There are tons of businesses out there in the big wide world, right? Too many to shake a stick at, in fact! But most of these businesses are now well established; just imagine how many businesses and companies there would be if all the ones that folded early on were still going strong! And trust us, there is a whole load of companies that do fail in their first year.

This got us thinking, though – why do so many businesses fail before they have got through their first year of trading? There are, of course, a manifold of reasons why this may be the case, and it’s always really interesting to read about them.

So, we’ve done plenty of research to find out what some of the most common reasons for business failing are. Read on and you might end up having your eyes opened as some of these reasons are very surprising!

There’s No Demand For The Business

Before anyone sets up a business, it is important that they do plenty of market research to make sure that there is enough of a demand for their new company. For instance, they need to look into the products or services that they want to offer customers and clients. Will enough people want to buy or use them and, if so, does the new company do enough to attract a big enough clientele?

Obviously, if a business owner does not carry out enough market research into the potential future of their company, then there is a lot that could go wrong. They could very easily end up offering some products or services that there is, in fact, no call for whatsoever. If this happens, then it will be a struggle to make enough money.

Alternatively, some businesses think that there is a niche for their business to fill when, in actual fact, there isn’t. This then means that customers find it difficult to differentiate between the new company and its competitors, and don’t see a reason to take their custom and business to the new company.

Not Enough Funding

One of the first hurdles that many entrepreneurs and new business owners need to get over is finding enough capital and investments. Thankfully, though, finding initial funding from investors isn’t too difficult as there are plenty of resources available that can connect new entrepreneurs to potential new investors.

However, once this first lump of cash dries out, there can be increased difficulties getting hold of a second round of investment. That’s because there is evidence of how well the company is performing, and this might make it a lot less attractive to investors.

Poor Money Management

Even if a business does get plenty of funding to keep going, that cash needs to be well managed. Otherwise, it could end up drying up a lot sooner than expected and thats why some businesses fail! It’s important that your business gets a solid finance and accounting team in place as soon as you can afford to do so. This can be quite expensive, so you might want to wait until you are turning a profit to get this team set up.

But sooner rather than later will definitely be a big benefit for your company’s money management. It’s important that you create a budget from the very beginning so that you know exactly where all your money is coming from, and where it is going to. If you get any of your money management wrong, then it is pretty much guaranteed that your business won’t make it past its first year.

Poor Reputation Management

In this day and age, almost anything can be said about a business online. If one of your customers leaves a bad comment or a poor review about your company online, then this could be potentially off putting to other people who might have used your services. So, it’s important that you are aware of your company’s online reputation and how you can improve this if you ever think that you need to.

There are various ways you can take care of your internet reputation management, from monitoring any comments and tweets that are sent to your company’s social media profiles. It’s important that you deal with these comments correctly.

For instance, you shouldn’t delete them, no matter how bad they are. Otherwise, people who notice that you have been deleting them might think that you have something to hide. Instead of deleting them, you will need to reply to the comments in a professional way so that you can explain yourself and paint your company in a better light.

Businesses Fail By Not Getting The Word Out

Even though you might think that it has become incredibly easy to get word out about your company these days, you might find that this is still a big struggle for some companies. So, it is important that you consider the various ways you can spread the word about your new company. If you don’t do this correctly, you will find that your customer numbers dwindle and nothing you try can give them a little boost.

For instance, when you are focusing on your company’s website, it’s important that you improve its SEO. This will help it rise through the Google search result ranks, so more people will discover you through their Google searches. It’s also important that you put the emphasis on local SEO. For instance, adding your business’s address onto Google Maps will greatly improve your SEO as more people in the nearby area will come across you.

A Bad Location

If you have a shop, office, or other business location that your customers and clients can pop into, then it is important that it is in a great location. It needs to be easy for people to reach and, ideally, should be in an area that gets a lot of pedestrians walking past.

That way, some people might be tempted to pop in to see what you can offer them as they are passing. It’s also a good idea to place your business somewhere that is easily reached on public transport. That way, your employees, customers, and clients will be able to reach you even if they don’t drive.

Inconvenient Recruitment Process

It’s important that you have a streamlined recruitment process in place for the times you need to hire new staff. Some larger companies have very drawn-out processes that can take a couple of months as applicants are required to go through several interview rounds.

However, putting these long processes in place in new or small business can be damaging. It means that you won’t be able to bring staff on board as quickly as you might have wanted to, and this can slow down other processes within the company. So, it’s much better to speed up your recruitment process until you can afford to hire some HR specialists to come into your company and handle your recruitment for you.

Growing Too Quickly

You might think that it is in a company’s best interests to grow as quickly as possible. In a way, that is true as it can help them to make a lot more money and expand into new areas and products. But that’s only if they are expanding well within their means.

If a business ever starts to expand or grow too quickly, it could end up being a big strain on all of its resources. This often happens when a business owner thinks that expansion is a sign of success – it isn’t always, especially if you are expanding your business at a rate that it can’t cope with.

To make sure that you are growing your business at a reasonable rate, you will need to do plenty of research into the market that you are operating in. You should also look at your current workforce and decide whether they will be able to take on any extra work or whether you will need to hire more staff before you begin to expand.

If you want to ensure that expanding your business is done in the most effective way possible, it is essential to work with a business broker. They can provide invaluable advice and assistance on how to grow your business sustainably. Working with a business broker can also ensure that your business is well-prepared for growth and can find the right opportunities to expand in a way that aligns with your goals.

No Web Presence

I’ve already briefly touched on website SEO and social media, but I hope that you, at the very least, already have a company website and social media profiles! If not, then you need to start creating some as soon as possible. In this current day and age, lots of people are finding new companies to do business with by looking online. If you don’t have a website or social media profiles, then there is no way internet users will ever hear about you.

You don’t need to create a profile on every single social media platform out there, just focusing on Facebook and Twitter should be enough to begin with. It’s important that you share all your news and updated product information on these platforms so that people hear about what you can offer them. And then, you won’t be one of the many businesses who end up folding because they failed to create a website!

Not Listening to What Customers Have to Say

Once you’ve put your business out there, especially online, you’ll get feedback whether you ask for it or not. The trouble with not asking is that customers who want to be heard are more likely to post comments online for everyone to see. And, what they have to say might not be all too favorable. Even just a handful of negative reviews or problematic social media mentions in your first year could be the end of your business altogether. 

One of the best ways to overcome this is to get ahead by actively asking for feedback from the moment you open your doors. For one thing, this has the benefit of ensuring you develop a better business model based on things like real-time genuine feedback from your target audience.

Putting yourself out there with things like feedback forms and customer questionnaires in your early days can also make a huge difference to the B2C and B2B customer experience you’re able to offer overall. Instead of feeling like another unreachable new brand, customers will immediately see that you care what they want. And, they’ll probably be far more invested in helping you to achieve it as a result. 

Sometimes the Business Fails, But You Don’t Have To

So, there you have it. Follow these tips and your business won’t have to fold in the first year! If you’re curious about the common reasons why businesses fail in their first year, this article offers valuable insights.

To explore more and potentially avoid these pitfalls, you can check out business listings on platforms like HedgeStone for comprehensive business opportunities and guidance.