The exact failure rate for early-stage businesses is open to debate.
Writing for Forbes, says it’s 80% within 18 months. At Inc, it’s 96% within 10 years.
Other authors arrive at different figures. More than one can be right, of course. And, however you slice it, the failure rate is distressingly high.
What can you do to ensure that your company beats the odds and survives the early-stage die-off? Start by eliminating these six impediments to business growth, which all too often prove fatal if left unaddressed.
- Threats to Intellectual Property
Most modern companies rely heavily on unique ideas, processes, products — collectively, intellectual property. When that property falls into the wrong hands, it’s an existential risk.
Unfortunately, that risk is increasingly common. Cybercriminals — including insiders — are relentless in their pursuit of new and innovative ways to steal intellectual property.
“You can buy a USB stick that will download a terabyte of data or use file transfer programs like Dropbox to pull down someone else’s IP without having to hack into anything,” Jason Straight, then managing director of cyber investigations at Kroll, . “These technologies are very effective for industrial espionage. Malicious insiders now have unprecedented opportunities to steal from a company.”
- Poor Data Security Practices
“Every week, new [digital] threats emerge somewhere in the world,” says , chairman of Miami-based Otte Polo Group. “It’s up to individual consumers and entrepreneurs to remain informed and vigilant to potential perils — and ready to take action should the need arise.”
In other words, your company needs to take data security seriously. If you haven’t already done so, hire or retain a cyber security expert to assess your vulnerabilities and recommend solutions.
- Unsustainable Cash Flow Burn
In the very early stages of your company’s growth, it’s inevitable that you’ll burn through cash. You must pursue two interrelated objectives: raise enough cash to see you through this period, and accelerate research and development until you have a ready for the market.
- Hazy Value Proposition
Can you translate your company’s mission statement, or statement of core values, into a compelling value proposition that clearly communicates its usefulness to prospective customers?
“[M]ission and vision statements by themselves do not always provide strong enough reasons for parents to make a clear choice, especially when they are about to invest thousands of dollars,” says . “The value proposition is intended to overcome these reservations by translating the mission and vision statements into language that will make more sense to hesitant buyers.”
Pagano’s advice is tailored to independent school administrators, whose customers are affluent parents willing and able to shell out tens of thousands of dollars per year to secure first-rate educations for their kids. But his words apply just as well to decision-makers elsewhere. Without a clear value proposition, your company’s message is likely to get lost in the shuffle.
- Unclear Chain of Command & Delegation Issues
Your employees need to know who their boss really is. Further, they need to have confidence that he or she has free reign to operate within well-defined guardrails, without interference or micromanagement by higher-ups.
Unclear chains of command and micromanaging are two sides of the same coin. Both stifle innovation, hamper problem resolution, and impede healthy risk-taking.
Are any of these things holding your business back? What are you doing about them?