Start-Up Failures:
How NOT To Join That Popular Club

If you haven’t heard the news, start-ups are something of a trendy thing right now.

In fact, they always have been. Unfortunately, there’s always been one problem – they are prone to failure.

Whether it’s the multi-billion-dollar Silicon Valley start-up or the local business down the road – they’re all classified the same. Whatever your standing, today will mull over some of the primary reasons why start-ups fail and how you can ensure you don’t join this growing club.

Keep On Top of Your Cash Flow

One of the most common reasons for start-up failure is cash flow issues. This means you’re not making enough money to cover your costs, and eventually, the business will go under. The most frustrating part about this is that you could “think” you’re hugely successful with umpteen contracts in the pipeline, only for cash flow problems to wipe out this success in the blink of an eye.

One of the main reasons this occurs is that other companies pay you late. Even though you are a young company, you still have the right to fair payment terms. Even if it means losing out on a bigger contract, take the hit, as the potential cash flow issues on the back of it could be far more damaging.

Don’t Leave Taxes Until the End of The Year

Another reason why many start-ups end prematurely is because of poor tax management. If you’ve got to the stage where your start-up is turning a profit in its early years, then a huge pat on the back is needed – as this can be difficult.

However, don’t leave a huge tax bill to mount. Make sure that any ‘profit’ you make considers your tax obligations, whether corporation tax or your VAT bill. While one of the wonders of starting a business is that you have much more freedom, it also means that you’re left to sort out all of the nasty paperwork like taxes yourself.

Don’t Grow Too Quickly

It can be really tempting to want to grow your start-up as quickly as possible. After all, who wouldn’t want their business to be an immediate, roaring success?

However, growing too quickly can often be the downfall of a start-up. This is because you can soon become overextended and can’t keep up with the demand. This can lead to cash flow problems (see issue #1) and even put your business in danger of folding.

So, what does “growing too quickly” really mean? Unfortunately, there’s no one-fits-all answer, as it can apply to anything. You might have had a highly successful festive trading period and decide to move into a bigger warehouse space. However, if such sales levels are short-lived, can your business cope with the increased rent?

The same situation could be applied to recruitment. Once you’ve taken the plunge to take people on, reversing your decision comes very difficult indeed, and you can fall into that dreaded category of “growing too quickly”, with no means to pay your employees.