What has been often observed is that Businesses fail for many reasons. The following list includes some of the most common reasons:
1 – Lack of Planning – Businesses fail because of the lack of short-term and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and keep a track of the results. The right plan should include specific to-do lists with dates and deadlines. Improper planning can damage your business.
2 – Leadership Failure – Businesses fail because of poor leadership. Leadership must be able to make the right decisions most of the time. From financial management to employee management, leadership failures can trickle down every aspect of your business. The most successful entrepreneurs research, learn and reach out to Coaches/Mentors to improve their leadership skills.
3 – No Differentiation – It is not enough to just have a great product on the shelf. You have to also develop a unique value proposition, without which you are likely to be demolished to rubble in this competitive world. You need to evaluate, what sets your business apart from the competition? What makes your business unique? It is important that you understand what your competitors do better than you. If you fail to differentiate, you will fail to build a brand.
4 – Ignoring Customer’s Needs – Every business will tell you that the customer is #1, but only a small percentage actually follows it. Businesses that fail is because they more likely lose touch with their customers. Keep an eye on the trending values of your customers. Find out if they still love your products. Do they want new features? What are your customers saying? Are you lending an ear to them? Organizations need to create an experience for their customers. This will also help companies to foster Branding for themselves.
5 – Inability to Learn from Failure – We all know that failure is usually bad, yet it is rare that businesses learn from failure. Realistically, businesses that fail, fail for multiple reasons. Often entrepreneurs are oblivious of their mistakes. Learning from failures is difficult but proves to be reward-reaping in the long run.
6 – Poor Management – Examples of poor management are the inability to listen, micro-managing – lack of trust, working without standard or systems, poor communication and lack of feedback. Entrepreneurs need to take an exit route from the ego-trip assuming they know everything. Employee’s and customer’s feedback are also important and must be considered for the growth of the company.
7 – Lack of Capital – It can lead to the inability to attract investors. Lack of capital is an alarming sign. It shows that a business might not be able to pay its bills, loan and meet other financial commitments. Lack of capital makes it difficult for the business to grow and it may jeopardize the day-to-day operations.
8 – Premature Scaling – Scaling is a good thing if it is done at the right time. To put it simply, if you scale your business prematurely, you will destroy it. For example, you could be hiring too many people too quickly, or spending too much on marketing. Don’t scale your business unless you are ready.
9 – Poor Location – Poor location is a disadvantage that can be too expansive to overcome. If your business relies on foot traffic, location is a strategic necessity. A poor location might make your customer acquisition costs too high.
10 – Lack of Profit – Revenue is not the same as profit. As an entrepreneur, you must keep your eyes on profitability at all times. It is the profit that equips the business to grow. According to Small Business Trends, only 40% of small businesses are profitable, 30% break even, and 30% are losing money. Hence regular check of financial ratios (A kind of financial health check-up) is of utmost importance.
11 – Poor Financial Management – Use professional accounting software to manage the company accounts. Keep records of all the financial records and always make decisions based on the information you get from real data. Know where you stand all the time. If numbers are not your thing, hire a financial professional to explain and train you to understand, at least the basics.
12 – Lack of Focus – Without focus, your business will lose a competitive edge. It is impossible to have a broad strategy on a budget. What makes businesses succeed is their ability to quickly pivot and the lack of focus leads to the inability to make the necessary adjustments.
13 – Personal Use of Business Funds – Your business is not your personal bank account. Therefore, refrain from withdrawing money to buy a new iPhone or any other personal expense.
14 – Macroeconomic Factors – Entrepreneurs can’t control macroeconomic factors. Common macroeconomic factors are business cycles, recessions, wars, natural disasters, government debt, inflation and business cycles. However, with proper planning and fund allocation, your business can still succeed in bad times
15 – Wrong Partner – It’s no secret that it is easier to succeed in business with the right partners. A wrong business partner will, at the very least hurt, or, at worst, destroy your company.
These are some of the reasons for the failure of a business, however, the list may be endless. Under this program, you will learn more about why businesses fail and how to fortify your business from falling between the cracks.