The 7 Things That Can Kill Your Online Business (and How to Prevent Them)

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The 7 Things That Can Kill Your Online Business (and How to Prevent Them)

Today’s prospective entrepreneur has more resources than ever before. Even with minimal previous experience, it’s possible to thoroughly research your business idea, draw up a business plan, and even launch a website—all from the comfort of your home.

The ease of starting a business in the modern era isn’t a ticket to unlimited profitability, however. The failure rate for startups is still relatively high; 50 percent of small businesses fail within the first 5 years of operation.

Why is it that so many online businesses fail, and what can you do to prevent those root causes from manifesting?

The Biggest Threats to Your Online Business

These are some of the biggest threats to your online business:

1. Shipping costs.

If you’re selling tangible products, either as a producer or a reseller, shipping is going to be one of your biggest factors for success. Not only does shipping cost a significant chunk of money, but it also takes time to manage all your outbound shipments. Automating your shipping process with an online service, and reducing your shipping costs is a good first step to avoid succumbing to this potential problem. However, you’ll need to keep a close eye on your rates over time and make sure you keep your profit margins in reasonable territory.

2. Competition.

No matter how good your business is, there’s a chance someone could do what you’re doing, but better. All it takes is one similar business to offer products like yours with a higher quality, a wider variety, or lower costs, and your customers may be all but forced to switch. The best way to manage this threat is to be proactive; learn more about the competitors that currently control the market, and find a way to differentiate yourself from them. You don’t need to offer the lowest price or the best product, necessarily, but you should have something that makes you different.

3. Cash flow management.

Cash flow is one of the biggest killers of small businesses. Essentially, cash flow refers to the amount of free capital your business has access to; cash flow management requires you to keep track of all your outgoing expenses, including when and how you make payments, as well as all the income you’re actually bringing in. Note that this isn’t related to your profitability, necessarily; it’s possible to be profitable on paper while still being cash flow negative. Again, the best route here is to be proactive; designate someone responsible for keeping an eye on your cash flow, and take action if it’s ever in jeopardy.

4. Customer dissatisfaction.

Customer retention is both cheaper and more important than customer acquisition. If your customers are dissatisfied with your products or your customer service, they won’t come back, and worse, they may tell others about their experience, preventing them from doing business with you. Always go the extra mile to ensure your customers are happy.

5. Overhead.

Overhead isn’t as big of a problem for online businesses as it is for others, since you probably won’t owe rent or similar ongoing expenses. However, you may still be forced to pay employee salaries, subscription costs, and more. If you don’t carefully control these costs, they can compromise an otherwise valuable profit margin, and prevent your business from making money.

6. Supplier problems.

One supplier problem can completely compromise your business’s operations. If they no longer provide a specific part or ingredient at a cost that’s within your limitations, you may be forced to lower your profit margins or stop offering a certain product. If your supplier provides a faulty or problematic product to your customers, it could reflect poorly on your business. Vet your supplier candidates carefully, and work proactively to keep your supplier relationships healthy and as high-quality as possible.

7. Talent, employees, and support.

In the early stages of growth, you may be able to manage your business as a solitary venture, but as you grow, you’ll increasingly rely on the talent, experience, and support of the people around you. If your employees are inexperienced or inattentive to detail, they could botch your well-considered processes, or lead to poor customer experiences. Again, vet your candidates carefully, and implement a consistent supervisory process.

Learning Through Experience

Don’t be discouraged if your first online business fails, or if you encounter hardships in the process of taking your online business from idea to reality. The world of entrepreneurship is tough, and while it’s possible to read up on all the best strategies and biggest challenges, the best way to learn is still through personal experience. Keep learning from your mistakes, adapting your approach to new pieces of information, and pushing for success.

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John is a serial entrepreneur and writer who is passionate about helping small businesses launch and grow. His work has been featured in Huffington Post, Entrepreneur, and Forbes.