Why New Business Start-Ups Fail - Assignment Example

MANAGEMENT SKILLS AND ENTREPRENEURSHIP Why new business start-ups fail Introduction Simply put, a business start up is one that is new in the market. Such businesses are sometimes established under some partnerships or as stand-alone entities. The essence of such businesses is based on some prevailing circumstance or an opportunity in the market. At times, the basis of start-ups is in some demand in the market. However, there are some compelling circumstances that make the business start-ups to fail. One of the reasons as to why the business start-ups fail is because of lack of proper market strategy. When going into business, it is critical to have a strategy for the future. For start-ups businesses, the focus is ever on the product and not on future prospects of the market. A proper marketing strategy is one that plans appropriately for the future. When there are no plans for the product going into the market. A market strategy entails a number of issues that are critical for the growth of business (Feinleib 2012, p. 23). Having a proper forecast and focus on the customers, the business is able to make inroads into the future in so far as market strategy is concerned. A sound business idea is critical for an establishment of any business. Business start-ups never have an idea that can be transformed into something that is workable. When investors get ready to invest in a business, an area of concentration is on those entities that are scalable. This means that businesses that have a wide mandate in the market are never a viable option for potential investors. Investors always go for those businesses that are not general, but specifically with respect to any target market. To this extent, start-up businesses fail in the sense that there is no idea that that is specific to the business that is to be established (Reuvid 2011, p. 45). For start-ups, experience is ever a big issue. Since start-ups are merely business entities that are new, there is no experience needed for market sustenance. Experience in a business entity has all to do with knowing the right forecasting methods, cost structures and resource utilization. In this sense, it becomes possible for businesses to engage in risky affairs that can lead to failure. Experience is needed for any business to make informed decisions. It is critical to note that business start-ups, due to their short period in the market, there are a number of issues that are known and this at some point prove to be a problem. Marketing issues as well as sales strategies are some of the problems that pose a problem to the business start-up (Smith 2012, p. 10). Management issues also cause business starts-ups to fail. Case in point is that bad management strategies cause failure in the sense that there are no proper management strategies. Good management strategies can be very beneficial to a business. Recruitment and selection can pose a challenge when it comes to management. As a management strategy, there can be a wrong strategy in the sense that people who are not eligible can be brought into the business. Consequently, leadership structure can be a problem. When there are confused roles and duplication, there emerges some confusion in the sense that people not able to get it right when it comes to role allocation. Planning is very critical aspect in any business. Being able to plan for the future is a show of desire to remain relevant in the market for the longest time. Business start-ups fail because there is no proper planning (Smith 2012, p. 10). Things like budget are essential components that reflect planning. In the vent that there is no planning, the business is bound to go through some difficult sections. Drawing up action plans for any eventualities in business are part of the planning process. Consequently, budgets are essential in the sense that they inform the basis over which resources are utilized. Planning for the future help in preparing adequately for the future. Business start-ups face problems due to poor planning. When they fail to plan, issues such as financial constraints can push the business out of operations. The case becomes different when there is proper planning because action plans are ready for implementation in the event that there are any eventualities (Cohen 2010, p. 13). Location makes start-up businesses to fail. There are some locations that may not be suitable for business. In market mix, location is one of the greatest aspects. This has all to do with reaching the customers. When a business is not at an appropriate location, the customers find it difficult to gain access to the business. This makes it difficult for the business to remain relevant in the business. Conclusion Business start-ups face a number of challenges and find it difficult to remain relevant in the market. A number of issues come into force with respect to the failures that the start-up businesses face. Poor planning, location, poor management skills and undue business ideas are some of the issues that cause the start-up business to fail. To this extent, it should be noted that for a business start-ups to succeed, the conventional success strategies should apply as appropriate (Bradberry 2011, 31). The Importance of a Sound Business Model Introduction Return on investment is the essence of any business entity. When investors try their hand into business, the concern is always the amount of profit that is likely to be generated. To this end, it is ever critical to establish a sound business model or models to ensure maximum that the business achieves the purpose for which it is set. Having a sound business model is critical for any business. A sound business model gives a determination as to how the entity collects the revenues. Businesses depend on the revenues in order to expand and keep track of its operations. Consequently, through the model, the business is able to note how the revenues are to be spent based on the need of the entity. It some instances, a proper model lack that outlines the basis over which revenue is collected. A business entity can generate revenue through a number of ways. However, a proper plan is necessary in order to come up the steps that are necessary for the business to ensure the business that not loose on its revenue. Some businesses have failed because of improper model for revenue collection (Business 2003, p128). A sound business model is critical in the sense that it helps in establishing partnerships and drawing investors to the business. No one would want to partner or invest in a business that has no proper channels of operation. Investors are ever concerned about the viability of the business and the profiling. When there is a business model, it becomes relatively easier to explain the structure of the business and the different structures therein. An investor would have basis over which the business can be understood (Jansen, et al 2007, p. 34). Areas of concern to partners and investors may include the equity turnover of the business and the versatility of the business programs. In the event that there is no model, a potential partner or investor thinks otherwise about engaging the business. A sound business model should be able to spell out the goods and services that are being traded on. There are businesses that have loose structures to the extent that there is never clarity in the product or service being offered by the company. A sound model, should therefore, spell out as appropriate the operations of the business with respect to the goods and services being traded within the market. A sound business model should be able to give the appropriate details concern a given product being offered by the company. The business model should outline all the necessities required in so far as the product is concerned. This should be similar to the services being offered (Muehlhausen 2013, p. 45). When a business entity has a proper outline of the goods and services being offered, it helps in keeping the clients up to date with the operations of the company. The business, through a sound model, gets to understand the products and services in the entity and this can inform the basis over which adjustments are made. A business model that is sound helps the enterprise come up with workable strategies capable of producing results. The business entity should have strategies through it uses to stay afloat in the market. A business model would best give search determinations as how a business should gain entry in the market or enhance performance in the market. For instance, a company may be having a business that deals with a number of customers. In this case, the business should be able to develop a communication plan that is sufficient enough to avoid miscommunication and interpretations (Pfister et al 2009, p. 12). Moreover, a business entity may want to focus more on customer satisfaction other than on the employees, service provision or product. To make the most appropriate determination, it becomes necessary to establish a business model that brings out the best strategy that is capable of ensuring that the objectives are met. When there is consonance in the business model, it becomes possible to establish a strategy that it aligns with the predetermined objectives. In this regard, it is critical to note that a business strategy is critical in establishing a proper strategy appropriate for the enterprise. There are business models that aim at dealing with the menace of middlemen. Middlemen in business mean that clients have to go through them in order to get access to the business. In essence, middlemen are the link between the business and the customers. To some extent, middlemen never give the correct interpretation of the business entity. In so doing, the clients form some opinions that are not representative of the business entity. This does not portray the company in bad picture. A sound model such as cutting off the middlemen would help the business to scrap the position and deal with the customers directly. In this case, the company gets to understand the needs of the customers as appropriate (Watson 2005, p. 28). Consequently, the customers get to know the position of the business based on certain issues of concern. A sound business model is important in the sense that it helps in establishing the target market for the enterprise. Any business entity must have a target group in the market through which it focuses on. A business model, therefore, establishes the areas that are to be explored in a bid to reach potential customers in the market. In any given market, there are a number of consumers. Not all customers would subscribe to the products or services being offered. The only practical solution is to come up with a model that is correctly able to establish the appropriate market target for the business (Watson 2005, p. 28). When t5here is no model that establishes the correct target for the business, failures are bound to occur to the extent that the company may suffer a number of consequences. It should be noted that a business must have a target group in the market. For instance, an enterprise may be established only to target low-income earners. In some instances, the middle class and the top level class. To determine correctly the target group in the market, a business model is necessary. It is, therefore, clear to note that a sound business model is critical for a business for the purpose of establishing a market target. A business model is critical in determining the sales channels for a business. A business entity must establish proper sales channels in order to remain relevant in the market. Case in point is that sales bring income to the business and the absence of such an important entity can only mean failure to the enterprise. Competition in the market can sometimes be stiff to the extent that a company has to come up with appropriate strategies to beat the odds. In this regard, the come should be able to establish appropriately the sales channels capable of drawing revenue to the business. This can only be possible when there is a sound business model that is capable of establishing the appropriate sales market channels. Sales channels are sometimes done through the market mix strategies (Pfister et al 2009, p. 12). This in essence means that the price, promotion, place and product are some of the critical elements in so far as sales are concerned. In this regard, the models are critical in establishing the manner in which sales channels are established. It is critical to note that to note that proper sales channels cannot be established without sound business models. Understanding the activities of the business is sometimes critical in establishing the extent to which the company can go. The operations of an enterprise can only be drawn clearly through a model. This in essence means that every detail is drafted and outlined to the extent that there is a clear indication as to what the business does. When the activities of the business are made clear, it makes it possible for the business to know the scope and limits of operations. In some instances, businesses have failed because of going beyond the prescribed limits (Business 2003, p128). It is critical to make the activities of the company known to the stakeholders so that there are no mix-ups. In establishing the activities of the business, it is critical for a sound business model to be established to determine the scope of operation in so far as the activities are concerned. Every business entity has a cost and resource structures. The cost structure has all to do with the expenses that a company incurs in trying to develop the products and even enhancing the services. A company has to be able to understand the basis over which every coin is put into service. Consequently, a business must have a proper channel through which resources are gained into the business. Cost structure and business resources can be established appropriately when there is a sound model. Conclusion Every business requires a sound business model in order to make sense in the market. It is, therefore, important for enterprises to come up with sound business models that are capable of producing results. Some of the areas of significance in so far as business models are concerned are the target market, revenue collection, sales channel, cost structure and resources just to mention a few. When there is a sound business model the business is able to meet its objectives as outlined. The Managerial Skills Required over the first 2 years of business to achieve break-even business volumes. Introduction Management skills needed for any business entity cannot be over emphasized. In any given sphere of management, it is critical to note that an individual has to posses the right skills in order to achieve the predetermined objectives. Break-even business simply refers to a point in time in the business entity when the total costs are equal to the revenue collected. This in essence means that there is neither a loss nor a profit. Achieving a break-even point is never an easy affair for those in management. There are management skills that are required over the first two years of business in order to achieve break-even business volume. Decision making skills are a critical managerial skill that a person needs in order to achieve the break-even business volumes (Cafferky et al 2010, p. 134). In a business, there are bound to be issues that require decisions to be made. A bad decision made in the business can cause the enterprise a great deal. For instance, in a business, there are certain activities that can be dangerous for the business entity. It is, therefore, critical for the manager to be able to make quick and accurate decisions that are able to save the business. Two scenarios can be eminent in so far as decision-making is concerned. A decision may be needed to save the business from making further loss or increasing the performance ratings of the business. When an accurate decision making process is established in the business, it becomes possible to achieve a break-even a business volume. Financial skills are very critical in ensuring a break-even business volume (Meyer 2007, p. 183). When it comes to finances, there is always a tendency to mess up to the extent that there is no proper accountability, with respect to how funds are used. Budget making process is critical for a business. A person in business should be able to draw a balanced that is neither with deficits or surpluses. There is a need to have a balanced budget so that there is no extremism on both sides. It is also critical to note that the budget should be drawn based on what is at hand. The essence of this is to strike a balance between the revenue and expenses. Financial skills also involve forecasting. In this respect, forecasting means that projections based on the earnings can be made. This helps in stopping the excesses or developing strategies that are necessary for making adjustments. Forecasting also involves determining market prospects and the viability of a business at a given point in time. Financial skills also depend on how well one is able to manage the cash that flows into the business. Proper management of the funds ensures that there are no misuses in whatever direction. Financial skills are critical in ensuring that break-even in business is realized as appropriate. Business management skills are also essential in determining if a break-even point is realized. In achieving break-even in business volume, it is critical that proper business management skills are enhanced. One of the single most strategies critical in business is strategy. As an entrepreneur, well-designed strategies should be initiated to ensure that there is a level of certainty, so far as the prospects of the company are concerned. When there are no strategies that are workable for the business, the only practical end is lost. While losses are realized profits become inadequate and this diminishes the prospects of the company in achieving break-even point (Solomon 2008, p. 10). Business functions should also be understood as appropriate. When there is a strategy aimed at achieving some ends in the business it becomes possible to strike a balance as to the most appropriate plan ton further to ensure that break-even point is realized. At break-even point, it means that loses are controlled together with the profits. Proper management skills ensure that proper ideals in business are put into place to ensure that there are no issues in the general distribution in the business. Proper management skills have all to do with the proper establishment of strategies not to mention proper decision-making and the flow of work. All these ensure that break-even is made possible in business volume. Communication skills are a factor that cannot be over emphasized. One would wonder why communication skill is an attribute of management that is capable of achieving a break-even business volume. How an entrepreneur communicates to the consumers determines if the same customers are kept or not. Customer loyalty is critical to any business entity. Research has shown that acquiring more customers is more expensive than keeping the loyal ones. A communication skill that is inherent in a businessperson determines if the customers are maintained or pushed away. When the customer base diminishes, the business is not able to make the same profit margin in the previous time. To maintain a customer base that ensures profitability of the business, proper communication skills should be enhanced. Profitability and loses in a business can be maintained when there is proper communication between the consumer and the owner of factor of production. This is the essence of break-even business volume (Nuthall 2010, p. 66). Leadership skills are critical aspect in any business entity. Case in point is that the business takes the direction that the leader in business has chosen. A business leader should be able to chat the right path for the business. As a leader, maintaining high performance in the business should be a priority. In essence, it is critical that the leader enhances attracting more customers through appropriate skills. Consequently, the leader should be able to bring up new teams in the businesses that are able to take the business to the next level. When a leader shows good examples to the employees, motivation of being having the same traits of the employees is enhanced. To a large extent, good leadership skills enhance the performance of the business to the extent that performance is largely enhanced. Leadership skills are critical in balancing loses and the profits. This can be enhanced when there is a high performance rating in the business (Chorafas et al 2007, p. 341). When employees work for the betterment of the business, it becomes possible to achieve break-even business volume. To achieve a break-even business volume over the first two years, an individual is expected to have the appropriate marketing skills. Marketing is a wide area that warrants focus if anyone in management has to achieve break-even business volume. Consumers are the basis of marketing. Without the consumers, buying and selling cannot be realized. An individual has to correctly identify the target group in the market. Once that is done, it is important that the manager finds means and ways of motivating the customers to consume the products or acquire the services of the business. When there are a number of customers coming into the business, revenue is increased. This makes it possible to have a drive towards the achieving a break-even in business volumes. Marketing is a managerial skill necessary for anyone in management for the first two years. Sales skills are one of the single most critical tools that a manager can have for the business. As an entrepreneur, a person is constantly looking for fresh opportunities and areas of interest in order to make inroads into the market. To achieve break-even business volumes in the first two years of business, a person should have the right sales skills. There are a number of market mix models that are necessary for sales. Pricing, place, promotion and product are some of the most critical components in sales. It is assumed that two years in business does not warrant enough experience to understand how the market works. For instance, when there are proper incomes from the sales, revenues are boosted for the business. The most appropriate to do is to come up with strategies that are appropriate in order to boost the sales in the business. For example, it is necessary to have a pricing strategy for the market segment with which the business is situated. To this end, one can choose to have a price penetration strategy as a means of gaining entry into the market. Through different initiatives with respect to sales, it is possible to achieve the break-even business volume. Conclusion The Managerial Skills Required over the first 2 years of business to achieve break-even, business volumes are varied and diverse. It is critical to note that the management skills are relevant in the business for the first two years in business. The essence of managerial skills in this context is to ensure that break-even business volume is achieved. Not all the skills are necessary for this purpose. Some of the skills that are necessary for this purpose include leadership skills, decision making, business management skills just to mention but a few. In this context, the management skills are appropriate to the extent to which they are able to achieve the break-even business volume. When the business is at a constant level where there are not loses or profits, the condition is called the break-even point. Every one in management always seeks to get to this point before taking the business to the next level. When there are no losses and profits, adjustments can be made to increase the prospects of the business. Sources of Evidence from the literature and the local market context The sources of evidence used in this publication were drawn from scholarly materials and peer reviewed articles. The sources used in this text are based on management and entrepreneurial skills. In essence, the sources are representative of the current issues that businesses have to deal with in so far as management and entrepreneurial skills are concerned. Management teams are constantly seeking for ways and means through which the businesses can stay afloat in the market. In so doing ensuring break-even point is the first step towards which this is made possible. Consequently, the literatures in the market context have all to do with the survival initiatives of businesses to remain relevant in the market. Sources of evidence used here are representative of the management and entrepreneurial issues that are relevant to individuals. In this regard, it is critical to note that the sources of evidence are directly connected to the issues that surround the market and the different establishments. There are business enterprises that are well established in the market but others are less productive. In this sense, star-businesses are some of the businesses that record massive failures due to inappropriate strategies employed by the businesses. Appendices: A. Why new business start-ups fail Strategy Idea Experience Management Planning Location B. The Managerial Skills Required over the first 2 years of business to achieve break-even business volumes. Decision-making skills Financial skills Business management skills Communication skills Leadership skills Marketing skills Sales skills C. The Importance of a Sound Business Model Revenues Investment and partnerships Activities Target market Sale channels Cost and resource structures D. Sources of Evidence from the literature and the local market context Literature review Bibliographies: Bradberry, J. (2011). 6 secrets to startup success: How to turn your entrepreneurial passion into a thriving business. New York: American Management Association. Chorafas, D. N., & Chartered Institute of Management Accountants. (2007). Strategic business planning for accountants: Methods, tools and case studies. Oxford: CIMA. Cafferky, M. E., & Wentworth, J. (2010). Breakeven analysis: The definitive guide to cost- volume-profit analysis. New York: Business Expert Press. Cohen, B. H., & Rybarski, M. (2010). Start-up smarts: The thinking entrepreneurs guide to starting and growing your business. Avon, Mass: Adams Media. Business: The ultimate resource. (2003). Beijing: Citic Publishing House. 128 Feinleib, D. (2012). Why startups fail: And how yours can succeed. New York: Apress. Jansen, W., Jägers, H. P. M., & Steenbakkers, W. (2007). New business models for the knowledge economy. Aldershot, England: Gower. Meyer, C. (2007). Entrepreneurship. Cape Town: Pearson Education South Africa. Muehlhausen, J. (2013). Business Models For Dummies. Hoboken: Wiley. Nuthall, P. L. (2010). Farm business management: The core skills. Wallingford, UK: CABI. Pfister, R. E., & Tierney, P. T. (2009). Recreation, event, and tourism businesses: Start-up and sustainable operations. Champaign, IL: Human Kinetics. Reuvid, J. (2011). Start up and run your own business: [the essential guide to planning, funding and growing your new enterprise]. London: Kogan Page. Smith, J. (2012). Smart business start-ups: Tips and techniques to start your dream business. Oxford: Infinite Ideas. Solomon, R. J. (2008). The physician managers handbook: Essential business skills for succeeding in health care. Sudbury, Mass: Jones and Bartlett Publishers. Watson, D., & Serious Investor Groups. (2005). Business models: Investing in companies and sectors with strong competitive advantage. Petersfield [England: Harriman House Pub. Read More