Top 6 Pitfalls of Business Failure and How to Avoid Them

FAILURE IS NOT THE END

The Six Pitfalls of Business Failure and How to Avoid Them

Failure is always followed by the feelings of disappointment, unhappiness and sometimes shame, but the simple truth is that failure is not the end. Failure is a stepping stone to greater heights and the end result of a learning process. Anyone who has never made a mistake has never tried anything new.

I have had my fair share of business failures and I know that the feelings are. You will think of the wasted efforts, the shame and sometimes the debts incurred. Therefore, when you’re starting a new business, the last thing you want to focus on is failure. But if you address the common reasons of failure up front, you will be much less likely to fall a victim to them.

HERE ARE THE TOP SIX REASONS WHY BUSINESSES FAIL AND THE TIPS FOR AVOIDING THEM

According to statistics published by the Small Business Administration (SBA), seven out of ten new employer-establishments survive at least two years and 51 percent survive at least five years. This is a far cry from the previous long-held belief that 50 percent of businesses fail in the first year and 95 percent fail within five.

Failure is not the end. I have had my own bitter experiences of failed business but I have never allowed failure to defeat me hence I am still on the move

1.       WHEN THE AIM OF STARTING THE BUSINESS IS WRONG FROM THE ONSET, THE BUSINESS IS BOUND TO FAIL

If the sole aim of starting your business is to make a lot of money or you don’t want to be answerable to anyone then you are in business for the wrong reason. You need a rethink. If your reason for starting a business is one of the under listed reasons, then you are most likely to succeed.

-           You are doing a business that you have a passion for. This is something you so much believe in because of your education, study, innate tendency or because you have identified a need to be met.

-           When you already know the failure does not mean defeat. You have learnt from your mistakes and every mistake becomes a lesson to success the next time.

-           You are physically fit and possessed the needed stamina to face the business challenges.

-           When you have the drive, determination, patience and a positive attitude to succeed.

-           You like your fellow man and put this in mind when conceiving your business ideas and plans. 

2.       LACK OF PLANNING

Sometimes, people have all of the right intentions when starting a business, but many times people get anxious, excited and start the business right up with little or no planning. Having a business plan laid out before you lunch your business is key. This is extremely important if you are looking to get some help funding the business at the start up. When you are trying to get a loan to launch your company almost all banks want to see your business plan. This is the first thing anyone should do when starting a new business endeavour. Lack of planning can hurt in many other ways as well. Another example is when you do not having enough products to meet the possible demands you may encounter. Thinking everything through beforehand is a must, as well as knowing what you need to start off successfully. There are many organisations that can assist you in starting a business for the first time. Seeking out one of these types of organisation to help you get going can be a big help. It will definitely be good that you have planned everything out so your business will have a great chance of been successful.

Good components of planning may include the followings: needed workforce, potential problems and solutions, marketing, advertisement, sales and expense target etc.

3.       POOR MANAGEMENT

Many business fail due to poor management. Many new business-owners fail because of lack of relevant business and management expertise. One of these could be bad management of finances which can cause a business to go downhill really fast. This is one of the reasons it is a good idea to hire an Accountant to help manage the financial part of any business. This professional can help reduce business failure because of bad financial management. Another example of bad management is hiring people to run the business for you without your paying attention to what is going on. Some people think they can just start a business and hire people to let them run it right from the initial stage. In most cases, this is just setting oneself up for failure. If you do hire people to manage and help run the business, you should still always know what is going on. You also need to trust the people in-charge of your business. Monitoring every aspect of your business will ensure that things go well. This is the only way to do it at the beginning. 

4.       INSUFFICIENT CAPITAL

Another very important reason why businesses fail is because of insufficient capital. Most business owners underestimate how much money would be needed and they are forced to close down before they have even had a fair chance of succeeding.

It is very important to know how much finance your new endeavour will require; not only the cost of starting, but the cost of staying in business. It is also very important to know that many businesses take more than a year or two before stabilising. This means that you will need enough funds to cover all aspects of the business until it is stable enough to take care of itself.

5.       LOCATION

Location can be extremely important when you are starting a new business. You could have an amazing business idea and a great building but if your location is out of the way and it cannot be found easily by people (customers), your business could turn out bad. You could have a great store or any other type of business that is amazing but if it is not in a good location the business will most likely fail no matter how good it is. It is good to find a place where many people will see your place of business. You will get walk-ins and people coming by to check out what you have to offer. Sometimes even a struggling business can pull it together and survive if it has the right location. Factors such as the location of competitors, condition and safety of building, where your customers are, accessibility, local incentive programs for business start-ups in specific targeted areas and others must be considered before locating your business.

6.       OVER EXPANSION

Over-expansion often occurs when business owners confuse success with how fast they can expand their business. Before expansion can be implemented, a careful study must have been put in in place based on an established solid customer base and a good cash flow. With the right systems and people in place you can focus on the growth for your business.

In conclusion, the success of any business is dependent on the business owner.