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When you are considering doing business in Silicon Valley, you are doing your research to make sure that you aren’t going to be one of the failures. Even though failures are becoming more accepted these days, the truth is that having a venture that fails is not something you want to seek after, even for the experience. Google’s venture capital arms tell us that business owners who had a first business that did well have a 29% success rate over business owners that had a failure who have a 16% success rate.
With that said, if you know the top reasons people fail, it is going to be much easier for you to have success. In this article, we are going to talk about four common reasons Silicon Valley business ventures fail.
1. The Competition Gets You
Even though we have cute sayings like, “stay in your lane” and “don’t worry about the competition,” it is a very real problem when you are facing competition that can take you out. While you do not want to rubberneck and cause yourself to fall, there is some good in taking a look at what they are doing and seeing how you can learn from it.
Just like the football players study the reel and see how their competition’s defense and offense are set up, you should set aside some time to study your competition’s strategy. You may find that you are doing what is necessary to win or you may find that you need to change up your strategy so you can get the gold.
There are many reasons that your competition might outdo you from the ease of use, price to connections. Make sure you are up to par in each category in your business so you can deliver a great product quickly that is easy to use.
2. Improper Team
If you fail to compile the right team, the business has already failed. If everyone likes working in the same areas, nothing is going to get done, or if the business owners neglect one area because no one wants to take care of it, you are going to have problems.
Many new businesses forget to take care of their human resources to ensure that they keep employees and are compliant with the local laws. Adding to the team doesn’t always mean hiring new employees. In the case of HR, you might look into PEO companies in California to see if you want to bring them onto your team. Technically, you are outsourcing, and the PEO company is not your employee, but they are still part of your team.
When you work with a PEO company, you are entering into co-employment with the PEO company for any employees that you bring on through the company. Having a co-employment relationship with the PEO company means that you are going to have shared responsibility for the employees and that you will not have sole control.
3. Lack of Capital
If you do not have enough cash, your business will come to a screeching halt. You will not be able to keep the lights on, and your business will fail. Many business owners overextend themselves and do not understand how to work with the cash that they have properly. Having a CFO that knows what they are doing and when to say yes and no is important. If you are spending your cash too freely, it is likely that your business is going to suffer and it is likely to become cash poor quickly. Even if you have business coming in if you do not have cash because you fail to invoice fully or partially at the beginning of the process, you are likely to go broke.
4. No Market Demand
No matter how great you think your idea is if there is no market demand, you are not going anywhere. While you may have a cool new piece of tech, it needs to solve a problem that people care about or give into a strong desire that they have. Simply being an interesting product or service is not going to allow you to get the results that you want.
Your interest in the problem doesn’t pay the bills. There needs to be a market out there that is ready to drop some cash to solve their problem. Without a need, there is no money and without money, there is no way to run a business.
Conclusion
When you are setting up your business, you need to make sure that you have everything in place properly. When you are doing business in California, there are many laws that you are going to have to comply with and these change from time to time. The ever-changing law means that you need to pay attention to these changes and make sure that you know how to comply with them.
Many companies run into challenges with penalties and fees due to a lack of understanding and compliance with the laws of California. If you do not have a team that understands how to work with these laws to stay in compliance, you could be endangering your business and its ability to continue functioning in California.
If you aren’t sure how to move forward with your business, you may want to work with a PEO to help you stay compliant and on track in California.
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This content is sponsored by Gary J Wilkinson.
Photo by Studio Republic on Unsplash