One of the best ways to learn how to succeed in starting your own business is to study what NOT to do. These are the top reasons why some businesses fail. Learn from their mistakes so you can be a small business success story.
Good news. Business failure statistics are less likely to fail in their first year than previously thought – as reported by the SBA Small Business Administration.
- Poor Leadership – Entrepreneurs who are not able to make the right decisions and lead a team are all too familiar in failing enterprises.
- Same As Everyone Else – Your product 0r service is no different, in any meaningful way, to consumers. New products that become best sellers must be better, cheaper, prettier and fill a previously unsatisfied need. Just because you are a better widget maker does not make your widget better.
- Failing to Plan – If you ignore business planning, in a rush to launch your firm, you will pay later in problems that could have been avoided if proper planning was done early on. It is far better to plan more regularly, informally, than once a year formally. Make those plans into action maps by assigning deadlines and responsible persons.
- Not learning from mistakes – Every person, and thus every business, makes mistakes. The problems come when the company and the entrepreneur do not learn from their missteps. Not heeding the lessons contained within the mistakes dooms the business to fall into the same trap again – perhaps to their extinction.
- Poor management – Often entrepreneurs are excellent at their craft, be it cooking, welding or computer programming, but lacking in management skills. This will sink your ship in choppy waters. The most detrimental of these are not listening, thinking you know it all, over managing and lack of sound business systems.
- Capital Shortfalls – Not having enough money will close down your shop because you will not be able to pay rent, salaries or buy supplies. Calculate your capital needs with ample cash for working capital to carry your business through lean times when customers pay late and costs to increase unexpectedly. Get working capital business loan- Read Kabbage Reviews
- Not Being Customer Centric – Lots of companies only give lip service to saying that their customers are #1. These failing firms ignore customer requests for new products, forget to view their service through their customer’s eyes and ignore trends in buying habits. Some entrepreneurs play ostrich and bury their heads in the sand to not hear negative reviews about their store. There is gold in every negative comment, reply and find out where the problem stems from and fix it at the root. If you get one negative comment, usually ten more customers just left became your competitor’s customers instead.
- Financial Mismanagement – Entrepreneurs know your numbers! Checking on the economic numbers of your startup is like checking your pulse to be sure you are alive! These details are indicators of the health of your company. Every industry is different, but most business experts agree that these points are paramount – projected monthly sales divided into daily sales compared to the current date, number of proposals submitted, number of incoming phone calls/emails and average unit sale (Total sales volume divided by the number of transactions). I recommend Quickbooks Online for the best small business accounting software
- No Profits – I am continually amazed at how many businesses view profit as a luxury and not a necessity. If you want to stay in business, you must generate profits. Watch your profit margin very carefully to know how low you can price your product without cutting into profits. Analyze your sales and expenses monthly and weekly to discover any profit leaking holes that need to be plugged immediately.
- Entrepreneur Pride – I love entrepreneurs. They have built our great country into the economic powerhouse it is, however, their strength can sometimes blind them into not being open to learning new skills and accept different views from their own. An example of this is when a client of mine re-designed their restaurant, menu, and signage. They hired talented designers and the place looked wonderful and customers raved about the new look. But about a month later, I visited and the owner had reverted everything back to the old way it was previously. I asked him why. He said he had designed the previous signs himself and he thought they were “better” than the professionally done ones. End of story – he went out of business. Be open to new people, ideas, and looks and embrace change to your success.