How to establish a successful business?
Ghaith Albahr: CEO of INDICATORS
Reem Barakat: Research Coordinator in INDICATORS
What are the reasons of the failure of startups?
Have you ever wondered why most businesses fail in the first years of their establishment?
Do you know what are the most important reasons for the failure of these businesses? Did you know the relevance of that to market research? Do you know what is the investment research and
what its role in ensuring the success of startups?
According to Small Business Trends site only 56% of companies reach the fifth year since their establishment, the most important reason for the failure of companies is the lack of need for the services they provide or wrong in the way the service is offered Which represented 42% of the reasons of companies failure, as for the rest of reasons, they were related to wrong pricing, as the price of the product was not estimated compared to competing products and the added value that it provides, releasing the product in market in a wrong way, the wrong design of the product because it was user un-friendly, and customers’ feedback have not been followed up and product development not followed so that it overrides its issues.
The previous research and many other researches about the reasons of failure of startups and entrepreneurs also indicate that customers have not been studied by the company’s founders, and lack of information about competitors and competing products , in addition to absence of product development in a way that can gain customer satisfaction and achieve competitiveness in the market, they are the main reasons why companies are gradually fail until they reach the stage of collapse and closure.
An example of that was EXEC company, according to Startup Graveyard website EXEC provided cleaning services requested online but the company has suffered from many problems and closed by its founders after facing huge loss due to lack of experience in the field, In addition to the obstacles of getting customers because of the lack of design service that meet their needs, this resulted in the company diversifying its services, where quality has not been concentrated in one service and waste their efforts in several services and what made the problem bigger was the neglecting Follow up of customer satisfaction and feedback, so the company did not notice its mistakes in time.
What is the relationship between the investment research and the feasibility study?
Most companies carry out brief feasibility studies focusing only on financial and technical details, and don’t focus on product design, customer behavior analysis, and study the competitors in the market, this is because some countries do not grant licenses to the companies without conducting feasibility study and that what make it a formal procedure to fulfill the governmental conditions which makes companies fall into a lot of issues because the feasibility study is not correct and most of these issues result from leniency in things that could be more than important to the company’s success. One of the mistakes that companies make is underestimating the importance of investment research which can reduce the waste of the seed capital and guarantee the achievement of revenue that help the company survive and guarantee its market share. Moreover, the important role that investment research plays is increasing the accuracy of the feasibility study by providing information about the customer behavior and the competitor that affects in expecting the costs, revenue and financial analysis, in addition to marketing plan and activities, Thus it can be said that the establishment of a company without relying on studying the market is one of the biggest reasons for its failure.
What are the steps to implement the investment research?
An investment research can be defined as one of the methodologies of market researches, it is devoted to being a market research for the establishment of the company and considered as a provider of information that required to complete the feasibility study, to obtain an effective investment research, It should be implemented in four steps:
which comes in the first steps of the investment research in order to test the correctness of the idea of the business that we want to establish. The idea validation contains three sections which is the availability of internal capabilities for project success, this means the seed capital, the expertise that can increase the business’s chances of success, and the expertise required to complete business requirements and the possibility of finding them. this is followed by testing the market environment related to business field, the most important thing that related to that is the competition environment and suppliers, customers, and the ability to enter new competitors. In the end comes the evaluation of the economic environment in the country, such as labor regulations, economic stability, available technology, energy and everything related to environmental affairs affected by this type of work.
before starting the detailed market research, many questions must be answered that helps in define the company’s scope of work and market research, including: does the company have to sell in the local market or export other countries? Which countries it have opportunity in? or which local territories? Which customer segments are recommended to target? What are product attributes that make it competitive (in terms of quality, product shape and size…)? What are the products that are in high demand recently?. Usually the data of the white paper data are collected from secondary data (Previous researches, government and customs sources), it collects information about the last three years. It can be said that the goal of the white paper is to search for any gaps in the market and use them as a market entry from which the company can benefit in order to competition and acquisition of its market share.
its main goal is to provide all the information that necessary to build the feasibility study and to establish a company in the right way. One of the most important information that provides is product description and the best way to release it to suit the needs of the market and the customers, or if it is a service, it should be designed in a way that meets the customer’s need as well as studying the competitiveness in market and all the details of competing products or services and alternative products, in addition to information regarding the appropriate marketing ways and sales channels, furthermore all information related to the legal conditions for establishing the company, and all the costs required for financial analysis in the feasibility study. The information provided by the market research should be as detailed as possible because any neglect of important details may be reflected for example on a product’s failure to compete, or on costs that were not taken into account. The market research is usually based on primary data that are collected directly through interviews with potential customers and consulting experts…
The feasibility study covers four main topics: legal study, technical study, marketing study and financial study.
What should I keep in mind when implement an investment research?
It is necessary to pay attention to the fact that the investment research is a cumulative process, so it doesn’t take place once and ends, as we have noted in the steps of the investment research as a sequential process that helps build accumulated knowledge on how to ensure the success of our business, in addition to this, the importance of having flexibility in work during the establishment stage, including that the results of the investment research are not considered conclusive, are rather tested and modified according to the results that we obtain during the testing process. In other words, to ensure the success of the business and the investment research, it is advised to continue during the first years of the life of the company, especially in the first two years, that the products and services of the company be released in the market within limited segments of the customers and read the reactions and feedback, in addition to searching for issues that customers suffer from and turning them into opportunities by developing products to solve these issues, and trying to discover customers problems with competitors to try to take advantage of them to increase the market share of the company . All these details mean that we should not limit the investment research to the stage before the company launching, but rather we must continue to read the market and develop the business model.
INDICATORS Company: https://indicators.company/en/
Startup Graveyard: http://startupgraveyard.io/
Small business trends: https://smallbiztrends.com/2019/03/startup-statistics-small-business.html