If you are a start-up or fledgling small business, you understand the challenges that come with being a new entrepreneur. You may have little to no experience among already established players in the market. You may also be uncertain about what to expect, barring some research you’ve done on the side. Avoid preventable mistakes by understanding the key reasons why only 20% of small businesses make it past their first year of operation:

Reason# 1: Not Doing Adequate Study and Research

Market research can be a key factor in the success of a business. This type of research can seem like a very complex and complicated process. However, it is mainly about finding out whether there is a genuine need for your product or service. The easiest way to do this would be to reach out to a market research firm. However, this may not be an option for a new business owner that is just starting out.

For a new entrepreneur, here are some tips:

• Reach out to customers to understand whether your product or service fulfills a need, or how it can fulfill an existing need better.
• Study the competition – what are they doing well and what could they be doing better?
• Stay on top of industry trends to gauge what’s trending and what’s not.
• Test different variations of the product or service in terms of specifics, costs, marketing, demographics, location-targeting, etc.
• Give yourself adequate time to test, re-test, and switch things up until you reach a phase where it looks like your product or service can actually start making you money.
• Do not scrimp on this phase of your business plan, as market research is one of the most important aspects of creating a successful business. Speaking of a business plan, always have a plan in place so you know what you’re trying to achieve and how you’re going to get there.

Reason#2: Not Having Adequate Funds

Insufficient cash flow is another crucial reason why a small business often tanks before it can take off. Every business owner should have the following in place when starting out:

• Funds to cover operational expenses (people, labor, systems,
  third-party fees, and charges) for up to a year or until such a time as you expect to get consistent profit.
• Funds to cover unforeseeable emergencies and contingencies such as hurricanes, floods, change in economic policies, etc.
• A backup plan for cash flow generation through alternative resources.

Reasons#3: Not Having the Right People or Systems in Place

People and system management will be an ongoing part of your business.

• Always hire people who look like they have the potential to rise within the ranks or provide ongoing value to the business. Look for a proven track record and fit for skills.
• Look for cost-effective technology solutions that fit your fundamental needs. Resist the temptation for unnecessary bells and whistles. Look for solutions that have options for cost-effective upgrades or enhancements, every few years.

Starting a small business can be a challenging exercise for anyone. Knowing how to avoid the common problems that cause start-ups to fail will help you to minimize the risks involved. It will also help get you off to a flying start.

Having a coach guide you will also help you to avoid mistakes and will help you to get the information and support you need to make the best choices possible for the success of your business.