Somewhere around 50% of new businesses fail within five years , and 96% shut down within a decade. How can you know whether your startup is going to be among the long-term winners or the short-term stalemates?
That's an important question. After all, it's far better to pivot now and launch a business that will succeed well into the future than it is to spend time launching a business which won't survive the turn of the season. To help, here are 5 pre-launch signs that your startup won't survive past its first 12 months.
1. Investors are resistant to fund your business
Investor funds allow you to grow your business more quickly than a bootstrapped business, immediately providing competitive budgets for ad spend, the ability to hire top-notch employees, the necessary software and hardware to create efficient internal processes, and whatever else your business might need to get a head start.
If you're struggling to catch investor interest for your business, it might be time to go back to the drawing board. As Domas Povilauskas, the founder of NOIA Network -- a startup which is working to rewire the way the internet works -- explains, "If you can't get investors for your business idea, there's a problem. Money issues aside, if investors aren't interested, that might mean your business idea isn't all that good, or you at least need to find a better way to present it."
2. You don't have set plans for testing and adapting
As always, the future isn't friendly to stubborn, unbending business models. And with instant world-wide communication devices in everyone's pockets, the environment you operate in changes at a frighteningly fast pace, target market expectations and competitor pivots included.
For that reason, your business foresight should include plans and processes for testing, iterating, and optimizing products, customer experience, internal processes , and even competitive analysis. The environment that your business enters into will change rapidly and, if your business is to succeed, your business must change with it. Maybe that's why Jeff Bezos -- the founder of Amazon -- said, "What we need to do is always lean into the future; when the world changes around you and when it changes against you -- what used to be a tail wind is now a head wind -- you have to lean into that and figure out what to do because complaining isn't a strategy."
3. Your business doesn't solve the market's problem in a new way
Market competition doesn't mean that your business is bound to fail -- in fact, competition can be a good thing, an indicator that there's a demand for your product or service. But if your exact business model has been commoditized by coaches all around the internet and loads of different solopreneurs are building the same business as you... it's unlikely you've found yourself a long-term winner.
Similarly, if your business doesn't serve a new market or solve an existing market's problem in a new way, then you should ask yourself, "What will make people buy from me instead of an established competitor?"
I like the way that George Konidis, the founder of GrowingSearch -- a marketing agency where he offers his expertise to small retail businesses and dominant online brands alike -- explained it when we talked on the phone: "I realized early on in my career that the status quo, no matter the industry, was never sufficient," he explained. "In the aggressive markets that I worked in, everything was about pushing the limits of growth potential, and so, I adapted and got extremely creative with my strategies as user intent evolved. -- SEO was always relevant, so that's what I pursued."
4. The math doesn't make sense
Often, good business is simple math. If you want to make money, you have to spend money, and you have to turn the money you spent into more money; also known as ROI. When you're working the numbers for your business -- overhead costs up against acceptable market value and potential profitability -- you should come out ahead.
If, for instance, there's a profitability gap between how much the product will cost you to produce and how much you can sell it for, you either need to find a new market that can afford a high-ticket price or manufacture a less expensive product.
Beau Crabill, the founder of Online Retail Mastery -- a firm where he shares his knowledge with other Amazon FBA hopefuls -- told me in an email, "Business is just math when you think about it. I'm never afraid to invest money into a business that I know will pay me back 10-fold down the road. And I think too few entrepreneurs really look at their budget, their overhead costs, and their expected profitability before launching."
5. Your business is behind the tech curve
The world is constantly changing. And nothing is forcing those changes quite as quickly as technology -- in just 20 years, we've gone from dial-up internet to high speed internet on our pocket-sized phones. If your business is going to succeed longer than just a few years, it must adapt with technological advancements. Your competition certainly will. And if you don't, you'll fall behind.
Will your business survive into its second year? It depends... the above 5 signs are indicators that it won't. If your business doesn't pass the test, you might want to spend your time building a business which spikes investor interest, where testing and optimizing are a part of the plan, one that solves your market's problems in a new way, the ground-zero math makes sense, and technological advancement are embraced, not avoided. Do that and you'll have a far better chance of building a long-term business which pays you back for years to come.