Why Do Some Businesses Fail?
Running a business isn’t for everyone, roughly 33% of small businesses fail in the first two years and around 50% during the first five years.
The best way to make sure your business is a success is to know what the risks are and prepare for them. So, what are the reasons that businesses can fail?
Cash Flow
Selecting the wrong type of funding for your business can be the start of the path to failure. Beyond that, your business also needs savings, private equity or finance which allows capital for growth. A further concern is poor management of debtors, stock and invoicing which can cause a cash flow crisis at a crucial stage of your development.
Ineffective Marketing
When planning your business model marketing should be an important part of growing your successful business. Your audience should be based on market research and creating a strategic marketing plan. Your marketing plan should involve a well-designed website and social media presence, whatever the product or service you provide, this is the best way to grow your audience.
Ineffective Planning
Creating a business plan requires a lot of research, planning and strategic thinking. Doing this effectively from the offset will save a lot of heartaches later down the road, and it can also benefit you when it comes to securing finance.
Poor Leadership
A lack of leadership can be detrimental to the success of a business. Leaders need to provide direction and act on behalf of the business. Good leaders make sure their staff and investors remain happy, and that their product or service consistently delivers on quality.
Company Culture
Every person that works for your business has their own needs but to make sure you are all working towards the same goal you need to make sure everyone is happy, supported and treated fairly.
Ignoring Customer Needs
Keep in touch with your customer's needs. Social media is a great tool for this as your customers can provide feedback and have an immediate response. Keep an eye on review platforms and make sure you are responding to feedback provided, especially if it’s negative.
Refusal to Change
Make sure you are keeping track of your successes and failures; this will give you all the data you need to know where you need to adapt and potentially change your approach. If you are too precious about your idea to be adaptable you will likely fail.
Unforeseen Events
No one can predict what the future will bring and COVID-19 proved that losing cash flow can destroy businesses. Around the world, we are still feeling the effects of the coronavirus pandemic. Preparing for something like this may seem like an impossible task but having a contingency plan in place could be the thing that saves your business. Look at how businesses have recovered from various events and consider if you can implement the methods into your plan.
When it comes to managing your own business, keep these pitfalls in mind as businesses fail often. Running a business will be hard work at times, so having contingency plans and thoroughly researched business plans will help considerably make your business successful.
Paramount Formations are on hand to provide additional information and guidance for all your business needs. Contact us using our contact form or call our friendly expert team on 0800 0198 698.
