We all know how tough it is to survive as a new business. Bloomberg’s industry survey found that eighty percent of startups fail within 18 months, and it’s even tougher when your product or service caters to other businesses. While the numbers may seem discouraging, the fact is that most new businesses fail for the same reasons. If you understand why they failed, you can take steps to ensure that your business doesn’t fail for those reasons.
Here are 4 common reasons why new B2B businesses fail.
Lack of Market Interest
Roughly 4 in 10 startups fail because there is a lack of market interest. The owners may have started a business without understanding that there wasn’t really a paying market for the product or service.
Another mistake is failing to aim at the right market. When you try to sell your product to the wrong population, you’re unlikely to generate sales. Some businesses make the mistake of assuming that coming out with a revolutionary product will create a market for itself. Then you face the challenge of educating customers who see such a product as a significant risk. In reality, most such products fail. The solution is to do detailed market research before you do anything else.
Poor Online Presence
Another issue is when startups get lost in the crowd, and many times, it starts with a weak online presence. Merrittgrp.com has a useful article that explains why having a great website is essential for startups if they want to succeed. It’s not enough to have a site that looks good; it has to be optimized for search, especially local searches if you’re dealing with local businesses. It is, unfortunately, an afterthought for many B2B businesses when it should play a central role in their lead generation strategy.
Lack of Cash Flow
Nearly a third of all startups fail in part or entirely because they run out of funds. They might run out of money before they have a viable product, or they have a product but can’t generate enough sales to pay the bills before they have to close.
Having a plan to get investor funding is essential if you have a long sales cycle. Another option is determining how you’ll generate cash flow as early in the process as possible. This may take the form of a minimally viable product rolled out to the market or getting advanced orders. Shortening the sales cycle will help you get money coming in sooner. Alternatively, you might maintain a tight budget to make your savings last as long as possible before you rely on loans.
Being Outcompeted
If your competitor can deliver a decent product at a good price, you have to have a better value proposition. Understand the competition so that you can differentiate yourself. Then you are able to explain why your product is better for a given market niche than the existing options.
It isn’t enough to market your product to the right market segment; you need to take care to eliminate the perceived risk customers are taking when they buy from you. You can do this by offering free trials or having a freemium business model.
While these issues aren’t the only reasons why startups may fail, they contribute to most B2B startup failures. Manage these risks, and your startup is much more likely to succeed.
