Why some start-ups fail and other succeed

Steve Boyes, SME Partner at Beever and Struthers discusses the fine line between success and failure when starting your own business.

Being your own boss in control of your own destiny is an attractive option in the present economic climate. Optimistic entrepreneurs often sup-ported by a redundancy settlement or savings, enter their chosen business sector with every intention of success. But many businesses fail to survive the first year. Why do some fail and why do some succeed?

Most successful entrepreneurs develop a business plan to not only cover financial strategy but also the route to market for products and services. Identify the unique selling points of your products and ensure that quality and price meet market demands and expectations. A business should undertake market research before it launches products to establish if demand exists and the venture is viable.

Good cash flow management is essential, but particularly when a business starts. A lack of sufficient working capital is one of the main reasons start-ups fail. Fundamental errors at the start of a business include unrealistic and over-optimistic assumptions, costs and expenditure.

The temptation is to accentuate the positive and downplay the negative, but the result is that not enough cash is introduced or borrowed at the start, leading to working capital problems. The cashflow cycle is vital at the early stages of a business’s life – poor collection of revenues may cause failure, even though sales and profits are achieved. Initial enthusiasm often disappears after a successful start because many entrepreneurs feel they have achieved their objectives. Owners fail to keep fingers on the pulse of the business and its marketplace and fail to adapt to changes in market conditions, prices or competition. There is plenty of advice available to entrepreneurs and successful ones will utilise that expertise to improve the status and profitability of their business.