Failure is a subject that a lot of us prefer not to discuss, but it is an important topic we can use to help us adapt, improve, and avoid common pitfalls in the future. New businesses can face difficulty when it comes to survival, but with knowledge and planning, they can give themselves the best chance of success. We’ll look at some of the issues that cause businesses to close, and how to best prevent them.
Table of Contents
Insufficient finances
Having the finances available to run your own business is essential for success, if you’re trying to start a business with insufficient funds, you’re going to come up against a few issues. If your business is a new venture, you’re going to need to budget before you can get started, so that you’re aware of how much you’re going to need to cover all your expenses. Whilst there is financial help for businesses available, like merchant advance and short-term loans, poor money management means you’re more likely to find yourself in financial difficulty and could mean that your business faces closure.
Creating a budget for your business can help you to manage your finances, as well as your cash flow. You can do this yourself by developing a detailed plan of your outgoings, like paying for your staff, premises, taxes and stock, and your predicted monthly profit. Doing this means you’ll have a clear idea of where your money is going, if you need to cut back in certain areas, and how much you’re making as a profit for the business to thrive.
Failure to understand your customers
Another issue that can lead to business closures is the failure to understand your customer’s wants and needs. Your customers are one of the main factors that keeps your business afloat, so failure to consider how they buy and spend can be disastrous. It is also important that businesses understand the market they’re in – for example, if your prices are higher than your competitors, you’re likely going to drive your customers away. If you’re offering the wrong product to your target market, this could also result in them shopping elsewhere.
When running a business, market research is essential to avoid these common pitfalls. Studying the market you’re in and how you compare to others means that you can compete successfully and give your business the best chance of becoming a success. Listening to your customer’s needs, and providing them with the best solution, product or service means they will keep coming back.
Not profitable
Profit keeps a business ticking over – without this, businesses will likely have to close. Starting a business in an already saturated market means that you’ll have to work harder to make a profit, with so many others offering the same product. Unfortunately, not all business ideas can be made to be a success, no matter how much passion or drive you have. Cash flow is key, and without this, businesses will not be able to operate.
When starting a business, having a unique selling point will help you to stand out from the rest. Think about how your business is different, and how your product or service is better for your customers than your competitors. Creating something unique means you’ll stand a better chance of being remembered and becoming more popular within your market.
Poor management
If you’re opening a new business, before you begin you will need to know how to manage. One of the common failures that lead to business closures is the inability to manage your resources. Management goes hand in hand with a few things such as planning, organising (whether that’s staff or stock), directing, and communicating. If you’re failing in one or more of these areas, you may find that your business begins to suffer. Knowing how to manage your finances is critical, as well as knowing how to manage your staff so that your business runs smoothly, and collaboratively with no room for error.
You can avoid any common issues that come with bad management by planning effectively. You must make sure that you have enough resources to cover what you need, you must also keep on top of your budget, as well as make sure you’re communicating clearly with your staff, and directing them when they need help. Business owners can take charge of this themselves or employ a manager to help.
Lack of strategy
One of the first things to do when starting a business or working towards making your business a success is to develop a strategy or plan to get you where you want to be. Not having a strategy in place means you won’t have anything to work towards. This can be detrimental as you won’t have the knowledge to grow your business, which could result in a lack of profit, as well as not having the ability to utilise the tools and skills that are available to you.
It is said that we are more likely to achieve our goals if we write them down. Creating a business strategy or plan means that you can map out exactly what you want to achieve and how you are going to achieve it. You can adapt it over time, or share it with business partners and employees, so you are all clear on how you’re going to make your business successful.
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