As one of the most significant tasks for many businesses and organizations, business management focuses on planning and organizing. One of the greatest mysteries of entrepreneurship is understanding WHY BUSINESSES FAIL? The truth is, no one wish to embark on a business and expect it to fail, but different businesses fail for various reasons. 7 common causes of business failure and possible solutions will channel us into exploring the top reasons why businesses fail within the initial stage and possible solutions:
1. POOR PLANNING STRATEGY
Do you know that most people end up closing their business at a tender age because of a lack of short-term and long-term planning? As a business owner, it is expected of you to make proper planning concerning the outcome of your business, and what it tends to achieve in the future.
Most business owners only plan for today forgetting that as each day comes by, the market becomes vast and evolves. Failure to adapt and grow when the market changes will end up causing the business to fail. So, you must always track and measure your marketing efforts.
Success requires a lot of planning and most importantly, entrepreneurship is easier when you start the business in the right way. The right plan should include a list of things to do with dates and deadlines attached to it so it can give an edge on how to handle it on time. Failure to plan may lead to your business failing before it starts.
2. WEAK LEADERSHIP
Most businesses fail as a result of weak leadership sense. As a controller of your business, it’s your duty to make the right decisions.
The most successful entrepreneur is one who studies, learns, and reaches out to mentors so as to improve your leadership skills. You must learn to be submissive, attend leadership classes and learn from achievers who have trend past the route you’re taking.
An inexperienced management team can cause a big hike to your business. You must seek professional advice so as to avoid any form of failure in your business.
3. IGNORING CUSTOMERS NEED
Do you know that in every business, your customer is your number one? But how many business owners see their customers as a priority? Especially small-scale business owners. Any business that fails to get a good human relationship with their customers ends up losing.
As an entrepreneur, you must keep an eye on your customers, know the trending values they are after, and most importantly, always do a regular check to know if they are still in love with your products. If they don’t, then you find out what new values they want and then you blend in.
4. POOR LOCATION
We’ve discussed the vitality of business location in our previous business articles and the impact it has in our today’s world. Do you know that poor location is a one-score down?
Now, you must know strategic places to locate your business. You can’t be a seller of charcoal and you decided to start your business where the people living in that area prefer the usage of gas cylinders. A poor location might end up leaving your business in a mess.
5. PERSONAL USE OF BUSINESS FUNDS
Using your business funds to finance your personal affairs may put a strain on your business. You may not have enough money left to run your business effectively as you might end up in bankruptcy. So, it is advisable that you don’t use your business funds to run your personal commitments as your business might end up crashing.
6. POOR FINANCIAL RECORDS
Most entrepreneurs fail to keep records of their financial sales. By so doing, they end up in poor financial management which at some point makes them lose real information on how to handle expenditures and purchases.
In securing a lasting business, you must learn to keep records of all financial activities. If as an entrepreneur, you’re not good with digits, you can get someone who’s good at it to help you manage.
7. OVER EXPANSION
I’m not saying over-expansion is not good. but this needs to be thought out well before implementation. As an entrepreneur before thinking of an expansion, make sure you’ve gained balance and gotten ground on who your customers are because it is very easy to make the mistake of expanding your business into too many verticals. Also, make sure you maximize your existing market, else you might lose your business completely.
In conclusion, it is true that most businesses fail and it is also true that many of them succeed but those that succeed are not as a result of miracles rather, it takes a careful approach to achieve it.
HAVE YOU OR ANYONE YOU KNOW FAILED WHILE STARTING UP A BUSINESS? PLEASE SHARE WITH ME WHY YOU THINK THE BUSINESS FAILED?