The launch of any startup is like the birth of a baby in a jungle full of predators. At any moment, while the baby is still small and helpless, danger may strike from any direction. Any newbie entrepreneur knows this feeling – the feeling that the business idea they are so passionate about and in which they invested time and money may somehow fail.
And the harsh reality is that more than half of the startups fail every year. It is always one thing or another – adverse economic conditions, bad planning, wrong product at the wrong time and the wrong place… But, except for cases when entrepreneurs really have no idea what they are doing and are doomed to fail, no startup will go down without a few warning signs.
If you are astute enough to act as soon as you’ve noticed any of these, you have a chance to save your business, to adapt it, or to change it altogether before it takes away most of your savings and entrepreneurial enthusiasm. These are signs which show you that either you are executing your business plan in a wrong manner, or that your business idea is not viable to begin with. Here they are:
1. You Are Focusing on an Abstract Idea Instead of the Main Goal: Revenue
This should be the first thing you need to know before you consider starting a business: your ultimate goal is to generate revenue. If you believe otherwise, then you should stay employed or find work with a charity. Your business is all about bringing money for you and your family.
If your main focus in everything you do is any other than this one, you will never find and apply the right strategies for marketing your products and getting paid. You will keep working on your Perfect Business Idea which will ultimately ruin you financially.
2. You Have No Idea Who Your Customers Are
Can you describe your target customer? Just a general description – basic demographic details, interests, needs, pain points your product solves… Nothing? Then how will you possibly sell your products or services if you don’t know where and to whom to market them? Imagine that you have a small stand where you display your products. Not knowing who your customers are is like placing this stand in the middle of an empty field and waiting for customers to find you.
3. You Are Running out of Cash Faster Than You Generate It
Is every end of month troublesome for you? Are you barely making the ends meet both for your family and your business? This means that your business model is not working well. You are not able to make money at least at the same rate that you are spending it. It is either a problem of reaching out and attracting the right customers, or the business idea per se is not designed to generate cash fast. You cannot afford to keep pumping money for months in a business which does not yield revenue. See what needs to be changed and make that change.
4. Your Niche Is Too Small and Specific
Are you selling a very specific product which covers a very specific and rare need? This means that you have a small target market. Or none at all. It is true that one of the key pieces of advice in looking for a business idea is to identify a specific niche with medium to small competition, but this niche needs to have a constant market share. Otherwise you may make it into the Guinness Book of Records for the most unique business idea, but you will not make money out of it.
5. You Are Getting Bored
This is a very dangerous sign, perhaps the most dangerous of all of them. While you are still enthusiastic, you can fix a lot of problems in your startup. But, if you have lost your interest, then your business is at the door of extinction. Before you give it up, consider how much time and money you invested in it, remember your excitement at the beginning and ask yourself: do you really want to give up? Is there no way you can regain that enthusiasm and come back with a vengeance, making your business a successful one?
Last but not least, many startups which promised to be wildly successful failed because they were swimming in troubled legal waters: their incorporation was not valid, they did not obtain all the licenses and permits they needed for operating, etc. This is why you should always make sure you follow your state regulations for startup incorporation and licensing to the letter before you even begin marketing your products to customers.