According to Bloomberg, business failure rate within the first 18 months is at 80%. The majority of business owners start their businesses with passion and high expectation to succeed. However, many of these businesses tend to fail within five years of operation. The rate of small business failure can be generally lessened if only small business owners can pay attention to the factors that lead to business failure.
Here are some of the major reasons why small businesses fail and how to avoid them.
Bad business choices. A common issue regardless of industry. Think long and hard before deciding on an action that you will implement in your business. Consult with your business partners and/or professionals for an advice. This will save you the stress of cleaning up the mess that may result from a bad businesses choice.
Lack of managerial skill. Business owners that lack the skill to manage its people and company processes necessary for business growth are bound to fail. Managing business without the right set of skills in place more often than not leads to its closure. If you want to succeed, you must be able to efficiently and effectively handle your employees, capital, production line and so on; even better, the business owner should consider hiring a good manager to run a business.
Harsh economic, government, and monetary policy. This is an issue for both big and small businesses. Entrepreneurs need to be extra vigilant and secure their business against the dynamic policies. Since you cannot really do anything to alter or even influence the upcoming policies, you need to be prepared to quickly switch your business to avoid getting hit by the negative effects of unfavourable government policies. Things such as government policies must be closely monitored so you can prepare yourself for taxation, levies, and duties, exchange rates, inflation, and others.
Difficult competition. Many small business owners find it hard to deal with competition because many profitable start-ups have shut down because of fierce competition. Even if you’re an inventor of a new, unique idea, your competitors won’t stop from swooping in and starting the same type of brand. What you can do is keep an eye on your competitor and utilize creative and value-laden ideas to make your customers happy.
Inability to adapt to the trend and changing technology. Technology is something all business needs to invest in, regardless of industry or type. It’s obvious that most of us are uncomfortable with change, some even resist change while others fully embrace it. Change is constant, which means that either you align your business with the trend and go on top or remain stagnant and ultimately fold up.
For example, if your business still doesn’t have an online presence aka website, then you are severely losing sales and growth. Not only are there a plethora of web developers out there, you can also make use of an easy-to-learn and comprehensive website builder from Crazy Domains to create your website and start selling or marketing your brand online.
Building your own website isn’t just more affordable, it allows you the freedom to do what you want when you want, and customize it as much as you can based on your business preferences and needs.
Take note that a lack of entrepreneurial skill, while a major factor why businesses fail, shouldn’t stop you from learning the necessary skills such as leadership, cash flow management, sales, and others. Note the reasons why businesses fail, learn from it, and strive to avoid them while growing your business. Best of luck!