When you start a business, you wish for it to run indefinitely. However, sadly, it’s common for businesses to fail.
In fact, 90% of all startups fail within the first five years of business. This is a huge figure that shows just how much is wrong with how we handle business.
We sat down with the team at PowerJackMotion to understand what can cause a business to fail. According to them, “For you to avoid business failure you need to know the mistakes that cause businesses to fail.”
Let’s have a look:
1# Not Having the Right Drive to Run a Business
One reason why most businesses tend to fail is a lack of passion and enthusiasm from the owner’s side.
Having the right drive to run a business is necessary. However, sadly, most of us are motivated by profit and not the fun of running and maintaining a business. Plus, when you lack passion, you tend to ignore things, which can lead to failure.
The solution lies in taking things seriously and choosing a business that you have a real interest in. For example, if you like cars then you should ideally start a business related to vehicles. It can be anything from selling cars to maintaining cars, but for as long as it’s related to what you love, chances are you’d be more interested in it.
2# Inferior Management
Another mistake that causes businesses to fail is a lack of a good management. Poorly managed businesses have little to no chance of surviving in the market among competitors.
Some businesses neglect what they lack in the management sector which becomes a reason for their downfall. Moreover, businesses with poorly skilled staff and owners have no luck surviving in the market.
Having no competent professionals and skilled staff to run the business is also a sign of a poorly managed business. The solution lies in hiring the right people to run the business. Plus, you can also provide training to your team members so that they’re better equipped to handle the business.
3# Little to No Planning
Not having a business planned out perfectly can lead to its downfall rapidly. Having no planning is a major mistake that causes a business to fail hence it’s important to have everything planned out before taking major business decisions.
The solution lies in taking your time and doing research. Don’t start a business right away. Sit down and know how you’ll acquire capital, how you’ll spend money, how long it will take you to achieve breakeven, etc.
4# Insufficient Funds
A lack of funds can cause any business to fail. The cost of running a business is only going up with inflation at an all-time high.
You need to manage your funds and keep an eye on cash flow. Your revenue must always be higher than your expenditure, otherwise, you’ll fail.
The solution lies in reducing expenditure and finding ways to increase revenue.
5# Location Problems
A good location is critical to the success of a business. You have to understand what a good location is. We’re not talking about the office environment. Of course, it’s important as well, but the location is a different thing altogether. It’s about where your office is located in the city.
You should choose a location that makes it easier for your clients to reach you. For example, if you’re starting a restaurant then look for a place that has other eateries nearby so that people can easily find you. Plus, it should be easily accessible even for your staff as well, otherwise, you may have trouble in finding the right team.
All these factors should always be kept in mind before selecting a location. Making a mistake in choosing the right location may eventually cause your business to fail.
However, location is not of importance to some businesses, especially businesses that do not need local clients. If your clients are out of the country then you don’t have to worry about how they can reach you.
6# No presence on the WWW
Having a social media page or a website comes with a number of benefits. Potential customers can look you up on the internet and check out all the products and services your business provides.
This can also increase the number of customers you already have. About 70% of the US adult population has access to the internet. Plus, 90% of them are said to indulge in online shopping.
If you want to reach this audience then you must be available on the internet, even if you do not sell online. This is important because people often use the internet to search for products and services and not only to buy online.
Last on the list is overexpansion. It’s important to grow but you must know when to stop growing.
Often, business owners think that it’s time to expand when their business is successful but they don’t realize that expanding means investing a lot more than before. Plus, you’ll need more inventory and staff as well.
All this does not come overnight, so be clear when it comes to expansion.