7 indicators of first year business failure - Business Works
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7 indicators of first year business failure

by Keith Tully, Partner, Real Business Rescue Some new companies are more complex or esoteric in their operations than others, but it can be important over time that its founding ideas are clear and at least reasonably easy to interpret, says Keith Tully, leading business insolvency expert and a Partner at Real Business Rescue.

A sensible pitch

This can be significant partly from a marketing perspective, in that it can be tricky to promote a business effectively whose core ideas aren't easy to understand. But also because clarity of purpose within a new business can be essential to its early-stage progress in any number of important ways.

Solid and onsidered strategy

Beyond the core ideas and the basic pitch of a fledgling business, it is vital that a new company's leaders are able to develop a solid and well-thought-through strategy for future development.

This will generally need to involve good ideas about how a new business can develop in the near, medium and longer term. A startup that has a clear focus and an understanding of its priorities from one day to the next and a good sense of where it needs to be in six months or a year will generally be well placed to make positive and sustainable progress.

A lack of early excess

A very common mistake that startup operators make is to take on too many people or too much debt at too early a stage of their development.

Having lofty ambitions and a sense of optimism is natural and can be a great advantage, but too much of either can easily lead a new business into the perilous realms of excessive debts and outright unsustainability.

Clear customer interest

Whatever field a new company is operating within, it will only survive if it is able to succeed in attracting customers and demonstrating a certain level of demand.

Not every new business will be a phenomenon and a smash hit with its target audiences but they ought to at least be able to show some measure of early progress in illustrating an appeal to certain demographics.

Conservative projections

It is better for new companies to make conservative projections about their progress in terms of revenues and profits and then to exceed them, rather than to make optimistic projections and fall well short of them.

Perceptions can be vital for startups and it can be essential for morale as well among a new company's workforce for expectations to be exceeded rather than fallen short of. So a new company whose projections look to be erring on the side of conservatism and caution can be a good and positive indicator in these scenarios.

Good communication

Being able to communicate key ideas about a new business is important and can make a real difference in terms of how a company is perceived both internally and externally. Good communications also bring a valuable clarity of purpose to a startup and its fledgling workforce.

It is particularly important that the leaders of a new company are clearly on the same page and working towards the same goals. Ideally this will create a situation in which a single individual is able to take up a primary leadership role and represent a new business in that capacity in a positive and dynamic way.

Not being risk averse

Clearly, taking too many risks as a startup can lead to failure and the collapse of a new business at a very early stage. But taking too few risks brings its own dangers and can just as easily see a new company suffocated by a lack of progress and indecision.

So an ability to take the right risks and have them pay off in ways that drive a new business forward can be essential for sustainable success when it comes to startup development.

After all, there is no hiding place for startups and the process of creating a new company of any kind inevitably involves certain risks. So what matters most for a startup's survival chances is not so much how well they can avoid risks but more how the inevitable risks they face are assessed, understood and negotiated by its leadership team and their workforce.

Keith Tully is a leading business insolvency expert and a Partner at: RealBusinessRescue.co.uk

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