your startup poised for success, or is it a failure in the making? Here are some signs to look for.

Your Return on Investment is Negative

The sign of a successful business is one that makes more money than it spends. It sounds easy in principle, but it’s a lot easier to spend money than it is to make it. If your return on investment (ROI) does not consist of a positive number, then your business has issues right from the start.

It’s all about pricing. Too much overhead and not enough profit will lead to a negative ROI. One big issue is products that are underpriced. Some entrepreneurs poorly manage their business from the get-go. They may hire too many people or buy too much stuff that they don’t necessarily need right away, causing them to go in the red.

You’re Too General 

While it’s good to have a product that appeals to a wide market, you run the risk of having a product that’s too general. While having a bigger audience can sometimes translate to larger profits, it’s actually much easier to tailor your product to a narrow market and work up from there. That way, you won’t be competing with much larger companies.

Learn More About Business Startups

While starting a business can be exciting, not all businesses succeed. The ones that thrive are in the minority. As an entrepreneur, it is important that you do all you can to make your company profitable. Otherwise, your startup could die an early death like the millions of others before yours.

Need help fixing your business? Orlando business startup lawyer B.F. Godfrey from Godfrey Legal can help. His expertise will help you avoid costly mistakes. Schedule a consultation to get your new business starting off on the right foot. Fill out the online form or call (407) 890-0023.

Resource:

entrepreneur.com/article/329366