The failure rate for startup businesses in the U.S. is roughly 80 percent according to a recent Bloomberg report. As a consultant and former employee for fashion and lifestyle businesses — brands, boutiques, fitness studios, restaurants, online marketplaces — I can point to frequent missteps that lead to business failure.
In this post, I’ll list 15 common mistakes of small and large companies, in my experience.
Mistakes of Smaller Companies
Not having a target customer. It is one of the most common mistakes of small merchants. They source what they like and hope that consumers will buy it. There are two ways to identify a target customer. The first is to find products you want to sell and figure out how to reach buyers. The second is identifying whom you want to sell to and then sourcing the product mix.
Not adding unique products to your product lines. Competing with Amazon and large retailers is a fast way to go out of business. Carrying unique products is a proven strategy to sustain a business. Amazon can kill profits and make shipping costs unsustainable. But you can command the price with a one-of-a-kind product. Shoppers will pay for shipping when they want something that only your business has.
Overstocking inventory. Spending money on marketing and then running out of inventory is a risk. However, that is much better than having excess inventory that you cannot sell. The key is maintaining a balance. Always test if products will sell and then stock them as necessary.
Not having new products. Consumers look for new items. Having fresh products regularly should be a primary retention strategy. If you are in the inexpensive fashion business, the number of new arrivals should be significant. If your product mix is more expensive, the number of new arrivals can be lower.
Making competitive products on demand. Manufacturing on demand can work well if your products are unique and customers are willing to wait. However, creating something on demand that your competitors have in stock and can ship the same day is a lousy way to build your brand name and make a profit.
Small margins. Making money is the primary purpose of any business. So, the pricing strategy for your products should have room for overhead, shipping, packaging, promotions, and profit.
Lack of marketing. A business has an established audience (which it must grow continually) or it must attract one. Both take money. Tiny budgets or word-of-mouth marketing can work can a side business, but not a real one.
Outsourcing marketing. Be wary of “SEO experts,” “marketing gurus,” and “brand strategists.” Inexperienced and desperate business owners often hire the wrong vendors — wasting money and lose consumers’ trust.
Working with wrong influencers. Influencer marketing is one of the most effective ways to appear in front of potential customers. However, before signing an influencer’s contract, make sure her followers are active and are your target audience.
Hiring friends and family. The proper talent is critical to success. Employees and vendors should have knowledge and experience specific to your business. If your employees are not helping, you should replace them quickly. This is often difficult when it involves friends and family.
Mistakes of Larger Companies
Management has a manufacturers’ mentality. This mistake is mostly applicable to businesses who have been manufacturing for years and then decide to offer products directory to consumers via the internet. In a manufacturing business, a company receives orders and then makes products. In online retailing, it’s the opposite. A company has to spend money on marketing campaigns and then (hopefully) receive orders. For manufacturers, that process can seem like gambling.
Hiring talent with the wrong attitude. Employees often spend more time at their workplace than they do at home. To succeed, a company’s culture and work environment should be positive. Anger, jealousy, and backstabbing have killed many businesses in the fashion industry. You can train working skills, but not personalities.
Not allocating enough budget for marketing campaigns. Salaries are a part of a marketing budget. Quite often, executives decide that salaries are enough and they avoid investing in marketing campaigns.
Poor supervision. While micromanagement is not advisable, closely monitoring significant operations is a must. I’ve seen a large fashion company go out of business in three months because the company lost a primary customer and the owner was unaware.
Too many meetings. I once worked with a lifestyle company where employees marched from meeting to meeting and then, at the end of the day, had just a couple of hours to do their job. Teams need to communicate. But keeping meetings to a minimum is always best.