Why businesses fail and how to work around it

Your sales will dry up, your customers will leave in their droves, your inventory will waste away – untouched and unbought – leaving you penniless, jobless, and every other -less you can possibly imagine.

Yet you might be thinking to yourself, “But Konrad, you don’t know me, you don’t know my business, how are you so confident?”

It’s funny you should say that…

But before we get into that, let me tell you a story.

The tale of the bratwurst

“Who doesn’t love a good old-fashioned bratwurst?”

This is the thought process of my fictional friend Lorelei.

Knowing the popularity of this breakfast banger, Lorelei decides to set up and put all of her money into a business that specialises in selling her own bratwurst – confident in the knowledge that this fabulous frankfurter will bring the crowds in their droves.

In her search for business, she stumbles upon a festival.

She checks all of the other vendors and as luck would have it, no one is selling anything even close to what she’s offering.

Jackpot.

Yet the festival comes and goes, and at the end of the day Lorelei hasn’t sold a single sizzling sausage.

Now, if Lorelei had taken the time to research her audience, she might have stumbled upon the fact that this was a festival celebrating veganism.

Okay, that might be quite a silly example.

But the lesson behind it is clear:

Lorelei built her entire business on what she thought people would want – not on what people actually want or need.

Nice story, but why is my business going to fail?

Right, let’s jump back to the beginning.

You’ll be happy to know that before I made my outrageous claim, I did my research.

If we look at statistics published by Gov.uk, we can see that 500,000-700,000 new start-up businesses are launched every year.

Around 20% of those businesses fail in their first year. This figure jumps to around 60% in the first three years.

So my confidence can be rightly drawn from these – let’s be honest – pretty damning figures.

Yet what you quite rightly pointed out to me (good job on that by the way) was that I haven’t done my research on you.

I was basing my assumption on the general landscape of businesses, when I should have been focusing on you.

So the short drink of water at the end of this long walk is – I made an assumption.

And assumptions are bad for business.

The worst mistake you can make

Since we’re on the topic of statistics, let me throw another your way: some 42% of start-up businesses fail because there’s no market need for their services or products.

Just like our friend Lorelei, the idea behind the business may have been good, but without a need in the market your business is doomed to an early grave.

This thought process is what I like to call inside-out thinking.

It’s looking inward at your business before you look outward at your target audience. It’s pretty risky and just not all that smart.

So instead of coming up with an assumption-based strategy, you need to formulate a demand-led strategy.

And how do you do that?

Research, research, research

In the business world, research is king.

And sitting up there alongside our king is even more business royalty – competitor analysis and keyword analysis.

We are living in the digital age.

That means that all of this delicious data is readily available for us to snap up and use to our advantage.

Even at its most basic, it’s ridiculously easy to do just a quick Google search before starting up a business.

Anything that will give you confidence that your idea will work and more importantly – is needed.

The same goes for your content strategy.

You shouldn’t just be pulling your content out of your hat. You need to base your content around what your audience wants to see and what will truly resonate with them.

Because at the end of the day, setting up your business based on demand (preferably unique demand) will put you on the fast track to success.

Be smart, be prepared

What this all boils down to is making sure that you are practising outside-in thinking, not inside-out thinking.

It’s simply taking a look at your market, spotting a gap, then filling it.

Simple really.

Don’t let your business become a statistic.

Don’t be the sausage in a crowd of vegans.

Don’t be a Lorelei.

Konrad Sanders is chief creative officer at The Creative Copywriter