Sometimes businesses just fail. It’s a harsh reality, but it happens more often than not. The trick to preventing your business from failing is to understand why so many others do.
In most scenarios, it’s not just one thing; there are almost always numerous reasons why businesses fail to become successful, or suddenly fail after a promising start. An entrepreneur could have the greatest idea in the world, but if he or she fails to properly follow the proper steps to turning that idea into a successful business, then it’s all for naught.
Here are a few of the most common reasons why businesses fail:
- Not enough demand for the product or service. Simple enough; there just aren’t enough people willing to pay for your service, and profits don’t come in. The old adage that sales cures all is inaccurate. More profit is what keeps you afloat, if more sales drives more profit – awesome! But, this tends to be a problem for small companies starting off and trying to compete against large corporations right off the bat. You need to be able to determine your niche, and how you can market to that niche to find early success. To create that demand, you must have a strategic marketing plan and not succumb to “tactics everyone else uses….”
- Inability to manage growth. This might be a surprising reason for failure, but it’s more common than you’d think. In this scenario, a small business sees some big-time early success, but expands too quickly and soon becomes too big to manage. Sometimes in the early stages of a business, less truly can be more. Ramping up too quickly is a classic mistake. The talent it takes to manage $250,000 in revenue is not the same talent it takes to manage $1.25 million!
- Poor accounting. You’d be amazed at how many small businesses engage in terrible, negligent accounting practices. Shoddy bookkeeping, bad math, you name it and it happens. Even if you’ve hired a third party to take care of your accounting, you can never assume that they’re doing the best possible job. Always double check, and keep accurate records. Set goals, set firm targets and gain the understanding of your team – it’s critical they be in-the-know. Then report performance and expect accountability. It’s all about the numbers!
- Poor management. Maybe it’s the fault of the owner or manager that the business isn’t taking off as planned, or is seeing a sudden decline. A lack of vision or planning, low operational standards and more can be key contributors to the failure of a business. Who hasn’t started a business because they loved the product or service like a great hobby? When that hobby turns into a business to manage…..the skill-set needs to follow.
- Poor marketing. You need to be able to extend yourself into numerous marketing channels if you want to have any hope of people finding your business. Stay ahead of the curve with technology as well, so you are constantly on the cutting edge in customer communication. Those businesses that fall behind are likely to stay behind. However, make sure the technology you use or the software you incorporate is effective, efficient and does not need you sitting behind a monitor. Also, just like your accounting, make sure you have reports that track the effectiveness of your marketing – you’ve got to be able to make decisions from intelligence and not from emotion.
- Inability to adapt to market trends. Perhaps your business is in a declining market and you have sudden issues of lack of consumer demand. Maybe there are new trends in your market that you have been slow to adapt. Whatever the situation, businesses need to remain flexible and adaptable at all times, or they risk being left in the dust. Get out from behind your four walls and talk to your customer in their environment, attend conferences or seminars to stay fresh, work on your business and not just in it. Always be educating yourself for tomorrow.
“Where performance is measured, performance improves. Where performance is measured and reported, performance improves dramatically. Where performance is measured and reported publicly, performance improves exponentially.” ~ Clate Mask, CEO & Co-Founder of Infusionsoft
Understanding these reasons for failure is a great method of concentrating on how you can make your business a success. Contact us today at Viral Solutions for more information on how you can avoid failing with your company, and instead achieve the goals you established at its outset.