Stopping Businesses From Failure
We always hear the successes stories of entrepreneurs who, against all odds, scrapped their way to the top, jumping every hurdle that came at them. But what about the businesses that failed? The one's that gave it their all, but it just wasn't enough?
We've interviewed a bunch of entrepreneurs who started a business but couldn't keep it open for one reason or another. Our goal was to understand what the hardships, mistakes, and wrong-turns led to their businesses closure. At Weird Street our mission is to give business owners the resources to succeed and make the "American Dream" attainable.
So to start, there will always be businesses that fail out of gross negligence (didn't pay rent, didn't get proper permits, broke the law, etc). We aren't talking about those people in this article.
At the end of the day, most businesses fail because they made bad decisions. Not intentionally, but because they just didn't know better or didn't get the right advice. If you're new to starting a business ask as many questions as possible. Every entrepreneur will tell you that everyday is a learning opportunity, whether it's hiring your first employee and figuring out what the hell to do or getting distribution and understanding volume and forecasting.
This is really where Weird St. is trying to help. We connect new business owners to the community of seasoned owners in the community. Small business owners understand the struggle and they don't want anyone in their community to fail.
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The second biggest thing we heard over and over again was that their business failed because after they got everything together and opened, but no one ever came in, products were sitting still on the shelves. They'd have some passersby and a few sales per week but that was it. Eventually they couldn't sustain and had to close. This, I believe is a two parter:
Understanding the Market
Before opening a business you should understand the market. Start by asking questions: Is there a demand for your product or service? Is this neighborhood in need of it? Will people in that area buy it? Who will buy it? This is all about understanding your demographic. For example when Whole Foods selects a new location they do so based on certain criteria (Large number of college-educated residents, easy access from roadways, lighted intersection etc.) This helps them reach the people who want their product and identify a location where these people shop/live so they have the best likelyhood of success.
Marketing Your Business
You must first understand who your market is in order to market to them. Marketing is often blamed when poor location and market demand are really the cause. These days marketing is relatively easy, with social media you can reach a huge audience with minimal effort. One great way to market your business on a budget is to engage with the business community as a whole—how can you get more people to come to your business district. If you work with your neighbors you can create a place people want to come and spend time, eat at [restaurant] walk over to the [boutique shop] and have some drinks at [local bar]. As a community you can engage people by having a block party, a charitable event or something similar; not only getting people to see your business but to see other businesses and want to return to the area more often. This creates more opportunities for your shop to be passed, seen, and visited on a regular basis.
Diving in Head First
While often encouraged this can lead to diving into a shallow pool and cracking your skull (or bank account). The safer route is to test the market using principles from the book Lean Startup - Eric Reis. Build a "prototype" and see what the engagement is without spending too much money. For instance if you're hoping to open a coffee shop or restaurant do a pop-up shop to engage interest. If you're starting a service like a salon, or a tour guide do some pre-marketing and get people to sign up or set up a table and gauge interest. When you feel you've received enough interest to prove that your business is in demand in that area then go for it and start your business.
- Stephen, CEO