Did you know that around half of small businesses fail within the first five years? It’s not easy to build a business that can stand the test of time, and sadly, many businesses fall short. There are many reasons why a business might fail, from jumping into decisions too quickly to being completely overwhelmed and unprepared. Here are some of the top reasons for failure and how to remedy them.
Poor Management
If you have no experience of making important decisions or leading other members of staff, being a business manager could be a huge learning curve for you. Sadly, many managers don’t take the opportunity to learn before jumping into the business, believing they’ll slide naturally into the role.
When leadership problems arise, they tend to spread throughout the whole business. It’s important for a manager to learn skills in leadership, managing employees and good communication. Why not find someone you admire in the industry and ask them to mentor you before you get started?
Lack of Knowledge
It’s true that there a lot of businessmen and women who have seen success and are self-taught. However, those cases are rare, so it’s important for every business owner to have as much knowledge about the industry and their business niche as possible. Starting a small business without the knowledge you require to push it forward will only lead to failure.
You may find out something you don’t like about the industry which could change your mind entirely on the type of business you want to run. Do your research thoroughly and study the market continuously. You need to know where your business can fit in and what you have to offer.
Lack of Communication with Customers
You shouldn’t have to be told that your customers are the most important aspect of your business. Without a solid marketing campaign, your customers will feel stranded. It’s also important to welcome and listen to customer feedback. If your customers feel like they’re being ignored, what’s to stop them from using your competitor instead?
Connecting with your customers on a regular basis will ensure your business stays fresh in their memory. Show your customers that you know what’s trending in the industry and you’re willing to be innovative. One social media post per day just isn’t enough. Try using Buffer to time your posts so you don’t have to spend all of your time worrying about social media content.
No Business Plan
There’s no such thing as winging it in business. You need to have a clear vision of where you’re going and where you want to be. Businesses that don’t set goals are destined for failure. If there are no goals, there’s nothing to work towards. Think about where you want the business to be in five years.
What do you want to achieve? You may have an idea of where you’d like to be, but how do you plan on implementing it? It’s also important to develop a financial forecast. How much do you plan to make this year and next year? Setting targets is paramount to a successful business.
Financial Planning
Many people who start a business aren’t fully aware of the costs of keeping it running. At least 50% of the first years’ profits (if there are any) will need to be reinvested in the business. This often means that the business owner’s income is a lot less than imagined by most. Many businesses fail because the owner can’t afford to live on the profits being made.
If you’re not skilled in managing cash flow, you may find that keeping a business above the water is difficult. You need to know where every penny is coming from and where it’s going. The best way to avoid financial difficulties is to plan to use a professional accountant from the very start. Although it’s an extra expense for the business, it’s the best way of making sure you’re managing your finances well.
Quick Expansion
You may find that your business takes off really quickly and there’s high demand for your products and services. The problem is, many small businesses aren’t equipped for quick expansion. Many people make the mistake of biting off more than they can chew and inevitably let customers down by providing poor quality or not delivering at all. It’s important to know what you can and cannot handle. It’s okay to say no if you know it could lead to failure.
Getting a business off the ground isn’t easy, so be as prepared as you possibly can be.
