Welcome to another edition of my Weekly Journal! I use this space to share about my journey from lawyer to jewelry business owner. In this week's journal entry, I wanted to talk about the common reasons new businesses fail. It is hard to start a new business and become successful with it. If it weren't difficult, almost everyone would do it! If you know the common reasons why businesses fail, you are more likely to avoid those pitfalls and build a business that lasts. These reasons are from my own observation and own experience, and the list is by no means exhaustive! Here we go:
1. No marketing or not enough marketing
This is probably the most common reason a new business fails. If no one knows about your business, no one can purchase your product or service. "Marketing" is getting the word out. It's the act of making people aware of your business. It can be anything from running advertisements on Facebook to participating in a local market and handing out postcards about your business. When you start a new business, educate yourself on marketing. It is crucial to your success. You simply cannot build a business and wait for people to come find you. You'll be waiting a very long time. You have to get the word out.
If you are uncomfortable with marketing, you need to outsource it. But be careful though - outsourcing marketing is very expensive and often not very effective. There are a lot of people and agencies touting themselves as marketing experts these days when, in all honesty, they aren't. Marketing in the digital space changes almost every day (that's no exaggeration) so unless you're hiring a person or agency that is on the cutting edge of digital marketing, I don't think it's worth a dime. Instead, I suggest you educate yourself well on marketing and then delegate it (if you really have to) so that you know whether or not the person or agency doing your marketing is doing a good job. If you aren't educated about it, you'll have no idea. And, chances are, you'll waste a ton of money.
2. Investing in the wrong things
Speaking of money, a lot of businesses fail because they spend money on the wrong things. For example, they use super fancy, expensive packaging that is going to get thrown in the garbage anyways. Or they spend thousands of dollars on a web designer, when they really could've hired someone for a few hundred dollars to set up a website for them on a reliable and well-established e-commerce platform like Shopify. Listen, I'm not telling you to have cheap packaging or an ugly website. But you can have pretty packaging and a pretty website at a much lower cost if you're smart about it. Do your research before investing in things. What are the alternatives? What do you need now... and what can wait for an upgrade later once you know your business is generating enough revenue to be profitable?
In my opinion, far too many businesses spend money on things that don't matter when they should really be directing those dollars towards marketing. From my personal experience, you want that marketing budget to be as high as you can possibly make it (because you are a new brand and NO ONE knows about you but your friends and family!). So spend that money on advertising and not the gold-foil tissue paper branded with your logo that's going to get thrown in the trash anyways. Later on, when you are booming with success, you can afford that custom tissue paper.
3. They quit when they don't get instant gratification
For some reason, people start a business thinking it's going to be easy. I have no idea where they get this idea from. It takes years to build a successful business, not months or weeks. And it's tough. You are going to have super, super highs and super, super lows. Weeks when you'll want to quit. Days where you start searching for a "real" job online. Months when you feel it's really over this time and finally time to throw in the towel. But if you want to ultimately succeed, you'll keep going and you'll figure it out. No matter what. A lot of people do not have this kind of grit and tenacity. They don't have the patience. They set up a business, run it for a few months or a year, and they abandon ship. That's not fair to you or to your business idea. That's like boiling 10 minute rice and throwing it out at minute 2 because it's not done yet. You feel me? If you go into business ownership, have the right expectations and give your business some time to get off the ground. Otherwise, you might jump ship on a business that could have been a million dollar business if you had only given it some time. There is no instant gratification in business.
4. Not enough money
Ok, ok, I know... more about money. But a business ultimately is supposed to generate money. And not having enough money is a problem. If you go into business ownership without much money, you're going to have a tough time. You have to be able to invest in your business. Think of it like a house. You have to put a down payment on a house, right? And, after you purchase it, maybe you'll need to inject a little money into a kitchen and bathroom renovation. The same with your business. And the idea is, that initial investment will ultimately pay off down the road and you can sell it for much more than you initially invested in it. So please, please, please don't expect to start a business with little to no cash. That is very unrealistic. And, on the same note, don't expect to draw a paycheck from your business right away. That might be news to some of you! But most new business owners don't get paid anything for some time. Any profit the business is generating needs to be put back into the business, so make sure you have enough savings or a part-time or full-time gig that can cover your personal expenses for at least a few months.
Sometimes people ask me, how much do I need to start a business? It depends! There is no one answer. Every business is different. You have to figure it out. For example, a service business (like a wedding photography business) probably needs a lot less money than a product business (like a shoe company). A wedding photographer needs a camera, a nice website, and a system for invoicing and contracting with her clients, etc. A shoe company, on the other hand, needs a lot of inventory. They need shoes in every size and color. Therefore, the up-front investment is going to be much higher. Word to the wise here: if you can't figure this part out, you probably don't want to start a business. Business ownership is hard and if you can't even get past the first hurdle of "how much money do I need?" there is absolutely no way you are going to successfully make it through the first few difficult months and years. I hate to be so blunt, but it is true and I want you to be realistic about business ownership before you waste a whole lot of money and energy on something that fails quickly.
There are lots of reasons why a new business might fail, so this is by no means a comprehensive list. But if you go into business ownership with your eyes open to these 4 common mistakes people make, you'll be more likely to avoid them!
I hope you're able to learn something valuable from my own experience. If you'd like my Weekly Journal sent straight to your inbox every week, click here to subscribe.
P.S. Are you on Pinterest? I have a Weekly Journal board on Pinterest so you can easily navigate my journal entries. You can view and follow the board by clicking here. I've written so much about quitting my lawyer job to start g+h over the past few years and I want to make it easier for you to access and read the entries that resonate most!