WHY DO BUSINESSES FAIL?
Why do most businesses fail within only a few short years?
Businesses don't run on autopilot. If you own a business, you know that it takes a lot of hard work, time, and discipline to make it run even relatively smoothly. In truth, it may take anywhere from two to five years before your business is performing well.
It is important to set the right foundations, create the right habits, and avoid activities that can be detrimental to the growth and survival of your business.
When you're running a business, it's easy to fall into a routine and forget about how even the smallest misstep can permanently damage your business. It's equally as dangerous to overestimate your business's ability to succeed in a short period of time and without the support it needs.
What are the common factors that cripple businesses?
Although there are many, many reasons why a business may experience a decline or have it close its doors for good, this article identifies five key factors that come up time and time again:
1. Lack of planning
A business without a plan is like a ship without a sail; it is destined to float along, guided by the current. In business, you must have a grasp on the key objectives and goals of the business or it will be it easy to go off-track or spend valuable time and energy working on something that, ultimately, doesn't serve the business's overall purpose or fulfill its objectives.
Another key component of this overarching plan is a good understanding of the business's perfect customers, an assessment of the current market, and the competition with whom the business has to share space.
Luckily, there is a document that takes all of these things into consideration and will fit neatly into a binder: the well-known and oft-avoided business plan.
A business plan is an extremely valuable resource that serves as a blueprint for your business and what you envision for its future. It lays the foundation for operation, outlines the plan for growth, and serves as a roadmap to success.
With a business plan in hand, you have the security of knowing exactly what you want for and from your business, the direction you want it to go in, and how you will get there.
Business Planning
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Defining Your Perfect Customer
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2. Poor management
It can be a struggle to find the time, energy, and resources to juggle the many demands of a business while also trying to help it grow. Among other things, poorly-managed businesses have problems keeping track of and stocking inventory, are short on cash, have a hard time keeping staff, and create more than the usual number of dissatisfied customers.
The owner/operator begins to feel overwhelmed and undermotivated, and is unable to find a balance between business and their personal life. This creates a cycle of overwhelm and poor management, spiralling out of control until the business fails.
There are some things that an entrepreneur/business owner/operator can do to prevent this from happening. First, they can start writing everything down: the to-do list items, the inventory tracking, the deadlines to order new material, promotion ideas, customer service guidelines, and so on. They should make use of a day planner, calendar, bulletin board; anything that allows them to write down their thoughts, ideas, and tasks in an organized fashion.
A business owner who feels their business is spiralling out of control should also reach out for help from an experienced business owner or, even better, a business coach who will help them through these tough situations using their knowledge and expertise in the field of entrepreneurship and start-up enterprises.
3. Poor marketing strategy
Even the greatest product cannot reach its full potential in the market if it is marketed poorly. Potential customers have a lot of options when choosing a product or service, and simply putting a product out there on the market does not automatically result in sales.
Education is an essential part of marketing. Potential customers need to know not only that your product(s) or service(s) are available, but they also need to be able to access them, afford them, and find a use for them.
Thus, a product/service marketing strategy must explain how it fulfills a customer's need while also being targeted at a specific demographic. For example, work-from-home single parents with only a small amount of disposable income, or penthouse-living executives who have the time and money to spend on their continued growth as a leader in the C-suite.
In every situation, when a business owner is feeling overwhelmed by the daunting task of keeping their business above water, they should reach out to a business coach for help. Even a short conversation could make a huge difference in their operation and their outlook.
4. Lack of funds
Poor estimations of start-up and operating costs can set a business up for disaster. Sadly, this is one of the most common mistakes; entrepreneurs often think that they will generate income as soon as they start their business, but usually sales are slower than anticipated during the first few months (or years) of operation.
For obvious reasons, it's important to have enough funds available before starting a new business, as well as a backup plan with alternate and additional resources should something go awry.
In order to keep track of a business's finances, every business owner should have a detailed budget and be able to adhere to it. Oftentimes, business owners shy away from anything that has to do with numbers due to a lack of confidence in finances. Sometimes, they may even feel embarrassed to ask questions or to reach out to someone with the experience that they need to get their business's financials back on track. However, it is extremely important that a business owner is clear about their business's finances and that they understand what their financial statements are telling them. After all, businesses run on money.
5. Lack of motivation
It's a well-known fact that most businesses do not see any significant income during their first year. Great success does not happen overnight, but understandably, it can be hard to stay motivated when looking at long-term business goals instead of short-term success.
It's easy to get caught up in it all, to get overwhelmed by all that needs to get done or even to become so excited about the vision for the business that the smaller, more important tasks get overlooked or forgotten altogether.
In each of these situations, it is important to take a step back and look at where the business is currently, where you want it to go, and which SMART steps you need to take to get there. Caution: goal setting comes with its own obstacles.
Don't fall victim to these common practices that will cost you time, money, effort, sanity and, ultimately, your business. In addition to creating a business plan, a business coach helps ensure that you don't fall into any of these common traps by teaching you time-management strategies, showing you how to apply for small-business and start-up funding and creating a budget, marketing strategy, and acting as your accountability partner through the good times and the bad.
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