Why Do Small Businesses Fail?

Here’s a fact: three out of four business start-ups will not make it, and almost 50% of businesses that successfully get off the ground will cease operations within a year.

Running and making a profit from your small business is no walk in the park. But having a good understanding of the major points that blow a business into oblivion will help you steer clear of these mistakes and increase your chances of standing tough even beyond the initial years.

Let’s examine these common elements that could hinder your business from getting a good head start and eventually succeed.

Inadequate Business Skills and Qualifications

It should go without saying that anyone planning to run a business should possess the basic business and enterprise skills. Other business professions would also require certain qualifications and certificates for the owner to be allowed to operate.

A new business will largely benefit when staff and personnel are required to undergo training courses so they better understand the different variables that keep a business running well and good.   

Lack of Marketing Strategy or Business Plan

Every business needs a good customer base to boost its sales that will cover operational expenses and eventually make a profit. But this is far from being realized if consumers are not even aware that your business exists or know of any special offers you have on your products or services.

A clear marketing plan or strategy should help your business get customers by being describing your product effectively, giving your product or service a reasonable price, and selling or marketing your product or service based on its functions or features. 

Insufficient Market Research

It’s too sad to know that many business owners are guilty of making a product or selling a service that has little or very minimal demand. Failure to define your market and understand what it wants often results in poor or zero sales and eventually pull your business down.

Undertaking detailed and sufficient market research is critical to gather the right information that you will need about the potential demand for your product or service and be able to act accordingly based on these information.

Dysfunctional Management and People Problems

The moment you hire your first employee, your small business should be committed to complying with all the legislation and dedicate enough time and resource to ensure that your staff and personnel are well managed. Work on getting the right focus, vision, benchmarks, and the like and your team should be happy to work with you all the way.

Poor Finance and Cash Flow

Every business big or small needs enough cash, financial resources, and a good credit control system to meet all start-up expenses as well as the cost of operating until the business is finally fully established. If your financial capacity is not up to par with the costs that you have initially identified, then the business will have a hard time getting off the ground.

Personal Limitations

Your personal outlook, attitude, goals, and reasons for planning and starting a business will largely influence the way you put up your business and man it. Obviously, your business will demand a large investment of your time and efforts to give it a good start and to make it succeed.

It is vital that you understand your personal strengths and weakness, your aims and motivations to know how you can work your way to establishing your business well and giving it the best that it deserves so it will grow and flourish.

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