The bad news is that 50 percent of startups fail within their first five years, according to Sangeeta Badal, co-author of Entrepreneurial StrengthsFinder. The good news is that this number has fallen 30 percent since 1977, says Case Western Reserve University professor of entrepreneurial studies Scott Shane.
Startup failure rates have been declining due to multiple factors, including smarter small business owners, more selective opportunity evaluation and better business management technology. Here are some of the strategies successful startups are using that new companies can copy.
Start With Smart Market Research
Forty-two percent of startups fail because the market doesn’t need their product, a CB Insights study of 101 failed businesses found. Successful companies use the latest market research tools to make smart decisions about which markets to enter and how to design their marketing campaigns. Today’s business intelligence and analytics tools let you study historical market data as well as project future trends. HubSpot content strategist Jami Oetting provides a survey of 14 of today’s handiest market research tools, which include Google’s Databoard, Nielsen’s MyBestSegments and American Fact Finder.
Tap Crowdfunding for Financing
When “Mystery Science Theater 3000” creator Joel Hodgson decided to revive his cult classic TV show for today’s audiences, he smartly chose not to go at it alone. Instead, he launched a Kickstarter campaign, leveraging his existing fanbase to raise $6 million in what became the most successful crowdfunding campaign of all time. Crowdfunding represents a powerful tool for startups operating on a shoestring budget to overcome the financing hurdle, one of the biggest barriers facing entrepreneurs. Twenty-nine percent of startups fail due to insufficient capital, CB Insights’ study found. Crowdfunding sites such as Kickstarter and Indiegogo are helping many startups solve this problem. Business News Daily assistant editor Nicole Fallon Taylor gives an overview of 10 other crowdfunding resources for entrepreneurs.
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Use the Cloud to Increase Productivity and Cut Costs
Cloud infrastructure and platform spending will reach $43 billion by 2018, according to a Goldman Sachs report, laying the foundation for explosive entrepreneurial growth on the cloud. By 2020, 78 percent of small businesses will be fully adapted to the cloud, Intuit projects. Small business startups are finding that the cloud increases productivity and cuts costs for applications such as data backup and storage, file hosting and sharing, web-based email and customer relationship management. Cloud solutions such as digital asset management tools also assist startups by providing worker teams with a central digital library for sharing multimedia files and documents between any devices from any location.
Outsource for Efficiency
Paying employees typically consumes the biggest chunk of a company’s budget, making outsourcing one of the most viable strategies for cash-strapped startups. Not everything can be outsourced, but experienced business management experts advise using outsourcing strategically so you can concentrate on what your company does best while leaving other routine tasks to specialists. Accounting company CEO Jessica Mah recommends that startups should consider outsourcing all non-critical business functions as soon as possible. Examples of functions that can be outsourced include administrative assistance, accounting, IT and marketing.
Leverage Inbound Marketing
Effective promotion is essential to get any startup off the ground, and the most cost-efficient publicity method for startups is inbound marketing. Content-centered inbound marketing using strategies such as social media, SEO and blogging generates 54 percent more leads than outbound strategies such as advertising and direct mail, according to HubSpot. HubSpot founder Dharmesh Shah provides a step-by-step guide to growing your startup using inbound marketing methods.
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