10 Strange Reasons Why Most Business Fails
If you are planning to put up your own business, you must first see to it that it must be in line with your passion or else it will fall into nothing. Here are some of the list why most of the time business fails.
- Failure to understand your market and customers.
We often ask our clients, “Where will you play and how will you win?”. In short, it’s vital to understand your competitive market space and your customers’ buying habits. Answering questions about who your customers are and how much they’re willing to spend is a huge step in putting your best foot forward.
HTML/Content Management Developer
- Insufficient Capital
A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.
It is imperative to ascertain how much money your business will require; not only the costs of starting, but the costs of staying in business. It is important to take into consideration that many businesses take a year or two to get going. This means you will need enough funds to cover all costs until sales can eventually pay for these costs. This business startup calculator will help you predict how much money you’ll need to launch your business.
- Declining Market
Everything moves at a fast pace in today’s world, new products, new services, branding and re-branding. You have to keep pace with the times, if your product or service has a dying customer base then the writing is on wall but most businesses do nothing about it at all including some of the giant corporations until it is too late. Take Kodak, book stores, record shops, newspapers not going online. If you can see the trend moving away and the writing is clearly on the wall be the first to adopt the changes and challenges and ride the waves of success. You have to understand your market and your customers, then be prepared to innovate by thinking outside the box. A great book to read is Blue Ocean Strategy By: W. Chan Kim & Renee Mauborgne. This book will help you to innovate your business whether you are selling products or a service, it’s a must read for anyone who wants to innovate and start leading the market rather than being a follower. If you understand your customers well and get regular feedback and can adopt then you will stay ahead of your competition.
- Lack Of Good Customer Care
It is very important that you make your customer care a priority. A business with good customer care grows. Good customer care brings return customer and return customers bring referral customers. If you do not treat your customer well, they go to your competitors. Learn to show your customers that you appreciate them. Always ask them questions about the product and offer them some percentage when they give your product a review (either positive or negative review). If you are not close to your customers, if you treat them like every other seller, they will only come when there is no other option. Bad customer care has killed a lot of businesses.
- Poor Accounting
You cannot be in control of a business if you don’t know what is going on. With bad numbers, or no numbers, a company is flying blind, and it happens all of the time. Why? For one thing, it is a common — and disastrous — misconception that an outside accounting firm hired primarily to do the taxes will keep watch over the business. In reality, that is the job of the chief financial officer, one of the many hats an entrepreneur has to wear until a real one is hired.
CEO, Blogger, Speaker, Author
- No Customer Attraction Plan
If your business is not making money, it is likely that you don’t have a proven plan to attract customers. While, marketing and sales are not the same, one is certainly a result of the other. You must make time every week for sales activity, otherwise you could end up with a glorified hobby.
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- Personal Spending
When new owners are working 18 hours a day, the line between their businesses and personal lives is sometimes blurred. Entrepreneurs sometimes see their business revenues as personal cash reserves. Failure to keep business and personal finances straight, and separate, can lead to heartache, liquidation and some very difficult tax challenges. Business advisers call it poor financial management, bad math or inadequate accounting, but a root cause of small business failure often boils down to spending business income and funds on personal needs.
- Poor Choice Of Location
Don’t let a cheap lease tempt you into choosing the wrong location. Consider competition (how many similar businesses are located nearby?) and accessibility (is the area well served by freeways, public transportation, and foot traffic?
All Business Editors
- Uncontrolled Growth
Growth is a good thing unless it is left unchecked and your generated revenue can’t keep up with the expansion. If your business experiences great success, do not be overeager to spend your profits by immediately buying more equipment or opening up new stores. Stick to the strategies you have set so you can still grow without bankrupting the business.
Co-Founder and CEO
- No Innovation
Remember, even Kodak was innovative, but have faltered from global competition. Leaders must create a culture of innovation or they will fall on the innovation sword. Innovation must be mission critical. As an example, textile maker, Milliken & Co., leveraged innovation to effectively compete. The strong bias for innovation by great leaders constantly recreates businesses and generates new opportunities. Leaders that are slow moving towards innovation will doomed the business.
Chief Executive Officer