20% of businesses fail in their first year. 50% go belly-up by the five-year mark. And within 10 years, that number jumps to 70%.
If you’re starting a business, those are some sobering stats. But they’re also probably too general to be helpful.
Because we all know that starting a business, launching a new product, or introducing a new market category is risky. But what we need to know is why.
Why do most businesses fail before their 10-year anniversary? What is the biggest mistake they make? And, consequently, how can we learn from their untimely demises?
The answer, according to their founders, is this:
The #1 reason businesses fail is that there is no market need for their products and services.
You read that right. Almost half (42%) of businesses that fail do so because nobody wants what they’re selling. They set up their proverbial lemonade stand without ever asking “do people even like lemonade?”
On first blush, it seems like such a simple mistake. Isn’t the first step of any new business figuring out whether buyers want what we’re selling? Isn’t validating the market page one on the local chamber of commerce’s new business materials?
Apparently, the answer is no. There are lots of businesses out there that figure they can skip the market research step. Which is how the world has gotten such gems as crispy beef-flavored bottled water for pets (ummm), Pepsi meant to replace your morning coffee (to which the world said a hard no, you can pry my morning coffee from my cold, dead fingers), and the app that notifies you when your friends take a pee break (TMI, thanks).
And, okay, we chose some ridiculous-sounding examples above. But don’t think that means you can guess at market success without the research part of the process. Sometimes ridiculous-sounding ideas flop like a toddler having a tantrum. Sometimes people love them, and they skyrocket their way to success.
Just take a look at equally weird-sounding ideas like the business that lets you rent a chicken before committing to chicken farmerhood. Or so-called rage rooms where you pay a fee to smash plates against concrete walls and beat up electronics with bats. Or jewelry made out of the cremated remains of your loved ones. These ideas probably raised a few eyebrows when founders presented them. They’re also all success stories.
The point here is that guessing what will and won’t work in the market is a crapshoot. If you want to know if your business idea is going to work, you need market research. Period. End of story.
And we’re looking at you, B2B. Because for some reason, B2B companies are the first to jump ship on the research boat.
B2C generally knows they need to figure out how their customers choose a washing machine or use an app or make decisions about chicken farming. They know they can love an idea and their customers might disagree. They know that understanding consumer minds is foundational to better connect with customers, find more of them, and convince them to buy.
But B2B? We’re falling down on the job.
B2B companies are more likely to skip market research, which results in trouble attracting customers, a major mismatch between customer values and company messages, and low customer satisfaction over time. In fact, where B2C companies generally hit customer satisfaction figures somewhere between 65 – 85%, B2B usually comes in under 50%.
So, you want to start a successful company? You want to grow fast and beat out the competition?
Be more like B2C. Prioritize market research.
And if you’re ready to do that? Let’s talk.