Sunday - Oct 17, 2021

Indicators of a Bad Start-up Investment


We have seen passionate entrepreneurs both young and old work on promising start-ups with the hope of one day being the CEO of a huge corporation. Unfortunately most of these start-ups fail even before they make their first profit. They lose lots of money and while some gather the determination to fight on, others thrown in the towel and call it quits.  It can be a journey of untold pain, tears, loneliness and inner sacrifice for those who make it to the top of the corporate ladder.

You should never be afraid to put capital into a start-up, it is possible to become a giant corporation like Nike, Google and Apple and so many more. However, it is important to take note of the early warning signs of a start-up that is destined to fail. Many new businesses do not even last a year before they are forced to close their doors.

Here are some of the reasons why fledging businesses end up running out of the urge to continue.

Lack of work plans- it is not unusual to hear a new entrepreneur discussing their idea of starting a business. They will have the great idea but they never put time into a business plan which is a requirement to transform an idea into a viable business.  Without a plan, you will never have a clear path forward.

Little or no revenue –  every business, regardless of the size will need some capital investmemt, even charities and non-profit organizations  need revenue to operate. A start-up will not be successful if it doesn't have working captial to sustain the day to day expenses.  Without investing some revenue  early closure will beckon.

Poor business opportunity- there are a million and one business opportunities out there. But  not every one is destined for success. Before you start your business, you need to do extensive research; know the positives and negatives of the industry you intend entering. Just because you see an opportunity doesn't make it a good business prospect.  There are some opportunities that might not be right for you. If you don't have sufficient resources and the skills necessary for a particular business,  it is better to let it pass rather being involved in  something that has the potential to drain your resources and leave you with regrets.  However, this doesn't mean that you  should never take a risk and venture into new uncharted waters.  Some of the biggest corporations came from an unique idea and hard work.

Fear to take big risks- if you want to be an entrepreneur you need to take risks.  Often the bigger the risk the bigger the reward. While opportunities are always available, it takes a risk to convert them into a successful business model. It's often easy to keep your money safe by taking small risks. The disadvantage with such mentality is that it can fool the entrepreneur into traveling the same safe path that is  traveled by the majority with just normal results. Only those who take calculated risks can hope for high rates of success.

Stiff competition- you are seldom the only one with an idea that you want to build into a business. The chances are that you may be just one in a line to recognize the same opportunity; others may of gone before you and have already have their business up and running. This market place competition is a contingency which needs to be conidered and  included in your business plan. You can take  consolation that research shows  more than three quarters of small start up business fail before  their second year of trading and many more  fail over the course of five years. It is only a well structured  business that enjoys longevity.   Don't fear competition, think of it like a tightly contested marathon race where the winner takes on equally gifted opponents to cross the finish line first.

Lack of intellectual property- If you have developed a new innovative product it is important to protect that product with a patent or in the case of creatiive, intangible ideas you need the protection of  Intellectual property rights. You need these protections to keep  other companies from using your products and ideas  Majority of small business owners don't realize the worth of their idea and never think to adequately protect themselves

Lack of professionalism and expertise- do you know why the likes of Apple, Microsoft, Coca cola and Samsung are market leaders? They are professional operations and only work with teams of the best personnel in their field. Of course these are not start-up businesses now but they were  once and saw the importance of preceived success by giving  attention to their company profile at all times. 

Indications that your business is heading for disaster 

Even if you have defied the odds and have passed the all important twelve month milestone, it is never time to relax.   Falling into a false sence of security and taking your success for granted is easy but unwise.  You need to be ever vigilant and watch for signs that your business is heading for collapse, this will give you the opportunity to take steps to rectify the down trend. 

Blurred vision- if a consumer came to your business and asked where you wish to be in the next 3 or so years, will you be able to give a concrete answer? Probably no, because you only think of the present and you have never thought beyond it. Lack of clear vision is an indication of a losing business.

Stagnant growth- your start-up may have already found loyalty in a considerable number of consumers. That may not be good enough to keep it going. Are there new consumers coming on board? Do you have new products coming into the market often? If your answers to these questions are NO, you are already on your way out of business.

Businesses, especially start-ups,  entail a lot of risk and rewards in equal measure. You know you are on the right track when you are willing to take the risk, withstand challenges, learn and stay on until it works.  Good luck in your start-up investment.