Whenever we ask this question we always get the statistics like how 58% of businesses fail their first year and how of the remaining businesses only a certain percentage will survive the second year, and so on. When we ask WHY? Often of the time we just get a vague answer like “that’s just how it works” or “they just do”. The answer is actually quite simple: lack of knowledge on how to run a business. Here are the top five reasons on why businesses fail and how to make sure yours don’t.
- Poor Marketing
I’ve seen it happen too many times, a small shop opens and find them hardly selling anything. Sure, they might have the signage in front of their shop; they might even be giving out flyers and still not getting anything sold. Marketing transcends fliers, sign boards, and newspaper ads; Marketing is selling the idea that people need your product or services; getting the trust of the public, telling them that their best interest is your best interest. From as simple as giving free samples or giving a guarantee that you will fix or replace your product if it breaks in within the guaranteed period. Marketing is essential and must always have a dedicated person or team who manages this aspect of the business learning and applying new ideas.
- Lack of business planning
Planning is essential in life, you don’t need to follow it strictly; you just need to know where you are going, a goal if you will. Some people plan their day and some plan their week, I keep a planner with me and plan my month to know where I need to be and where I might be in a later date. Businesses as a whole needs goals and plans too, allowing it to have milestones will allow it to keep growing and not stagnate.
- Insufficient Finance
If you have the money to start the business on your own I highly recommend that you do not take out a loan to start your business, but the time will come that you will need money to grow and cater to your clients. It is essential to develop a good relationship with your bank and proper financial institutions that might be able to work with you to finance new ventures and projects allowing your business to grow properly.
- No clear Objectives and Vision
Related to business planning but in a larger perspective; Your business must have an objective that you follow overall, be it simply to serve the best tacos or something as grand as to provide the cleanest energy. It is easy to get lost if you don’t have a ultimate destination.
- Management and Leadership
It is often hard to do but you can’t be a business where there is no clear leadership roles, it is important that there is order and systems that can be and will be followed in order to keep things running in clockwork. If your system works and makes you money then a huge part of your business is your system.
There are more variables that could be the cause for a business to fail, but these are the most common reasons for businesses to fail. It is essential to always keep vigilant and check if everything is functioning properly in your business. Remember it is not just your livelihood, but the jobs of everyone you employ that is on the line.
Interesting read on this topic – http://www.forbes.com/sites/ericwagner/2013/09/12/five-reasons-8-out-of-10-businesses-fail/#64f6c0f85e3c