Every entrepreneur’s fear is for their startup business to fail due to unanticipated circumstances. Usually, this happens after their newly established business reaches past the “honeymoon stage”.
It’s been said that the most crucial time in a business takes place within its first five years. It determines whether the business will make it or not. The initial years of every startup are full of hope, drive, and learnings. For some, it may even seem as though all things are falling perfectly into place.
But there will be a time where profits will take a downward projection and customers will begin shifting their focus and look for something new. It is during this crucial turning point that some startup businesses fail during this period.
During this period, there are important factors involving the structure of the startup business that need to be considered. It will eventually be helpful in sustaining the company and eventually reaching the core goals for starting the business.
Listed below are the 8 factors that play a crucial role in the long-term success of a startup business:
Creating a feasible business plan will always be the key. It serves as a guide to know what the business’ priorities and objectives are. Entrepreneurs often get caught by the excitement of venturing into things that they tend to stray from their main goals.
It is important to always focus on the business’ strategy!
There will always come a time when new doors of opportunity will open. Having new ideas is always acceptable for as long as the business owner can determine the right time to implement these new strategies or assimilate additional ventures.
As a new businessman running a startup business, it is helpful to avoid tasks that are heavy on time and effort but deliver little results. Instead, energy and resources must be concentrated on tasks that will help the business grow and sustain itself.
Focus on the business’ objectives. There will always be a time where the business will require additional innovations, and during that period, business owners should maximize all the time to give their startup the ‘metamorphosis’ or positive transition that it needs.
2. Churn Rate
Churn Rate is defined as the yearly estimate or rate where employees leaving their jobs or customers putting a stop to the services and subscriptions they have signed up to, reaches its peak.
This particular period is considered as a nightmare for every business or enterprise, most especially startups. It is the responsibility of the startup owner to hire and invest in the best and the most loyal employees.
Many factors affect or influence the probability of a churn rate in a company. For startups, it may be the result of a personal choice of the employee. Their choice may be due to the kind of work environment provided for them. People tend to leave if they do not feel secure or valued or if they are not happy with the surroundings where they are supposed to work.
When a startup has a high percentage of employees leaving the company on a regular basis, it reflects badly on the business. However, business owners have the power and capability to resolve the increasing rates of resigning employees.
If business owners do not want the possibility of employees leaving, they must come up with an engaging and healthy work environment where their staff can perform aptly and provide positive feedback about it. Make them feel that their contributions matter and that they are part of every success that the company has.
Sometimes, an enterprise’ success is because of the management and employees’ unity.
The location of startup businesses is a big factor in determining whether it will attain big success or not. Proper location can merit additional revenue to a startup business.
There are two considerations that need to be pondered when deciding on the startup’s location:
- The business owner’s personal location
- The target market’s location
When it comes to finding the best location for a startup, visibility and accessibility are key. A strategically located office or establishment that sits near the business owner’s residence is convenient because it enables the owner to reach their office or store more easily should there be emergencies that arise.
Taking note of how accessible the store’s location will be to the target customers is also vital. Initially, startups will have to decide on a specific market to target then determine certain areas or locations in town that they frequent.
For instance, if a startup targets customers who belong to the working class, then it would be best to situate the business within or near economic centers or central business districts. If the target audience is comprised of students, find a location near schools or universities.
4. Business Persona
Always keep this in mind: the startup’s persona will become the face or image of the business that will be imprinted in the customers’ mind.
It is important to ensure that customers will recognize the startup in every endeavor or promotion that the business decides to take on. Establishing the most suitable persona for a startup can be achieved with the help of a proper marketing strategy. It will likewise be an advantage if startups know well who the target customers are.
Take note of customer feedback as it will assist in formulating the startup’s persona. There are several methods where customer feedback can be collected. One of the most effective methods involves conducting a survey among the target customers.
Startup owners can create a persona based on the responses of their customers. Doing so helps entice customers more and ensure that the branding or image created for the business will really respond well to the intended audience.
A startup’s goal is to ensure customer retention and acquisition is constant that it eventually lead to the attainment of loyal customers.
In every startup, beginnings will always be the hard part. It is a period where businesses have to pay for several costs but gain little profit. During this phase, some businesses are forced to close down because it can no longer handle the cost-profit imbalance.
Some factors affecting cost are: Rent, bills and payroll.
Always remember that one of the goals of business is to make profit. Any business will have a hard time sustaining itself if the cost is higher than the profit. In that case, costs need to be reduced.
Try applying money saving measures such as looking or negotiating for a store location with lower rent fees, using energy-saving appliances, or simply avoiding unnecessary expenditures. Sacrifices are needed in order for the company to survive during hard times.
Allocate funds only for items and services that are needed. Avoid overspending at all costs.
6. Sudden Capital Increase
A pleasant part of growing a business is when people start recognizing the brand. During this stage, businesses can expect an increase in the number of clients interested in availing the product.
On the other hand, some businesses fail to survive this phase or stay long enough to get to this point. Businesses who were unable to anticipate this situation become unprepared and unable to meet the growing market demand.
An increase in market demand will require startups to release more capital in order to meet what the client dictates. This also means making the necessary adjustments to give way for the company’s development.
Some enterprises lacking extra funds to meet the sudden boost in market demand are unable to keep up with the continuous growth.
7. Market demand
There will always be a time when things reach a sudden decline and no one seems to be liking or responding well with the products offered by the startup. During this period, as the owner, it is helpful to gather customer feedback in order to be more knowledgeable of what the target market wants.
The secret ingredient to a successful product or service is maintaining uniqueness while also following market trends.
Stay updated with the latest trends in the industry and in the purchasing behavior of customers. Focus on consistently evolving and innovating the services and products. When sales drop down, take this as a chance to review the products.
Check whether there are things that need to be changed with the appearance, construction or packaging. Better yet, be open to devising new versions of products that require total replacement. After all, remodelling and creating new products requires the constructive feedback of customers.
The final factor that can save a failing startup is proper leadership. Regardless of the size of the company, every business owner must be ready to lead and manage their team, especially when the business goes through challenging and tough times. The cooperation and efficiency of a group of employees usually depend on how the CEO or leader reacts to and handles varying levels of stressful and positive situations.
It is better to work with optimistic and passionate people. The people and environment surrounding a startup or a team comprising a particular startup have the power to influence the team’s mood and perception of things. It may not always directly help in solving the company’s pressing problems, but still, the psychological and emotional support that it brings leads to better decision-making and performance.
Once everything is settled, construct a leadership structure that fits the startup. Business owners of emerging companies should avoid assuming an all-around role. This is an unhealthy habit that most business owners tend to practice a lot.
The better alternative is to select the best people for the job needed and designate time and concentration on building the personal development of each and every employee. Train employees in a nurturing manner where they can exhibit their skills and knowledge. Learn how to communicate and motivate employees.
A great percentage of their motivation for work depends on their leaders and the environment where they are working. More importantly, initiate an ideal company culture that employees will eagerly want to be a part of.
A business plan will always save the day but there will also be several adjustments that will arise as the startup continues to develop. Things will not always go according to plan, and that is why taking note of all the eight crucial factors mentioned in this article will help prepare the business for any hurdle that it may face in the future.