Seeing your business flourish within the very first year of the launch feels like all your Christmases have come at once. Isn’t it! But expecting it this much soon can leave you disappointed. Not every company can go platinum overnight like Uber and Facebook! Most startups take at least 2 to 3 years (and sometimes years) to be profitable and become truly successful after hitting the 7 to 10-year mark. Studies reveal the heart-breaking fact that two-thirds of start-ups never show a positive return. The Business Employment Dynamics report coming from the Bureau of Labour reveals that 20% of new businesses fail until the end of the 1st year, 30% fail during the 2nd year, 50% fail by the 5th year and 70% fail before their 10th year ends. But interest in entrepreneurship is at an all-time high. After all, who won’t want to be on easy streets!
Understand startup: A twist in an old story!
You might skip this section because, like many, you think that you already know what a startup is. But let us tell you, a startup is not just any new business in its earliest stages of development. You can’t call a newly opened regular beauty salon a startup but a “beauty salon on wheels” or a salon offering 100% organic & herbal beauty solutions. A startup rather is a young company launched to develop a unique product or service, bring it to market and make it irresistible and irreplaceable for customers. Rooted in innovation, a startup is zeroed on remedying deficiencies of existing products or producing altogether new categories of goods and services, disrupting ingrained ways of thinking and doing business for entire industries. That’s why many startups are infamous within their respective industries as “disruptors.” You might be acquainted with startups in Big Tech—think Facebook, Amazon, Apple, Netflix, Google, collectively known as FAANG stocks—but even companies like WeWork, Peloton and Beyond Meat are regarded as startups. A startup usually has two important attributes:
- Innovation: A startup is a way of testing never-before-tested assumptions – sufficiently new technologies, products & services, or markets
- Growth: A startup holds the possibility to expand exponentially rather than linearly. It is scalable. This usually happens because technology provides leverage (usually, a marginal cost of production close to 0)
So, a startup is in essence a “business experiment with potential”. This means that real startups are predisposed to failure by its very nature. The assumptions they are testing are very likely to be wrong. The more innovative the startup, the riskier the assumptions it’s testing, and the higher the chances of its failure. When you put this new kind of risk on top of the conventional risks of starting a company (finance/cash flow risks, operational risks, team risks, marketing risks, etc.), it’s no surprise most startups fail.
Failure means what?
Failure for a company means it’s time to pack up! It usually happens when a company can’t keep its head above water anymore and has to shut down its operations. Closing a business prematurely is just the tip of the iceberg! The owner has to deal with tons of things from collecting on outstanding accounts and applying those payments to any outstanding debts, to liquidating assets to pay debts further and then start paying back any and all investors who contributed money to the startup. Adam Global can help you cop it sweet. Shutting down a company demands huge care and diligence. Dissolving the business is only one part; they must comprehend their legal obligations and those of their company and its stakeholders. For a successful company closure, they have to generate as much value from their assets and work with a lawyer to prioritise disbursements (employees always come first). Plus, they are required to take care of tax and regulatory filings and terminate contracts. A startup is sure to fail where:
- The break-even is never concerned
- The business is dependent on the next investment round for survival
- The business talks of jargons like MVP, net sales than simple terms like profits
- The partners never miss a moment to agree to disagree with each other
- The salaries and expenses are being traded by founders for equity very frequently
- The customers have a hard time understanding the product/service, and founders don’t care
- The founders are diluting their stake in a heavily funded startup and using the money to fund other startups (why do they do that?)
- The hiring and firing happen without any plan
- The company makes stupid acquisitions in the name of growth
- The startup keeps quick sales on a pedestal by forking out money on unnecessary ad campaigns (eCommerce businesses in developing countries can be seen as a common example)
And the 1% success rate is for those who survive the drill and talk break-even and profits.
Causes of small business failure
Bringing someone round is a piece of cake for Dubai, the UAE’s evergreen startup hub, to start a company on its land full of opportunities! But it’s not just the intelligent infrastructure, business-friendly climate, tax-haven status and beguiling sky-scraping structures, Dubai features, that makes you a successful business person. Then what is it? Why do some startups succeed and most fail? The reasons behind startup flameouts can be anything – from financial fraud, lack of funds, bad timing, bad partnership, poor management, not-up-to-the-mark employees, unexpected changes in market conditions, government debt, flawed business plan and business cycles to several out-of-control factors such as recessions, wars, natural disasters, inflation and pandemics. Lack of research, financial mismanagement, poor marketing practices, not keeping abreast of customer needs or the competition, failing to adapt and growing too quickly are some of the major culprits to blame for a startup failure. In addition, many entrepreneurs enter the market with a terrific idea but fail to execute it properly. Ways to avoid failing include setting goals, accurate research, loving the work, and not quitting.
How Do Startups Succeed?
Investing in a startup is like playing a lottery. You hit the ball out of the park only if all the stars align, otherwise it’s no less than a mug’s game. For a startup to blossom, some vital questions must be answered, such as:
- Are the founders and their team obsessively passionate about the idea?
- Are they ready to weather any storms aiming to damage their enterprise?
- Do they have field expertise?
- Are they willing to devote extra time?
- Why this idea and why now? Is this a new idea, and if so, why haven’t people tried it before? If it isn’t, what makes the startup’s team uniquely able to crack the code?
- How big is the market?
If a startup has meaningful answers to these questions, it may stand a shot at becoming part of the 10% of early-stage companies to survive and thrive.
How can an entrepreneur ensure success in Dubai?
The world can see how Dubai is turning into a smart city “test bed” for entrepreneurs worldwide! A startup’s likelihood of success enhances if the company can stay in business long enough for the customers to try out their products and finally incorporate them into their lives. Company formation in Dubai can be done effortlessly with the help of company setup specialists in Dubai likeAdam Global. But remember, starting a business in Dubai could be an easy feat but running it successfully is definitely not! As a fresh entrant into the industry, you have to understand and deal with myriad issues — legal, financing, sales and marketing, intellectual property protection, liability protection, human resources, and the list goes on. And the worst part is, there is always a possibility of Keeping these 10 simple tips in mind, startup founders can survive and thrive in Dubai, UAE.
Choose the location of your business wisely
The primary reason why Dubai is the most preferred location for entrepreneurial ventures is because of the niceties given to startups. And one of them is the availability of free zones in abundance. As you know, it’s the location of your business that can make or break it, pick a site for your company that’s in line with your products and service requirements. Decide between the mainland and free zone, taking the advantages and disadvantages of each jurisdiction into account. Do not fall for the free zone just to evade the taxes and duties or mainland just because setting up a mainland company is easier and quicker than a free zone company setup. Take your decision from a long-term perspective instead of falling prey to short-term benefits. Remember that a good location decision stays with you forever, beating the path for your customers and investors to you and for you to success.
Conduct adequate market research before the launch
Lack of market research or feasibility study is the biggest startup killer. You must know whether the product or service you are going to launch is required. And one way to figure this out is by performing market research. Do not forget that you are new to the industry, and the lack of experience and know-how required to run a successful business can lead to poor decisions. A feasibility study done on the major decisions being taken in the company can mitigate the risks. This would include exhaustive market and audience research along with competitor analyses to ensure you’re taking the right route.
Embrace a forward-thinking attitude
Your business plan is the blueprint of your entrepreneurial journey, so draw it with a vision in mind. Even if you’ve already embarked on your journey, you can still look forward. You have to determine the outcomes you want for your firm and the growth path you want the company to be on in the coming months and years. You may include the below-mentioned elements in your vision for better decision-making:
- Your mission statement
- Your offerings
- Your product niche
- Ways to find prospects
- Marketing/promotional strategies
- Issues you will address
- Ways to stand out in the crowd of competitors
No rule of thumb! The list can be as long or as short as you want it to be. The important thing is to make it workable and achievable.
Oversee cash flow expeditiously
You need to stay flush to be able to run a business, big or small. It’s the consistent flow of cash that keeps your business hydrated. The moment the flow stops, you won’t be able to pay off the day-to-day expenses incurred and your business will ultimately dry up and die. You have to agree with the fact that it takes years of experience for an entrepreneur to understand how to manage cash flow well. But by adopting these practical ideas, you can efficiently manage your cash flow:
- Build cash up in thick times, so you can use it in thin times
- Make a budget and adhere to it
- Monitor your cash to debt ratios to ensure financial stability
- Be heedful of your business personality
- Initiate lean, employ believers, and focus on growth
- Maintain your marketing budget and put on your creative hats
- Know your numbers
- Knuckle down to make money but don’t forget to manage it
- Get insight into your financial future with cash flow forecasting
- Send out invoices on time
- Take deposit payments in advance
- Pay bills on time
- Promptly follow up with customers who fall behind on payments
- Stay calm in bad times to be able to take sane decisions
Be financially ready for unpleasant surprises
The future is unpredictable, and the world can throw surprises on you when you least expect it. Just like it did in 2020! When a crisis happens, it affects a startup the most. Your startup must be ready to deal with any sort of emergencies and other contingencies. And cash reserve is the answer! Hope for the best and prepare for the worst by planning in advance. Here are some tricks to get prepared for market downturns, potential paradigm shifts and other such uninvited crises:
- First and foremost, develop a habit of saving. Put 10% of every buck you earn into savings. If you’ve done this for 10-20 years, you’d have no cash flow crises. No excuses — eat the frog! (You may thank us later!)
- Have a good relationship with your bank
- Apply for an overdraft in your heyday (banks love you when you are loaded!) to keep an emergency fund on hand only for rainy days
Tell the world your success stories
Wondering if you have any? Yes, you do. Your loyal customers are your success stories, even if they are just a handful. Any which way, it’s your 20% of customers that bring 80% of the business. Keep your customer on a pedestal and make it visible by hiring employees or crew members who possess a good attitude, have an interest in the customer, and are enthusiastic to meet their needs. Take the customer experience seriously. Share their case studies, regard their points of view and acknowledge their feedback (whether good or bad) positively. Taking them into account while framing business strategies, planning a marketing campaign and developing new products can make you a startup hero in a matter of a year or two. Look after your existing customers, and do not shy away from investing time and money in creating the best customer service experience to write more success stories.
Step up the marketing game
Marketing is the soul of your business, keeping it alive in the hearts of customers and investors. But at the same, it is a money-eating monster. But the good news is that there are a number of inexpensive ways to market your small business without breaking the bank. What’s important is you gauge and measure the results to avoid frittering valuable funds. In the simplest terms, your marketing budget should be a percentage of your revenue. A general rule of thumb says a B2B company should spend 2-5% of its revenue and a B2C company 5-10% of its revenue on marketing. Whether you are a newbie or a mature company, you need strong marketing strategies to keep your business in fine fettle. The statement will make sense if you have seen the movie “The Intern”. Play your USP card to stand out in the niche you are targeting! A thriving small business requires a stable stream of sales and customers – and for that, you need a marketing plan. But do not forget to keep reviewing the marketing plan whether it’s working and if it is not, do not hesitate to revise it. Also, you also have to strike a balance between ‘traditional’ offline marketing activities and digital marketing.
Understand your competition
Be it a business or battle, a competitor should never be underestimated. Knowing what your competitors are doing is a meaningful part of running a successful business. Who knows they are keeping a close watch on you to keep you from stealing their market share. Competition is healthy for businesses – as it can tip you off to new threats and opportunities and force you to innovate, staying ahead of the curve. Studying the marketplace is the key to comprehending your competition. First, take a hard look at the things your competitor does. Are your competitors introducing new products, opening new divisions or expanding into new markets? Have they revamped their website or tossed a new ad campaign? What kind of blogs they are posting on social media? Are they hiring employees or laying people off? And so on. Second, look to see what your competitor doesn’t do, and then try to fill in that part of the market. Social media is a great help in spying on your competitors. Some other popular tools to take a peek at your competitors include Hoover’s, setting Google alerts and Phlanx.
Keep a beady eye on the surroundings
You can’t run a business wearing blinders. When you are in business, you have to stay up-to-date on what’s going on in the environment around you. Keeping abreast of market conditions, the latest developments in the industry, changes in the rules and regulations and anything that directly or indirectly can impact your teeny-tiny business, for instance, the recent amendment in the UAE Commercial Company Law (think corporate tax!) and other laws (such as New Labour Laws). You must constantly watch the internal factors as well to be able to identify opportunities and pinpoint the threats. This practice will help you develop an effective strategy to mitigate menaces and capitalize on possibilities. This eventually leads to adaptability, which is one of the most important attributes a startup in Dubai must have to ensure long-term survival.
Engage an experienced business advisor when required
Your business is a newborn, it needs you day and night! And top of that, you are new too. You might require expert advice every now and then to run your one-and-only startup efficiently. If you have recently launched your startup, you have to prepare for the upcoming corporate tax. Plus, there are numerous other things that you have to deal with when your business is brand-new and still struggling to make an identity in the market. You keep hearing that about 70% of businesses fail within a decade of their establishment, so you can’t take this statement lightly! Company failure seems no less than a nightmare to the founder. And an expert business consultant in Dubaiby your side can help you not just establish your business successfully, but also run it like a seasoned business person while keeping you from expensive mistakes.
Get in touch with our qualified Dubai business advisors at Adam Global to know how can we help you in taking your business to the next level. Your first consultation with our business specialist in Dubai comes at no charge.