90 % of new start up lost their businesses a result of these 6 reasons
According to research by the Small Business Administration, half of new businesses survive for the first five years and only one-third of new businesses survive for 10 years. The reverse is compelling because we can conclude that if only 50% of new businesses remain in the first five years, the other 50% will fail in the first five years. We can also conclude that about 65 new businesses will not be able to build it for ten years.
Popular Forums online have reported another serious statistic based on Bloomberg research that eight out of 10 businesses fail in the first 18 months.
What are the reasons that give a 50/50 survival opportunity to fail a business and demand a product or service that is in demand?
Let’s discuss six reasons why businesses fail and some ways you can avoid business failure.
1. Leadership failure
Your business can fail if you show poor management skills, which can be obvious in many ways. If you don’t have enough experience to make management decisions, supervise employees, or have a vision to lead your organization, you will struggle as a leader.
Your leadership team may not agree on how the business should be run. You and your leaders are arguing with each other in public, or employees may be conflicting with each other’s instructions. When strong leadership is needed, you may be reluctant to take power and solve problems while your business is heading for failure.
How to Avoid Leadership Failure: Useless leadership in your business will affect your every move, from financial management to job motivation, and once productivity is disrupted, failure spreads to the horizon.
Learn, study, find a mentor, enroll in training, do personal research – do everything you can to improve your leadership skills and industry knowledge. Check out other business and leadership practices and see what you can apply for yourself.
2. Details and price reduction
You may have a great product or service that is in high demand, but your business is still failing. Maybe your idea is trivial or you don’t have a strong value. If there is a strong demand, you probably have a lot of competitors and they are failing to stand in the crowd.
How To Avoid Failure of Good Price: What Makes Your Business Different From Competitors? How do you do business that is completely unique? What are your competitors doing better than you? Develop a customized approach or service package that no one else in your industry is using, so you can offer it as a strong value proposition that attracts attention and interest.
This is how you build a brand. Your brand is the image that your customers recognize and associate with your business. Your brand identity, which includes your logo, tagline, color, and all the visual aesthetics and business philosophies that represent your company, should support your pricing proposal.
This will separate you from the crowd and present your personal opinion to your customers. Do your best to offer your unique price in your market so that you can capture the market share and start increasing your conversion rates.
In order to promote your brand and establish yourself in a different way, you will need to use as many spaces as possible to advance your marketing plan and present your brand to the public. You can be much better than your opponents but it doesn’t matter if your prospects don’t even know you in this game.
Try social media, word of mouth, cold calling, direct mail, and more. Make sure your online presence is good, develop lead generation and contact information retrieval techniques such as high quality content on your site, a subscriber newsletter and an informative way.
3. Not in line with customer’s requirements
Your business will fail if you neglect to keep in touch with your customers and understand what they need and what they think. Your customers may like your product or service, but they may like it if they change the feature or change the process. What are they telling you? Are you listening or is the market declining? Are they still interested in what you are selling?
These are all important questions to ask and answer. You may be offering a product or service that is less than trendy.
How to avoid losing contact with customers:
A successful business will monitor the trending values and interests of its existing and potential customers. Survey customers and research the market and find out what interests them and keep abreast of changes and trends using the Customer Relationship Management (CRM) tool. Efficient use of CRM can help save your business from failure.
4. Non-profit business model
The failure of shocking failure is building a company on a business model that is not right, operates without a business plan, and pursues a business with no proven income.
Business ideas can be good, but without strategic guidelines, ideas can fail to materialize.
How to build a good business model:
Research and evaluate how other businesses operate in the industry. Develop a complete business plan that includes financial forecasts based on projected revenue, strategic marketing, and challenge management solutions to overcome potential barriers and competitive activities.
Create a milestone chart with specific tasks and goals over time so you can measure success, solve problems as they occur, and stay on track. An excellent business model that incorporates best practices can help your business avoid failure.
6.Poor financial management
Small Business Trends.com, a business news source, presents this infographic, stating that 40% of small businesses make a profit, 30% go out, and the remaining 30% lose money.
You need to know at the last minute where the money is coming from in your business and where it is going for success in your business. If you do not have a contingency plan, your business may fail, a reserve of money that you can call a financial crisis.
Sometimes people start a business with dreams of making money but they do not have the skills or interest to manage cash flow, taxes, expenses and other financial matters. Improper accounting practices can lead to business failure.
How to avoid financial mismanagement:
Use professional business accounting software such as QuickBooks or Zero to keep a record of all financial transactions, in which every expense and all revenue is collected, and this information generates a statement of income.
What to use (statement of profit and loss) to do. Even better if you use a business dashboard tool like LivePlan that makes it easier to monitor your finances.
This is the valuable information you need to run your business, know where you stand all the time, and work on it in black. If you lack financial management skills, consider having a small business consultant and professional bookkeeper or a certified public accountant to help you manage your finances.
7. Rapid development and expansion
Every time and after that the start of a business grows far beyond what it can sustain. You open a website with a trending product and all of a sudden you get orders that you can’t fill. Or maybe the opposite is true.
You are so confident that your product is taking the world by storm that you will invest heavily and make a lot of inventory and you cannot move it further. These are just some of the goal setting shareware that you can use.
How to avoid development and expansion problems.
Professional development and expansion takes more careful and strategic planning in the form of day-to-day operations. Even well-established and successful commercial franchises such as fast food restaurants and convenience stores do careful research and planning before opening a new location.
They measure local and regional demographics and spending trends, future development plans for the region and other important issues before moving on. To avoid failure, you need to focus on your business. The same should be done.
Do all the research to make sure the timing is right and that funding is available for expansion. Make sure the initial business is stable before expanding into additional space.
Don’t list orders, you may not believe you can sell, but you already have a plan in place to fill orders quickly. The key to successful growth and expansion – and avoiding business failure – is strategic planning.
If 50% of new businesses fail, then 50% of new businesses can succeed. Starting a business is an exciting endeavor that requires a well-defined product or service and strong market demand.
Whether you want to start a new business or you are already running a business, you should understand that success depends on careful planning and financial management that starts before the start and continues throughout the life of the business.