Stand up to failure

Vivek Bindra

Failure is a part of life.Talking about reasons behind the unsuccessful business in India, IBM Institute for Business Value and Oxford Economics found that 90 per cent of Indian start-ups fail within the first five years. Another report indicated that Indian start-ups have only 30 per cent contribution towards patent filed (Asia 2015-16), rest 70 per cent contribution came from MNCs. The most common reason behind the failure is lack of innovation. This is the reason why startups funding in India has reported a decline curve from 2015 to 2016. Here are a few takeaways to overcome the pitfalls:

1.Missing innovation around customer’s money- making model: Start-up entrepreneurs mostly focus on business money-making model instead of customer money-making model. In fact, they should understand the customers’ needs first and reframe their business strategies accordingly to get a good lift in the market. Need gratifies the business greed and according to the need innovative business strategy should be designed.

Ask yourself: What problems are you solving in your customer’s life if he cannot solve in his own? Start-ups fail when they are not solving a market problem.

2.Negative cash flow and negative working capital: Another reason for business failure is non-circulation of cash flow within the business. Slow recovery from suppliers, credit period extension can be the factors behind non-cash crunch in business. Maintenance of sufficient cash flow can be done by adopting timely or advance payment policies in order to operate smooth functioning of business. 

Tip: A cheque in hand means nothing — you need cash. Cash is the all-important fuel to run a business.

3. Expansion with negative 

margin: There must be clarity regarding what is the biggest source of earning in your business. A pre-planning of how to earn profits must be identified to avoid profit compromising situation in future. You can learn from various start-ups that have implemented market acquisition and loss leading strategy by selling cheap products in initial stages to acquire the market but left with no profits in the end. 

Tip: Prepare for deep profits in advance to avoid future impairment.

4.Lack of talented manpower: An efficient team is not only smart enough to maintain business sustainability but also in handling future uncertainties. If you have not yet developed your navratanas, identify the proficient people who have high potential, performance, and a good combination of skill-will; to constitute a competent manpower for business that helps your business in transforming your ideas into execution process. 

5.Scalability with recurring revenue model 

Generally businesses work on experimenting new customers instead of retaining the existing ones due to which they have to face business failures. Find out the specific business model for your business which can help you in engaging customer retention, business profitability, regional strength and ultimately scalability for business in long run.

6.Mixed marketing signal & wrong positioning: Start-ups generally face lack of research in market planning, positioning and segmentation due to which business pitfalls arise. Key out the nature, uniqueness and utility of your product/service in order to define your target market and build the market sustainability.

Tip: Find out a single signal of your identity either your product is the most prestigious, cheapest, most reliable, best valuable, problem solver, convenient or a newest one. 

7.Releasing product as a laggard: A market research is very essential before introducing a product in the market. You should have a better understanding of the market requirements, product timing and adoption curve first to set up your business. Otherwise no strategy of discount, low marginal product, credit or scheme will allow you to penetrate your product in the market. 

8.Save yourself from competition: Be prepared to handle tough competitors’ strategies with your well versed knowledge how to benefit from patenting and intellectual property rights. Another way is to enhance your brand equity or searching of low-cost raw material suppliers which plunges business cost of production. 

Tip: Complaint is a gift, catch it. 

9.Missing the process of converting feedback into feed forward: Appreciate and utilise your customers’ feedback qualitatively irrespective of its nature. Your first product is your trial product which needs modification.

Tip: Customer wants to be with you but only thing that he is expecting please change yourself.

10.Business model of building complete eco-system: Create a business strategy by engaging others into your business in order to enhance your association at wider level e.g. Facebook, Youtube exemplify their strategy to not work in isolation but to create dependencies for others. 

— The writer is International Motivational Speaker & Leadership Trainer