If you are a business owner, you really don’t want your business to fail. The actions you take going forward after reading this article on why businesses fail will go a long way to help your business succeed ultimately.
The sad reality is that of many small businesses started yearly, about 20% usually fail in their first year and about 50% of the businesses fail in their fifth year according to the data from the Bureau of Labor Statistics as reported by Fundera.
Of course, for every business that fails, many others are succeeding, and that should be you, and I guess that’s why you are reading this post on why businesses fail so you can do better than your competition.
In today’s post, I’ll share with you the 1 core fundamental symptom of impending business failure. You’ll then discover the 10 major reasons that inevitably lead to that trajectory and avoid them at all costs.
Just to be clear you understand when your business is leading towards failure or not, here is the index you must always bear in mind. Your business is on the trajectory to fail if it is unable to acquire and keep increasing the number of customers at a reasonable net profit.
Your business is on the trajectory to fail if it is unable to acquire and keep increasing number of customers at a reasonable net profit
The questions you then want to ask are whether or not your business is:
Any failure in these 3 indices indicates that your business needs urgent attention and whatever cause of that failure must be addressed immediately to prevent the overall business failure in months or years.
If your business is not acquiring an increasing number of customers, or if it isn’t keeping an increasing number of its customers, or if it isn’t generating increasing net profit, then here are the top 10 reasons why that business is on the path of failure and how to change its trajectory right now.
In every team, everything begins and ends with the team’s leadership. It doesn’t matter the experience of the team members, an inexperienced leader is usually the factor deciding whether the business will either succeed or fail.
Almost every other reason for business failures to be stated further begins with the leader. He hires the team members, has a business plan or not, shares the vision of the business if he has one, delegates properly or not, and motivates or discourages the team members.
As an owner or manager of a business, you must know something about your industry. You must understand how to inspire your team, delegate tasks to the most experienced, and have a clear vision of what business you are in.
Furthermore, you must know how your business solves your customer’s problems and the unique value proposition that set it apart from your competitors
If you don’t know where you are going, you will probably end up somewhere else you won’t like. Not having a business plan that shows the anticipated trajectory of your business and what you’ll exactly do to get to your milestones is tantamount to planning to fail.
Businesses that started out making a profit often go bank into bankruptcy because they make unplanned moves like investing in an unprofitable venture or scaling abruptly without paying attention to their business plan if any was ever created.
A business plan reveals your vision for starting the business. It contains the products and services you’ll render, your market analysis, your financial projections, your marketing strategy, your budget, etc.
If you don’t have a business plan, now is the time to create one and follow it or amend it as your business evolves. However, see that you do not make decisions without giving attention to your business plan.
One of the most common reasons for business failures is having inadequate working capital. The worst time to go into business is not having the projected capital, and not being able to source for it from investors.
From paying your employees’ salary to producing or stocking up your inventory to the marketing budget to delivering your products to customers, etc., working capital is a necessary factor in deciding the success of your business.
Before you venture into a business, you must have a proper financial analysis of the capital you need to invest into running the business up to the period you projected it to start making enough profit to run itself.
This is why having a business plan is great for you to pen down your analysis and even to get investors to invest in your business.
Without adequate funding at the beginning of your business, you might get to a point where you have to close the door of your business until you get proper funding in place. This why ensuring you always have a positive net profit is vital to even keeping the business running and succeeding.
The effectiveness of your employees is needed if your business must succeed. Companies that succeed have their employees have a sense of ownership of the business, taking full responsibility to successfully exceed their targetted goals.
As a business owner, your task is to hire experienced and loyal professionals to help your business achieve its goals.
Where employees do not understand the vision and values of the business, or where they do not take the customers seriously enough as you would, they inevitably help to ensure the failure of your business.
Your employees must be trained on the company values, and culture, and inspired to achieve the business goals if you must prevent the failure of your business.
Your business has failed before it gets started if you don’t research your market before venturing into it.
Having a business is all about meeting the market demands. And if you already have strong competition, then you must understand how to position your business to have a share of the market.
This comes about when you do thorough market research and analysis before you even begin the business.
Without understanding who your target audience is, where they gather, what their deepest darkest desire is, why they have that desire, who they are currently patronizing, whether they are satisfied or want more, etc, you wouldn’t understand how to position your products or services to meet their demands and scale your business.
READ MORE: How to Conduct Effective Market Research for Your App Idea
This is your first task as a business owner. You must know your audience specifically more than they know themselves. You must also know your competitors, and how to position your business if you want your business to succeed.
There is nothing as powerful in acquiring customers as deploying effective and profitable marketing campaigns before, during, and after the production of your products and rendering of your services.
Effective Marketing is the most direct consequential effort a business can make to acquire customers second to which is the efforts in keeping those customers.
But not many businesses even understand their target audience enough to create the right marketing campaigns that speak directly to the desires, pains, and wants of their customers.
It takes having a strong passion to have your business succeed at all costs and win the markets for you to create the best marketing campaigns. This is why the leadership should have some knowledge about marketing so they can give more attention and resources to it.
The problem then comes when the leadership knows little to nothing about marketing and yet is hesitant to budget enough resources on marketing, It also comes when the business has little working capital to even spend on marketing and has no means of generating funds.
It then becomes worse if the leadership hesitates to hire the best experienced in marketing or outsource the marketing to the best agency.
These all lead to failure in acquiring customers which inevitably leads to business failures.
Indeed, acquiring and keeping an increasing number of customers at a reasonable net profit is the lifeblood of a business. And marketing is the primary operation a business undertakes to meet its desire of being successful.
Indeed, acquiring and keeping an increasing number of customers at a reasonable net profit is the lifeblood of a business.
It is one thing to acquire customers via effective marketing campaigns, it is another thing to keep the customers in increasing numbers.
Many businesses focus more on their products rather than their customers. They get so passionate about their products that they don’t think about what their customers want in the products.
As a result, they can’t keep their customers and will begin to lose them to competitors who understand the customers’ desires and tailor their marketing towards those desires.
If your business must succeed, you must continue to exceed your customers’ expectations more than they expected and more than your competitors are willing to even meet those expectations.
You must focus on your customers, treat them well like they are the number one priority of your business, find out what they want, and exceed those expectations.
Doing otherwise, focusing too much on your products rather than your customers, and not making any attempt to give attention to their demands about your product is a sure way to lose them to your competitors.
And just like many other once-profitable companies have gone bankrupt, you might soon find out your business has failed. To avoid failure, satisfy your customers’ desires and exceed their demands by giving abundant value
Flexibility and Innovation should only come when you have understood your customers well to exceed what they want. That is when you either add to your product or service offerings, add more features, or create an entirely better version of your products and services.
Companies that fail to innovate do so because they hesitate at meeting the customers’ demands.
From Blockbuster to Nokia, to Compaq to General Motors, history has shown that businesses that fail to evolve and innovate in response to consumer demands are in danger of failing and going into bankruptcy.
However, businesses like Apple, Google, and Netflix have shown that innovating and giving customers what they deeply desire and wants is key to sustainability and success.
Businesses can tick all the boxes about how to become successful and keep moving towards success but have their success cut short by the inadequate financial management of the leadership.
Overconfidence about the success of the businesses and decisions to recklessly appropriate funds to scale into another investment vehicle without proper planning and research is one of the factors why businesses fail.
As a business owner, you should learn to quickly pivot when a part of the business keeps draining the business of resources without yielding any profit. Apple made such a difficult decision to discontinue the Newton project that has sucked the dying company of about $ 100 million.
Other thriving companies today have made such difficult decision which has paid off and prevented the businesses from failing.
Lastly, having a successful and lasting business demands that the business model is easily profitable and that the business can run itself.
When a business model seems to not profitably compete with customer demands, it’s wise as a business owner to go back to the drawing board and ascertain whether or not to tweak the business model to meet customer satisfaction and yield a reasonable profit.
More so, having a system in place that ensures the business does not solely rely on the presence of the business owner before functions properly is a sure way to ensure it doesn’t fail.
This means your employees, management, and every other part of the business system have been built to understand their responsibilities, goals, and expected outputs and they deliver without needing to be micromanaged.
If you’re serious about growing your business with effective digital marketing strategies, then you should read this post now
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Tags: business growth, digital marketing, new york business growth, sonline sales
