5 reasons businesses fail … and how to avoid it
Too often we hear of businesses going bankrupt and start-ups closing their doors because times are tough. Over 50 per cent of small businesses fail in the first year and 95 per cent fail within the first five years. But why is that? And more importantly what can you do to avoid this happening to you?
Fail 1 not enough emphasis on the customer
Your customers are the lifeblood of your business. Simply flogging a product or service and not taking the time to evaluate your customer’s wants and needs will lead to failure. As a business owner you have to stay focused on what your customers are saying and asking for. Are you on top of market trends? Are you watching your competitors? Are you keeping up with technology and using it to your advantage? If you haven’t done this, then make this a priority. Customers = business.
Fail 2 lack of leadership from the top
As a business owner, you are the CEO of your ship. You need to be able to direct it in the right direction. However we are not all born leaders and you may need help in the form of a management team or board of directors to properly guide the business. If you have staff , then you need to be able to share your vision so they are committed to your cause. Every great business has a great leader at the helm, they rose to the occasion and were able to get the right support behind them to make their vision a reality. One of the reasons a business will fail early on is because of a lack of focus and direction and poor leadership from the business owner/CEO and resulting management team.
As a business owner you have to stay focused on what your customers are saying and asking for. Are you on top of market trends? Are you watching your competitors?
Fail 3 lack of innovation and differentiation
Quite often the challenge in business is to constantly innovate and differentiate your business, products and services from your competitors so it stands out. With the advent of technology, social media and intense online competition, the need to innovate, stay sharp, focused and ahead of the curve, has never been more important. Failing to recognise where the market is heading and being prepared to innovate to stay ahead of the times has seen mighty companies go out of business. We live in a rapidly changing environment and as an astute business owner you have to be nimble to move with the market, make the tough calls and stay ahead of the trends, or risk being the dinosaur in your industry!
Fail 4 lack of business planning and strategy
Most business owners run their business with a day-to-day survival mentality. It’s not uncommon to find that the majority of business owners have no idea what their level of cash-flow and profitability is and are living off dangerously high levels of debt and credit, with no proper planning on how to grow, scale, leverage and become more profitable. The average business owner does not have a business plan. To make it worse, they are not getting any meaningful advice on how to manage their business. Failing to plan is planning to fail. Make sure you seek the advice of a mentor or coach, so that you can obtain sound strategic advice on how to manage and grow your business.
Fail 5 poor financial management
The vast majority of business owners have a very weak understanding of how to manage the financials of a business. Quite often there is a lack of understanding between managing cash flow and profit. SmallBizTrends.com states that 40 per cent of small businesses make a profit, 30 per cent come out even, and the remaining 30 per cent lose money. In order to have a successful and thriving business, you as the business owner must be able to account for every last dollar. Not taking your financials seriously could be costing you thousands. If managing the financials, including tax, GST, payment terms, accounts receivable and payables, is not a strong point of yours, then get a professional to help.