Do you know the most common reasons for business failure?
If you want to start a successful business, you should understand the reasons businesses fail. Educating yourself in such a way will increase your chances for success. What are the reasons so many companies fail? One of the worst aspects of a failing business is that the business owners are unaware of the troubles until it is too late. They are either missing or ignoring the warning signs. Mistakes are tricky because if you knew that you were making a mistake, you would probably avoid it. Understanding that you have made a mistake and correcting your mistakes fast is a key part of success.
What is the single most important reason for a failed business?
A business fails – for the most part – because of the entrepreneur. Yes, you can blame the economy, a business trend, bad luck, or any number of reasons. The fact is that people start successful businesses in recessions. Entrepreneurs have managed to overcome bad luck and other reasons others have failed. The best often find a way.
Companies fail all the time for all kinds of reasons. I want you to consider the following list to help you succeed with your business.
You fail to plan. Planning takes work, but it is an important part of success. When businesses fail to plan, they put themselves at a major disadvantage. It’s like trying to run a hundred miles without any preparation.
You are unable to lead. Contrary to popular belief, leaders aren’t born. Leaders emerge from adverse situations. Your team is looking to you for answers. They rely on you to set the direction, only then can they get behind you and help you succeed.
Can you differentiate your business?
You can’t differentiate your business. Most businesses that failed weren’t any better than the existing businesses in the market. If you are going to compete successfully, you have to be better than what’s already on the market. If you are just as good as others, you won’t make it.
You are failing to understand the value of the customer. Many businesses focus on themselves not the customer. They concentrate on their own internal needs and struggles instead of helping the customer. The most successful companies are constantly connected with their customers. They are asking questions and providing answers. They are listening instead of talking.
You can’t learn fast enough. Every entrepreneur makes mistakes. The successful ones learn and improve after a failure. And they do it fast enough to succeed. Failed entrepreneurs not only fail to learn from mistakes they don’t even know that they have made any.
You are failing as a manager. You can’t succeed in business without effective management. If you can’t manage your business, you have to hire a manager. Until you can afford to hire a manager, you have to become a better manager.
You don’t have enough money. You don’t have to be rich to succeed in business, but you need some money. Even the least expensive business require some money. If you can’t support yourself, you won’t be able to succeed. Calculate the cost of living and the cost of keeping your business going before you start a business.
You are failing to learn to walk before you run. A quick way to kill a business is to scale it at the wrong time. Scaling isn’t always a good idea. If you scale your business too fast, you might damage it. If you scale it too slowly, your competition will take your market share.
Poor inventory management. Inventory management is a tricky part of business. It can make or break you. Successful entrepreneurs are masters of keeping an optimal inventory. Too much inventory will hurt your cash flow, and so will too little inventory.
You are selecting the wrong location. For a brick and mortar business, the wrong location can be a death sentence. Choose your location carefully. Think about foot traffic, weather, the location of your target customers, the cost of doing business, taxes, etc.
You are missing the point about profitability. Making money is not the same as being profitable. Focus on profitability instead of revenue. Many businesses went bankrupt with huge revenues. Don’t let that happen to your business.
You are ignoring your books. You might hate accounting, but you still have to know the financial details of your business. Keep accurate financial records to help you understand what’s happening in your business. Successful entrepreneurs can look at their books and get an accurate snapshot of the health of their business. You don’t have to become an accountant, but you have to know enough to understand the financials of your business.
You fail to focus. Focus is the competitive edge you need to succeed. Focus on one thing: one product, one service, or one market. With a laser focus, you can quickly improve and move forward.
You are unable to separate business and personal finances. You can’t use your business bank account as your personal bank. Keep personal and business finances separate.
You can’t resist looking at shiny objects. Entrepreneurs are easy to get excited about new ideas. You might be distracted by expanding into new business ideas. Unless you dominate one area, you should resist the urge to pursue new opportunities.
You have partnered with the wrong person. The right business partner could be the difference between success and failure. Choose your business partner carefully. Your best friend is unlikely the best business partner. Partner with someone who is smarter, more experienced, richer, etc. than you are.
You are failing to understand the realities of your world. There are economic cycles that will have an impact on your business. There are business trends that will have an impact on your business. None of that means that you will fail or succeed in business. The key is for you to see the realities of your environment and respond accordingly.
You don’t have a contingency plan. What happens in your business if you are gone? If you are a sole practitioner in your business, you are most likely done. But if you have a business with a staff, you still need a plan. What happens if you get sick or die? You might not want to think about it, but you should have a business succession plan in place.
You are failing to plan ahead. You can’t plan for everything, but failing to plan will hurt your business. You don’t need a formal business plan. A business plan can be as short as one typed page.
There is no real mission or purpose of your business. A successful business has a mission. You will more likely succeed if your business has a purpose. Draw out the basic principles of your business. Answer the following questions. What are your core values? What is your mission? What is your purpose?
You are unable to define your target customer. Failed businesses either can’t exactly define their target customer or fail to attract the target customer. You have to be able to clearly define your exact customer. For example, small business is too broad of a target market. You need to drill down even more. Freelance writers who live in the USA is a much more accurate target market.
You fail to improve based on what your customers tell you. Many failed businesses ignored the customer. Your product or service is incomplete without customer feedback.
You can’t define your service. What are you selling? Be precise when you describe your service. Focus on what is included in the service.
No sales strategy. Everything has to be sold. Even the most successful products need a solid sales strategy. Develop a working sales system. Once you have created a successful sales system, try to scale it.
Failure to set measurable goals. If you don’t set goals, you will fail. The best goals are measurable. Instead of growing sales, you should double your sales.
You are relying too much on enthusiasm. It is important to stay positive, but enthusiasm is insufficient. Without a plan, a successful strategy, and measurable goals your enthusiasm will quickly fade.
Unable to keep yourself accountable. It is easy to fail if no one holds you accountable. Treat yourself as an employee. Plan your days, weeks and months in business. Understand your goals and keep yourself focused on reaching your goals.
You are failing to write down your goals. It is easier to reach a goal that is in writing.
You are not reaching out for help. Seek out, advisors. When you reach out to people with more experience in business they can help you reach your goals.
Unable to get feedback from fellow business owners. Contact business owners with specific questions about your business. Always reach out to somewhat larger companies than yours. They have faced many of the same challenges you are facing now.
They are failing to take action. A failed entrepreneur is an idea man. Ideas are cheap. We all have them. Success is about executing on your ideas.
You do not believe that you can succeed. To succeed, you have to believe that you can succeed. When you plan, work hard, adjust as needed, and attract paying customers you can start believing.
Lack of coaching. The right coach can help you to succeed. Find a coach who has built at least one successful business – not a coaching business.
You are unable to attract investors. Most businesses fail to attract investment and fail before that even start. Of course, you can start many companies that don’t require financing.
You are failing to seek out the right mentors. The most successful people seek out mentors.
Don’t understand the difference between risk and carelessness. You can’t succeed without accepting some risk, but you will fail if you are careless.
Lack of patience. Even if you are doing everything right – and you are not – it will take time to succeed. Think of your business as a marathon. You are building a business every day, but you can’t expect to succeed every day.
Failure to get others excited about your business. You can’t succeed alone. You need customers. You also need a team behind you to help you succeed.
You are not expecting failure. Expect to fail. Even if your business succeeds, you will fail many times on the way. Build on your failures and move forward.
You are unable to adjust as needed. Change is hard, but you can’t succeed without adjusting. You might need to change your service or a product. Your customers will always tell you what’s wrong. If you are listening, you will make the right changes at the appropriate time.
You should never make a decision without the customer in mind. You don’t have a business without your customers. There are always competitors who want to steal your customers.
Unable to operate a profitable business. Profit is success. Focus on building a profitable business from day one.
You are ignoring the importance of cash. Cash is not the same as profit. Positive cash flow is one of the most essential pillars of a successful business.
You are unable to get paid in advance. When you are paid in advance, you are greatly improving your cash flow. If you are selling a service, try to get full payment in advance. Offer your customers rewards for advance payment.
Offering credit to customers can make your business vulnerable. Do everything you can to avoid offering credit to your customers; it slows down your cash flow.
You are failing to grow your top line. The best way to increase your revenue is to either increase your prices or increase the number of transactions. Growing your top line revenue solves a lot of problems.
Can’t obtain loans or lines of business credit. Sometimes you might need a loan to pay for inventory or to make improvements in your business. Apply for a business loan to make sure that you have a loan available. Don’t use the money unless you need it.
You are failing to plan for the worse. Bad things happen. The key is to be ready. Make a list of emergency contacts and actions in case of an emergency.
You are failing to expect the unexpected. It will happen sooner or later. If you are going to succeed as an entrepreneur, you have to be ready for anything. What if one of your suppliers goes out of business? What happens if a key employee quits? Do you have solutions to solve unexpected problems?
There is an army of competitors working around the clock to take your customers. Make no mistakes about it; the competition wants to put you out of business. You can make some mistakes and still succeed, but your mistakes add up. Each mistake counts. Every one of them will push you farther from success. If you want to succeed in business, you have to mercilessly push yourself, and your team to reach your goals.