“95% of new businesses fail”

I think we have all heard or come across this phrase at some point. According to the U.S. Small Business Administration, more than 50% of new businesses fail within the first year, and 95% fail within five years.


Therefore, when we start a business, a crucial question is, “What do we need to do to avoid being part of that 95%?” How can we ensure that our new business falls into the remaining 5%?

I often receive similar questions myself. In this article, I would like to share my perspective on what we should be particularly aware of when starting a new business. Let’s get started!

1. Conduct Thorough Research (Deep Dive Research)

You need to know and understand the business you are about to enter. Understand what the competition is like in your market, why customers would choose your product, what differentiating factors or advantages you can create, and start planning on paper before investing real money. One of the most popular tools used for this is the Business Model Canvas, which we are all familiar with.

The Business Model Canvas consists of 9 essential components that cover all types of businesses, as follows:

  1. Value Propositions: What is the value/strength of your product or service?
  2. Customer Segment: Who is your target audience? Who will buy your product?
  3. Channels: Through which channels can you deliver or reach your customers?
  4. Customer Relationships: How will you build relationships with your customer segments?
  5. Revenue Streams: This is very important: “Where will the business's revenue come from?”
  6. Key Resource: What are the main resources in your business?
  7. Key Activities: What are the main activities your business will undertake?
  8. Key Partners: Who are the key partners in your business?
  9. Cost Structure: What is the structure of your expenses and operational costs?

2. Sell What “Customers Want,” Not What You Want

You must ensure that you are selling what customers want, not what you want. If your product is not something customers desire, no matter how hard you try, it will be difficult to make sales because it does not solve any problems for them. So how do we know what customers really want? The simplest way is to avoid making assumptions in the meeting room. Go out and talk to real customers, learn, and understand them. Identify their pain points and what they truly desire.

I have previously written about this in Plearn by Krungsri GURU in an article titled “Identify Your Customers' True Needs”

I have seen many entrepreneurs follow their dreams and passions. If your passion aligns with what customers want, that’s great. But if it doesn’t and you have no backup plan, be prepared for failure.

While pursuing passion is commendable,

“Running a business solely based on passion is probably not enough.”
 

3. Understand Both Direct and Indirect Competitors

Nowadays, things change rapidly. For example, just because you have a restaurant in a certain area doesn’t mean your competitors are only nearby. Your competition could come from restaurants located many kilometers away. The emergence of food delivery platforms has led to the rise of ghost restaurants (restaurants without a physical storefront), providing customers with more choices.

So, if you are currently in the restaurant business, your direct competitors may be nearby, but your indirect competition could come from anywhere. Therefore, if you are in the restaurant business, knowing just about running a restaurant may no longer be sufficient; you also need to understand digital marketing.

4. Hire the Right People and Pay for What You Should

This is something I often emphasize: don’t try to do everything yourself. In business, you cannot do everything alone; you need a skilled team. Therefore, hiring others to handle tasks you are not good at or cannot do well is essential (if you don’t have the budget to hire, consider finding partners who excel in areas where you do not).

Ben Walker, the founder and CEO of Transcription Outsourcing, once gave an interesting piece of advice that I believe is very true. He said:

“The first piece of advice I would give to business owners is to find a good coach or hire a reputable consulting firm. It is impossible for one person to manage every aspect of a company, no matter how skilled they are.”

Lastly, this isn’t just about people; it also includes systems. Anything that can help us run the business more smoothly should be worth the investment. Of course, we need to study thoroughly because sometimes the systems we purchase can end up being burdensome and add unnecessary work for your team.

5. Money Matters

Money is a big issue because business owners must be able to explain the sources and details clearly and unambiguously.

Starting from before you begin the business, where will your funding come from? How much will it be? What is the cost of the money (interest)?

Once the business is underway, you should also evaluate how to handle financial matters in various scenarios: Best, worst, and average case scenarios.

  • Best Case Scenario | The business performs exceptionally well: This is what everyone hopes for. The next thing to consider if the best-case scenario occurs is how to scale up. Where will the funds for reinvestment or further growth come from? Is it from profits or loans?
  • Worst Case Scenario | The business performs poorly: This is the most concerning situation. If everything does not go as planned, which often happens, what will we do? Have we thought about how much additional money we would need to inject if sales do not meet targets or if we incur losses? Where will we get that money? If we cannot find funding, how will we cope?
  • Average Case Scenario | Normal situation: This is considered a good outcome as it aligns with the planned expectations.


These five points are what I believe we should think about and consider carefully before starting a business.

Good luck with your new venture! ^^

SOURCE: www.krungsri.com