Why Businesses Fail and Pitfalls to Avoid

Starting a new business is never easy. The reality is that over 50% of small businesses fail in the first year and 95% fail within the first five years. Why? What goes wrong? Following are the nine most common reasons for failure - being aware of these mistakes will help ensure your success.

Poor marketing

Successful businesses are those which understand and meet the requirements of their customers. You must understand the needs and wants of your clients. Learn the basics of marketing and ensure you track the success or failure of each marketing technique. Dump those that aren't working.

Make certain your marketing strategy sets you apart so a customer can clearly see why they should choose you rather than a competitor.

Cash flow problems

Many businesses struggle through poor cash flow management. Most businesses are slow getting off the ground, so you need to plan on living for one to two years without business income. Also, you must create and use a realistic business budget, and not constantly drain the business income on personal spending. Tight control and monitoring are essential.

Poor business planning

A business plan should cover aspects such as marketing, finance, sales and promotional plans, as well as detailed breakdowns of costs and profit predictions. Many business owners think that dedication and hard work will pull them through. A global look at the business, frequently updated, is essential to assure success. If the skills are not present to prepare one, no other allocation would be as effective as obtaining professional assistance.

Maintaining poor books and records

This results in having no conception of profits, costs, margins, sales or customer ratios. Thus the business owner is unable to make intelligent decisions because he or she lacks critical information.

Good planning means that you've looked at all the aspects of your business and are prepared to handle problems when they arise. Your business plan helps you to focus on your goals and your vision, as well as setting out plans to accomplishing them.

Lack of Finances

Insufficient financing often means that businesses are unable to take opportunities available to them, or have to compromise - going for high cost solutions to problems, rather than lower cost ones that would yield greater competitive advantage.

Failure to embrace new technologies and new developments
In a fast changing world, leading businesses are ones that make best use of advanced modern technologies in an appropriate way. That allows them to work more efficiently

Poor choice of location

Location is crucial for certain types of businesses. A good location is one that appeals to large numbers of customers, while at the same time minimising costs. If your business runs out of commercial space, you need to make sure that you are convenient to your customers, and near your suppliers and your employees, with good easy communication routes.

Poor management

Weak and inexperienced management is one of the major causes of business failure. Managers have to lead a team to be motivated and accountable.

Poor staff relations

Successful businesses motivate their employees to work hard to help the business succeed. It is crucial to develop an orientation system for new employees or to follow through on personnel development to foster a team spirit. Business owners must, however, be prepared to swiftly discharge poor performers without fear.

Lack of clear objectives

Successful organisations have clearly focused and communicated objectives that enable everyone in the organisation to pull in the same direction.

The author is a business coach who has owned and grown successful businesses for over 19 years. He can be contacted as follows
0800 781 0414

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