5 Ways to Know you are in the Wrong Business
Report says 21.5% of business startups fail in their first year and 50% in their fifth year
There is nothing as exhaustive and devastating as expending all your efforts on building a business and yet, no significant result to show for it. Many entrepreneurs, especially small business owners, can relate to this. Why are your strategies not working? Sometimes, it’s the inevitable early-stage struggle that almost every small business experiences or a wrong business model. And it may just be that you’re in the wrong business altogether.
The wrong business choice is often the problem, but entrepreneurs are too emotionally invested in the business to see it. This is why many startups fail in their first five years.
According to Investopedia, as of 2019, the failure rate for new businesses was around 90%. The report says about 21.5% of startups fail in their first year, 30% in their second year, 50% in their fifth year, and 70% in their 10th year. These businesses fail for so many reasons, which includes lack of sufficient capital.
Here are some ways for you to know you may be in the wrong business and how to mitigate it.
1. Your product or service is not meeting genuine needs
Before launching a product or service, the fundamental question you should ask yourself is, do people really need it? Is there a starving market for it? Etc. If the answer is yes, and you’re still struggling, then all you need is a suitable business model and marketing strategy. But if you’re not sure how to answer these questions, then something is wrong.
Perhaps there isn’t a genuine demand for your goods or services. It’s time to design a new plan if you’re not hitting your sales targets. Survey the market and your audience to determine the real issue so that you can develop a solution. And sometimes, the solution is to close the business and try something else, but this time, conduct market research and let the result determine your next steps.
2. The business is not scalable
While a non-scalable business is not necessarily a bad thing, it usually has a growth limit. It largely depends on your goals and how big you want your enterprise to grow. Scalability isn’t a significant concern if you only want a tiny business to operate by yourself because you can do all the labour yourself. Scalability, on the other hand, is critical if you’re going to grow your company significantly.
A TPM Focus article defines scalability as “being able to maintain or increase your performance (i.e. profits, margins) even when faced with larger operational demands (increased sales). A truly scalable business can expand and increase its revenues, all while minimizing increases in operating costs.
As cited in the article, “if you are a chiropractor, would you be able to increase the number of patients you adjust each day without adding another chiropractor to your staff? No. We all get 24 hours in a day and there are a certain number of patients you can physically treat in a day. Anything more would be unbearable. So, although an increased number of patients would enable you to potentially make more money, it’s not a scalable business model because you are limited in the number of patients you can actually serve without your costs exponentially increasing.”
So, if exponential growth is your plan and you’re running a non-scalable business, it’s time to pivot. This means you need to determine the necessary steps needed for your goals to be attained. Visualize your economic end game and give yourself a picture of your business growth at every stage.
3. Can the business Sell in the future
Obviously, only a scalable business is sellable. Remember Paystack? The Nigerian fintech startup was bought by American fintech giant, Stripe for more than $200 million. The company has expanded to Ghana and South Africa. This could only be possible because it is a scalable business.
When you’re thinking about your business, consider whether you’re meeting market demands, whether you’ll be able to develop it significantly without putting in the proportionate effort, and whether you’ll be able to sell it in the future to build wealth.
Know everything there is to know about your business and its market. This will help you see if you are venturing into a business that is scalable has a good market model.
4. You started the business on a wrong motivation
Many entrepreneurs make the error of choosing a business based on other people’s earnings in the same industry. Those kinds of people don’t endure long. Unless you are passionate about what you do and WHY you do it, it’d be hard to attain sustainable success. It would help if you had a strong reason beyond money. When the going gets tough, and you do not see the money as you envisaged, you’d get frustrated.
You should create it before hitting a brick wall if you don’t have a stronger WHY (higher purpose) other than profit.
According to Simon Sinek, in his book, ‘Start With Why’, all companies know WHAT they do, and many know HOW they do it, but “very few organizations know WHY they do what they do. WHY is not about making money. That’s a result. WHY is a purpose, cause or belief. It’s the very reason your organization exists.”
5. It’s Hard to Stay Productive
If it is hard to stay productive at your work, you are most likely bored and uninterested in the business. People who are enthusiastic about their work, or at least moderately engaged by it, will automatically complete more tasks because they enjoy it. To improve productivity, you must pick a business that you are good at and passionate about. This also brings us back to the importance of having a strong WHY.
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