Creating a business is not a trivial process. Facts have shown that 50% of them close their doors before they reach 5 years of existence. So the question is: How did the other 50% survive after that? What strategies did they adopt to achieve this result? What do young entrepreneurs need to know before they start?
Why do businesses fail after 5 years?
The success of a business is not only a financial success, even if the reason for its creation is to make a profit. It is also a question of success in sustaining its activities beyond the first three fateful years. You should know this in Francethis sustainability is limited to a maximum of 55%, Depending on the site area. A low number compared to the number of companies created each year. (source)
This situation can be explained by the fact that in France, future entrepreneurs can choose the legal status of a self-employed businessman which allows them to set up their business in very onerous administrative procedures.
Moreover, it is one of the solutions that gives them the opportunity to test its viability at a lower cost. Results: They are generally unprepared to run the business, have no desire to expand their activities and end up going out of business. Some self-entrepreneurs decide to change their system and turn into a company. In this context, they are first required to close the previous business before opening another business.
Some Best Practices for Starting a Business
During the first 2 to 5 years of its establishment, the company was in the period when it should solidify its reputation and develop its activities. During these years it had to adapt its marketing strategy to demand, find potential customers and gradually retain existing customers. But to achieve success, it is necessary to follow some rules.
Research Growth Sectors
Starting a business requires research beforehand to determine which sector it will be able to succeed in. It may sound simple, but not all activities are equal in terms of longevity. Thus, those related to food or trade are generally those that have the shortest life. These are indeed sectors where the competition is fiercest. Therefore it is necessary:
- Take care of this competition;
- Learn about their business model;
- Uncover their weaknesses and of course their strengths.
This knowledge makes it possible to adapt strategies accordingly.
Before you begin, feel free to train yourself on this topic.
This training design and promotion of digital training offer Presents the module “Designing a Sustainable Business Idea”.
Do market research
Before setting up a business, it is also not enough to study the current sector. It is also necessary to ensure that they are not saturated, and that the demand there is still very large. Market research is an essential step, as it allows the young entrepreneur to do just that Better understanding of the activity he will be conducting. It is quite possible to go to a specialized company, but from a financial point of view, this can have a very high cost at first.
Make a plan of action
Creating a business plan helps to better clarify and arrange the ideas in order to get a more accurate picture of the project. This document is the primary tool to convince potential investors of its long-term profitability. Several elements are presented, in particular:
- founder or founding team;
- details of offered products or services;
- The results of market studies to prove that the sector has been well defined.
The project leader should also highlight the marketing strategy that will be implemented. At the financial level, it will be necessary to evaluate the financing, from the estimated turnover, taking into account, for example, fixed costs.
Regular innovation is an essential factor. The goal is not always to bring a new product to the market, it can be to improve the existing product and suggest a new way to sell it to customers, or to attract new products, and to improve the loyalty system. It is entirely possible to scale and expand the ranges of products or services.
Diversification of sales channels
Currently, having a physical store is not enough to establish itself in the market. Online shopping has become a real way of life and the COVID-19 pandemic has changed the game a lot in this sector. Having a physical store and an online sales website at the same time is not necessary. It is also necessary to combine other skills whether they are competing or complementary, the goal is to get closer to the customer, to diversify the goals.
Setting up a business takes time and is based on a thorough knowledge of the sector being invested in, as well as knowledge of potential customers. The future entrepreneur must be able to adapt his offer according to these. For first-time business creators, the accompaniment of experts is not useless. On the contrary, this strength can ensure the sustainability and profitability of the company. Knowing how to be resilient in the face of market changes is also essential to being successful and past the five-year mark.