5 Reasons why your French business might fail

By Valérie Aston on 28 September 2011 · Viewed 5763 times · Questions

I’ve worked with hundreds of French and English entrepreneurs over the years, helping them set up, develop and market their business. What strikes me is that some entrepreneurs have had to close their business in the very same year they launched. Yes the economic climate is can be tough, but in my experience this was rarely the cause of the business to fail.

In many cases the failure is linked to one or more of the following 5 reasons:

  1. Lack of, or poor market research
  2. Stock related issues
  3. Lack of investments and under funding
  4. Marketing plan with no, or an unrealistic budget
  5. Lack of support

1. Lack of, or poor market research

A gut feeling or a passion may be a good start to find a business niche or idea, but you will have to take off the tinted glasses and search for the facts. What is the market trend in this sector in France, are there any regulations, who are your competitors, get to know their products and price range, what is the average order, are there any influencers in your market. Do your online research, then go and meet a business advisor with your local Chambre de Metiers, Chambre du Commerce or BGE (former Boutique de Gestion). Also meet a couple of accountants, as you will get some useful insight on your local market. Chances are they will know more about your competitors.

2. Stock related issue

This issue is recurring for shops and online shops. Getting your stock level right from the first order is extremely hard. Suppliers tend to over sell to you and since you are starting your business, you may be tempted to follow their advice. You may therefore end up with products that your customers are not all that interested in: wrong brand, price range, etc. This often triggers more problems as your cash is stuck in unsold stock, making it hard for you to order the right products, hence being in a vicious circle. My advice is to plan for the same level of stock, but to purchase it in 2 separate orders, to enable you to adjust to your customers’ real needs (2/3 then 1/3).

Another stock related issue is the underinvestment in stock: an empty shop or online shop will quickly give a poor image to your customers, especially as items can quickly become out of stock. I often have entrepreneurs telling me that they’re going to invest in a small stock, then re-invest the benefits in a larger stock. If you get your stock wrong and have hardly any sales, there will be not benefit to reinvest.

3. Lack of investments and underfunding

Many expatriates I work with chose to self finance their project, compared to French entrepreneurs who would systematically request a bank loan. This maybe by choice or simply because they think that French banks would not finance them. Whatever the reason, you still have to make a financial plan to assess how much money is required to launch your business and run it for a full year. Include investments for equipment, building works, signage, car/van, shop decoration and set up, PC and software, business-notaire-accountant set up costs, stocks and enough cash flow to face the unexpected (at least 3 months expenses without making any sales).

4. Marketing plan with no, or an unrealistic budget

Planning your business development on word of mouth never works, unless you are ready to wait for 7 months with hardly any sales! Define your sales and marketing strategy based on your market research.

Create your marketing tools (logo, business cards, flyers, website, Facebook page), then establish marketing campaigns for the first 6 to 12 months (flyers distribution, cold calling, emailing, advertising, Google or Facebook ads, etc). Get quotes and allocate a specific budget, then measure the return on investment to limit your investments in year 2 on the most efficient tools.

I am often suprised by entrepreneurs investing large amounts in stock and websites, while investing pocket money on marketing! Having a top of the range e-commerce site without investing any money to drive traffic to it, is similar to opening a sweet shop in the middle of the woods... who is going to find it?

5. Lack of support

Your first year in business will be scary and by no means a walk in the park. It is stressful, you will invest many hours for a small return and you might find yourself isolated if working from home. This means that you will need a strong support around you - family, friends or ex-colleague.

Valerie Lemiere: Start Business in France

About the author: Valérie Aston

I've been helping people who want to start or already have a small business set up in France since 2009. After graduating from a Master of Business Administration (MBA) degree, I worked as a senior marketing consultant in the UK and France for various International companies. I worked as a conseillère en création d'entreprises (senior business advisor) for BGE here in France and run this independent business on a daily basis.