While liquidating one of the startups in Bahrain which we formed last year we felt very sad. The reason is not just because he is one of our clients and we won’t get any business from him. But because we at Khalid Khan Advisory Services S.P.C do not consider client simply as a client but for more as a friend. This is the reason we have more than 95% of client retention. Once a client will work with us, we make sure that the client does not go anywhere.
Therefore, we did a little research on the startups and found the following 5 reasons to be a very important reason for the failure of startups.
Poor research work
A long-time back one of my friends suggested we start a restaurant. I asked him why the restaurant business looks so promising to him. He responded, “Do you know X restaurant? It is owned by ABC and he also started a restaurant and today he has 4 restaurants”.
You must have met people who think about a business seeing the success of. What they don’t see is the hard work behind that established business.
I politely refused his offer based on the research I did on the operation cost and my risk appetite. He went ahead without doing proper research and at the end lost over $50000. The amount lost is not very big, but for some, it might be lifelong savings.
Proper research of the market is very important and never thinks what works for X will also work for you.
A team is as good as its leader. Do you think Microsoft, Facebook, Amazon, Apple etc. will be so successful if their top management lacks the vision and don’t know their goals?
I have not seen any company till is successfully growing and doesn’t have competent management and team. Management is the base of any company and you can say it’s like the wheels on which a machine is running.
Poor services or product
A restaurant which serves poor food (“Product”) or a law firm which provides poor services (“Services”) can never flourish unless they have clients who don’t care about the quality of the food or don’t care about the status of their cases.
This is the reason big companies invest a lot of their after-sales training, etc. And also seek feedback from the clients regarding their services and products so that they can survive the competition and as mentioned to us by one of our clients would prefer Lexus over other SUVs because of the good service available for Toyota in the Kingdom of Bahrain.
Lack of financial prudence
A person starts doing business and does not follow the basic principle of financial prudence. Let me give you an example of cars which for some is an asset and for some liability depending upon their use and similarly opting for
One of my clients wanted to start a salon business. However, he was not calculating the cost of hiring employees, the cost of accommodation of employees, cost of visa and other government fees etc. He was even eager to take BHD 10000 on loan. We asked him how much he expect and how many people he assume to visit his salon in a month. After taking all the details, we drafted his feasibility report of this startup in Bahrain with the suggestion that this business is not profitable and viable based on his choices. This happens to most people as they ignore many nitty-gritty’s of business and legal regulation which later on cost them a lot.
Ignoring market sentiments
Sometime startups may have perfect data and research for business and still they fail just because of ignoring the sentiments of the market. It is not necessary that a startup has to be wrong from the start for failure and many times startup could also fail due to the sentiments of the market. That’s why it is a necessity that start-up in Bahrain or anywhere else must follow the spirit of the market.
For example, in India real estate business was growing exponentially for a good 10 years and suddenly (2013 onwards) started falling to the level of negative returns even though there was no fundamental change in housing needs
However, the only thing which swings drastically was market sentiments. Classical example of market sentiment is the upper level of resistance and of the resistance of a company share (for a given period of time) in share trading which has nothing to do with of a company.
If your business is in distress or you are going to establish a new business then we can help you. We help businesses improve their performance and grow by solving problems and finding new and better ways of doing things. For more details contact us at firstname.lastname@example.org.