Why Do Most of the Businesses Fail in the First Year?

The graph in the researcher's report highlights that the exponential failure of start-ups reaches 33% in the first year and 45% in 5 years. And the overall percentage of those that manage to put the ball in the basket is only 25%. These statistics have been consistent since 1990. There are still companies that have gone bankrupt within days of opening because their accounts receivable and payable management was weak.

According to Investopedia's research, 784,715 new businesses were started in 2019 and almost 523,414 failed within two years. However, to avoid being counted in the failed business column, you need to have thorough and proven research for your business.

With the right research, funding planning, and flexibility, businesses can find success and growth. We will guide you through the biggest mistakes a start-up makes and possible best practices to improve the chances of success.

Top 5 reasons why startups fail

Sometimes people focus on major tricks and neglect the fundamental points that form the backbone of your business. So, here are the points that are neglected by startups that have failed to rise. Let's see:

No proper investigation

With business ideas and money, you started working on your business project. Unknowingly, you forgot to do proper market research before starting your business. This becomes a global mistake and indicates that your money is going to fall into an abyss.

Having a business idea is a good thing, but market research is mandatory before investing your time, money, and hopes. Investigation in terms of market value, target audience, growth and best location. It is quite difficult to convince customers to buy the product if you are not aware of the competitors' strategies. For example, in the electronics market, Vivo has been competing fiercely with the Oppo brand by offering additional touch features and cameras at the same price.

Business plan issues

Some business people think that they are ready to start their business if the market research is done. This is not the case at all. A survey is necessary to avoid falling into the trap, but it is your dream project. So it would be best if you plan strategies that will make you different from your competitors. Otherwise, you will always be investing in changing your strategies, and when the climax comes, you will be out of breath.

For example, if you have an idea for a grocery business, a location near a flat would be most appropriate. Including products for everyday use and maintaining quality will help you grow. For example, in your grocery shop, you can add dairy products, medicines, and personal products. This will encourage people to stop their cars and buy all the items in your shop.

Too little funding

It is rightly said that you should start your business with less investment, but less does not mean that you should avoid important areas to invest in.

For example, if you have a newly launched product and you have not invested in good marketing, you will not reach the market. Thus, there will be no sales and you will be at a loss again. Therefore, it is necessary to know where funding is needed in your business to make it stronger.

Poor cash flow management

Having a money trail is very important in any business. This is the main mistake that all startups make. They fail to manage their cash flow, which leads them to bankruptcy.

For this, you need to have cash flow management from day one. It is true that it becomes difficult to keep a journal for every cash outflow and inflow. To overcome this problem, many industries use Invoicera for online invoicing and cash management.

You can also use Invoicera accounts payable and receivable software to manage your cash flow without much interaction. It will automatically manage all your cash flows without any problems.

With the accounts payable and receivable software, you can check your transactions, investments of any year. The details are stored on the cloud.

For example, if you are in the real estate business, selling 2 flats and renting 8, Invoicera will play an important role. It will keep track of all the rents received, the maintenance automatically updates the actions.

The multiple features of this online invoicing software will avoid human errors.

Wrong location, wrong marketing

If you choose a bad location for your business, it is obvious that the internet connectivity will be poor. As we are all aware that digital marketing has overtaken door-to-door marketing, a poor internet connection will lead to poor marketing. Also, in this day and age, everyone has a smartphone with them.

If your location does not have good GPS power, people will not be able to reach you. So choose a location that has good internet connectivity. With a strong social media presence and advertisements, you will be able to connect with your target audience and sell your product.

Staying rigid

Once you have created your business and gained a customer, it does not mean that the process is over. In business, you have to be up-to-date, aware, and active at the same time.

If you have a rigid belief that you don't need to change once you have created your business, you are wrong.

Alteration is a necessity based on market demand. For example, there is a huge demand for smartphones, and you continue to sell basic mobile phones.

Key points for starting a business

Check these tips to keep in mind to ensure the success of your business:

Idea

An exclusive idea is more in demand than businesses that have been running for many years. So try to make your business idea unique.

Research

How will you know that your idea will work?Through this research, you will know whether your idea is unique or not, whether this business idea will work in the market, which location will be the best to set up.

Budget

Every business requires a different budget. Therefore, first check how much investment is needed and what your budget is. If your budget meets the requirements, then understand in which areas you need to invest at an early stage. This will enable you to act intelligently.

Plan

Once you have finalized your budget, start your planning. Plan what you will include in your business. Make a list of equipment and products. Also plan how many employees your business will need. Finally, you should have accounts payable and receivable software for good cash flow management.

Execute

After planning, make sure the execution matches your plan. No more or less than that. This will keep your budget in balance and not be distracted by your flowchart.

Final thoughts

The main concern is managing your cash flow. And it needs to be managed from the start of your new business. Whether it is any task, if you have all the details of all the actions involved, there will be no mistakes in the process. Humans are considered geniuses, but when it comes to multi-tasking, they can't compete with machines. In the same context, cash management requires the platform that manages cash inflow and outflow at the same time.

Coming to cash management software, how do you understand which software works best for your type of business? For this, you can research the same market to get a clear view of the software.

To help you with this, our market research the most powerful software is Invoicera which is compatible with any type of business. Companies and startups all use this software.

You can download Invoicera accounts payable and receivable software for your accounts receivable and payable management. This will enable you keep track of your cash flow and business management. It is preferred because with this one software, you can manage the workflow, cash flow has visibility and streamlined processes. You won't need two pieces of software for labour management and accounts receivable and payable management. So it's a good choice.

However, be careful and worry about all the issues before starting your new business and preventing it from failing.