Every startup business is unique in its own way but so many meet the same fate that it is worth considering some of the common problems that can contribute to the downfall of even the most innovative and exciting companies.
1 – Failing to prepare
There is much to be said for not waiting too long for the stars to align before taking the plunge and embarking on a startup project. However, a clear lack of preparation can lead to chronic failings within an organisation that end up being simply too debilitating to overcome or compensate for.
It is difficult to generalise across sectors but, without a strong sense of what your competitors are offering their customers and what your operating costs are likely to be, you can’t really know what your chances of startup success might be.
2 – Taking on too much
The energy and determination of one individual can make the difference between success and failure as far as startups are concerned. However, it is very important not to take on too much and to have in mind that establishing the right kind of support network can offer much improved chances of making a successful start and moving a business on to a state of real sustainability.
Having access to accountancy services and employing assistants to help in a variety of ways can give the driving influences behind a startup the space and the support they need to maximise productivity and potential. On the other side of the coin though, having too many employees on board at too early a stage can leave startups with cash flow concerns they are never able to overcome.
3 – Borrowing too much money
There is great appeal in the idea of borrowing substantial sums of money in order to fund the early stages of a new commercial startup venture. The other side of the story of course is that a good number of high calibre companies and very capable entrepreneurs find themselves eventually with large amounts of debt to contend with and little hope of achieving the success they were aiming for.
Even, or perhaps particularly, when the first flush of enthusiasm takes hold of a new startup company, it is crucial to take a sober look at the process and potential pitfalls of borrowing money.
Financial flexibility is a tremendous asset for companies of any size aiming to make sustainable progress but particularly for startups, whose margins for error are relatively slender and for whom the downsides of over-reaching too soon can be terminal.
As a leading corporate insolvency specialist, Keith Tully from Real Business Rescue understands what it takes to keep struggling companies afloat and how best to deal with financial adversity.