In the news, there are regular reports about businesses that are going under for a wide range of reasons. But what are the common reasons why businesses fail and how do we prevent these issues from showing up and becoming a problem in our own businesses? Here are several reasons why businesses commonly fail.
- Overconfidence. When you see another business thriving, it's easy to assume you'll enjoy that same level of success. But what about the experience level of the other business owner? Does it have a better location? What about community confidence and loyalty? Don't overestimate your potential for success.
- Started for the wrong reasons. Don't start a business because you don't want a 9-5 job, to avoid dealing with other issues in your life or because you think you'll make a lot of money quickly. Starting a business for the wrong reasons only leads to frustration and lack of commitment to your business.
- No unique offerings. There can only be so many metal fabrication companies in a town. What makes your business opportunity unique from the rest of the pack? Can you specialize in plasma cutting or precision metalworking? Make sure you can promote your business on the differences that make it awesome.
- Not enough funding. Many entrepreneurs overestimate their expected income and underestimate their projected expenses, especially during the startup phase. These poor projections can lead to money trouble fast. Don't forget about potential cash flow issues as well when planning your business finances.
- Failure in communications. Whether it's setting out a clear business plan, communicating with clients over customer service issues or creating effective marketing messages, you need to make clear, compelling communications a priority.
- Bad planning. Failing to plan is planning to fail. Make sure to plan out every possible aspect of your business to ensure you have a fall-back plan for most situations. Remember, 25% of businesses in a disaster never open their doors again, so make sure you have contingencies in place.
- Bad investments. Every business has a piece of equipment that is an absolute headache, breaking down on a regular basis or producing sub-standard results. Take the time to read reviews on equipment and invest in quality machinery that will out-perform your expected workload.
- Inexperienced or untried leadership. When a company starts to succeed, it's common for there to be problems as leadership tries to grow with it. Take the time to learn through outside education or a solid mentor program to gain the knowledge needed to grow with your business.
- Not in touch with clients. The eclectic reclusive inventor is a classic character in fiction, but it shows up in business as well. It's tempting to go into seclusion while developing a new concept, but that concept will then be formed without feedback from the people who will be buying it.
- Expanding too quickly. When a business has a sudden burst of growth, it's tempting to over commit to that growth, but remember that your business is all about the long haul, not fast growth that may fizzle out before delivering on your new investments.
By keeping these key issues in mind, you can help steer your business clear of common failure points. Taking the time to effectively plan, communicate and execute your business goals helps you keep your business alive and thriving. Ensure that you schedule time to take care of these vital tasks to keep your business healthy.