Five Reasons Your Business Will Fail Then Die (And How To Avoid Them)
Why is it that so many businesses fail while so few succeed? What are the main reasons why your business is likely to fail then die? How to avoid them so it won’t happen?
According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn.
But why? What can we learn from the colossal amount of failure with business that we can apply to our own business aspirations?
One of the great mysteries of entrepreneurship is why businesses fail.
ImportantSome people start one successful business after another while others fail to succeed. The worst part about a failing business is that the entrepreneur is almost always unaware of it happening until it is often too late.
It turns out that some entrepreneurs live in a land of denial while others are unaware of their mistakes.
It makes sense because if the entrepreneur really knew what he was doing wrong, he might have been able to save the business.
If you don’t want this to apply to your business, there are some steps you need to take to avoid failure.
WarningTo safeguard a new or established business, it is necessary to understand what can lead to business failure and how each obstacle can be managed or avoided altogether.
Clearly, you won’t fail unless you entirely give up. It won’t really matter how many times you fail if you hit it out of the park just one time.
ImportantFailure happens, sometimes you win and sometimes you learn, but as an entrepreneur or business leader you have responsibilities for your employees and fellow directors, you have to do everything you can to guard against it.
As an entrepreneur, it is your own duty to devote yourself to avoiding these crucial mistakes that are the causes of business failure.
Thus I give you five reasons your business might fail and more importantly, what you can do to avoid it happening to you. Read on!
They Promote Poor Leadership
Your business can fail if you exhibit poor management skills. You will struggle as a leader if you don’t have enough experience making management decisions, supervising a staff, or the vision to lead your organization.
Most businesses lack strategic and effective leadership.
WarningWithout real experience in the business world, most newcomers to the entrepreneurial fray struggle with the overwhelming amount of demands placed on them. When problems do arise, which they often do, navigating those murky waters becomes an impossible task.
Leadership is about motivation and inspiring the troops with a bold vision.
ImportantIt starts with building rapport by helping people fulfill their aspirations within the company. Without it, it’s hard to make good decisions or take effective actions. Leadership affects every aspect of a business, from how productively employees work to how operations are organized.
Failing to manage people arises from failure to listen to suggestions or complaints, and providing harsh criticism under the guise of constructive feedback. This lowers productivity and teamwork. The right leaders don’t just lead others to leap like a lion; they look at the wildlife in its entirety.
Wake up to realize it’s your baby. You’re the founder. Which makes you the leader.
Matters not if you’re a business of one, or 1,000. Lack the ability to strongly relate with people? Gain the skills necessary to do so. Struggle with anger issues? Solve it with anger management.
Leaders are not just born; they are made through experience.
It’s not enough for businesses to have leaders who are simply good at “leading” with no strategy or rapport. In fact, many leaders end up micromanaging their employees, resulting in low morale and productivity.
Motivation is a driver, but effective continuity from a weathered front-runner steers the troop.
ImportantA business needs leaders who pay attention to the little things–from constructive criticism to employee needs. These little markers add up to effective leadership.
They Don't Listen To The Voice Of The Market
Your business will fail if you neglect to stay in touch with your customers and understand what they need and the feedback they offer. Your customers may like your product or service but, perhaps they would love it if you changed this feature or altered that procedure.
What are they telling you? Have you been listening? Or is the market declining? Are they even still interested in what you’re selling?
ImportantThese are all important questions to ask and answer. Maybe you’re offering a product or service that is fallen well below trend. If you’re not addressing the consumer’s pain points, you probably don’t understand the consumer very much. And if that’s the case, then you have no business selling until you do really do understand them.
If you can’t connect with your target audience, your business will fail.
WarningAn inability to connect with your demographic means that not only are you unaware of what your potential consumers want and need, but you’re also oblivious to how you can best help them.
You will ask your clients, “Where will you play and how will you win?”. In short, it’s vital to understand your competitive marketspace and your customers’ buying habits. Answering questions about who your customers are and how much they’re willing to spend is a huge step in putting your best foot forward.
Your customer holds the key to your success deep in their pain, behavior, dreams, values and the jobs they are trying to accomplish.
ImportantComplete understanding of your customer is imperative to your success. Listen — in my mind entrepreneurs must walk 1,000 miles in the shoes of their customers. Not 10. Not 100. One thousand.
If you want to be a smart business owner, you must be able to project the consumer’s wants and needs, and deliver to them in ways that exceed their expectations.
It’s not always about giving consumers something unique; you would want to know what your target market looks for regularly and how much they are willing to spend. You also need to understand at least how your service fosters customer loyalty.
They Don't Know How To Plan
Managers and directors can easily be distracted with too many minor tasks every day that their focus tends to shift, their thinking shrink. A good manager or director will never lose focus on what’s important and where their priorities are.
The weakness is when you get caught up in trivial perfectionism in the tasks which can and should be left to others.
WarningThe short-sightedness becomes obvious when DOING rather than BECOMING becomes an obsession. Take charge and do not leave any room for lack of execution. Get someone strong to hold you accountable on a daily, weekly or monthly basis, or join a mastermind group.
Lack of planning is when you ignore the value of planning and don’t bother to learn the methodology of planning.
ImportantA good plan should include both short- and long-term goals as well as a way to measure goals and results. It should also have clear to-do lists, benchmarks, and milestones.
It all begins with planning. The biggest mistake many entrepreneurs make as they start their ventures is that they don’t sit down and write a business plan. The goal is to keep it concise. Don’t treat it like a business school project. You can do a great business plan in one or two pages.
Business owners who fail to address the needs of the business through a well-laid-out plan are setting up their companies for serious challenges.
WarningSimilarly, a business that does not regularly review an initial business plan — or one that is not prepared to adapt to changes in the market or industry — meets potentially insurmountable obstacles throughout the course of its lifetime.
Creating and maintaining a business plan are key to running a successful company for the long term.
A company’s specific business model and infrastructure should be established long before products or services are offered to customers, and potential revenue streams should be realistically projected well in advance.
They Lack Of Long-Lasting Value
You may have a great product or service for which there is strong demand, but your business is still failing. It may be that your approach is mediocre or you lack a strong value proposition.
What sets your business apart from competitors? How do you conduct business in a way that is totally unique?
ImportantDevelop a customized approach or service package that no one else in your industry is using so you can present it as a strong value proposition that attracts attention and interest.
Successful companies succeed with this main ingredient: exceptional delivery of goods.
First a promise, then the steady production but most of all, mind-blowing upkeep of goods. A company fails to succeed when it begins to underdeliver.
Be a value deliverer, not a mediocre or just-getting-by establishment.
Add value to the goods you sell or the services you provide, outsmart your competitors, and make sure your customer is happy doing business with you. If fail to differentiate, you will fail to build a brand.
Staying afloat is exponentially harder when competition is fierce and smaller businesses have a bull’s eye on their backs. If smaller businesses can’t compete against their larger counterparts, they need to find ways to pivot and stay in business. To do that takes a keen business sense and true guts.
Whether you are trying to turnaround an underperforming business or a failing business, knowing what your competitors are up to can save your business.
ImportantThe more you know the greater the chances are you will succeed in turning your business around. Remember the more you know about them than what they understand about you, then and only then are you ready to compete by taking away customers from your competitors.
You must clearly define your value proposition. Once you understand it, ask yourself if you are communicating it effectively.
If it is your investment that you’re concerned about, remember that you profit only by creating value for your customers and that’s where your focus must be.
They Are Financially Illiterate
You must know, down to the last dime, where the money in your business is coming from and where it’s going in order for your business to succeed. Your business can also fail if you lack a contingency funding plan, a reserve of money you can call upon in the event of a financial crisis.
It’s easy to spend when the coffers are full. But having an acute sense to control the company’s expenses is imperative.
Much of this comes back to the founder’s personal money habits. Are they millionaire habits? Or are they detrimental? When the expenses spiral out of control, it’s impossible for the business to survive.
Lack of capital is an alarming sign.
ImportantIt shows that a business might not be able to pay its bills, loan, and other financial commitments. Lack of capital makes it difficult to grow the business and it may jeopardize day-to-day operations.
Startups and new businesses need to move swiftly without spending tons of cash to figure out their secret sauce.
Using tools and methodologies such as Minimum Viable Products, Lean Marketing and Experimentation is critical. Think and move quickly, ‘fail fast’ if you’re going to fail at all, and nail your business model.
Revenue is not the same as profit. As an entrepreneur, you must keep your eyes on profitability at all times. Profit allows for growth. According to Small Business Trends, only 40% of small businesses are profitable, 30% break even, and 30% are losing money.
Making proper financial decisions is one of the most critical balancing factors to ensure entrepreneurial success.
WarningSome entrepreneurs reward themselves by spending big. Avoid these mistakes by sticking to proper budget planning and resisting the urge to spend. Chances are, it’s too soon for you to be forming frivolous spending habits.
In the realm of business, true success takes patience and accountability skills.
Many business owners do not keep a record of their sales on a daily basis. That’s a big misstep. Every business owner needs to plan and manage every project and never compromise the monitoring of expenditures.
There are other factors or reasons an entrepreneur might experience business failure but the above 5 are the major causes of business failure.
If you can overcome the listed causes, you are not far from being a success in any chosen field in business.
Keeping a business and taking it to the top takes plenty of skills, research work, extensive experience, and professional know-how. Wanting to own a business is one thing; maintaining and continuously strategizing to keep it from failing is a completely different story.
Running an organization is no easy task.
ImportantBeing aware of common downfalls in business can help you proactively avoid them. It’s a constant challenge. We know, but it’s also a continuous opportunity to avoid becoming one of the statistics.
Yes, it is true that most businesses fail. It is also true that many of them succeed.
WarningThose that succeed are not the result of miracles. Entrepreneurs who lead businesses to success understand that it takes a carefully planned and executed strategy. A little luck also helps.
Failure is a topic most of us would rather avoid. But ignoring warning signs of business trouble is a surefire way to end up on the wrong side of business survival statistics.
What you don’t know you don’t know can trip you up the first time you start a business, but by learning what you missed the first time, you will increase your likelihood of success when you try again. Share your thoughts in the comments section below!