Being your own boss is a lot more pleasurable than working for others, obviously. Everybody wants to be their own boss but that brings challenges of its own. The inflation at the present time in Pakistan has caused people to incline towards small businesses so they have an additional source of income to support themselves financially.
Starting a business is not as easy as you might think. You might have seen businesses up and running, becoming successful and then shutting off completely. Ever wondered what causes a business to fail? What factors lead it to collapse?
In this blog, you will come to know of the main reasons leading to business failure and different ways you can avoid them.
Startup Failure Statistics
According to research conducted by Small Business Administration (SBA), about 33% of new businesses fail in the first two years. Another 50% come crashing down in five years time. Only 33% last upto ten years or longer.
Reasons Why New Businesses Fail
Starting up a new business is not everyone’s cup of tea. There are many hurdles an entrepreneur might face in the business world. Some of the reasons are given as under:
Lack of Planning and Research
It is vital that you know the industry you are stepping in. Some people start businesses without any long-term planning or proper research. You are bound to find yourself in competition when you step into the business world. Any business you are thinking of starting up, there is a good chance that it is already out there somewhere. This means that the people who are running it have a good deal of knowledge about it.
What makes you different is how well you have researched and planned your business. Research requires effort. Digging for something important which the competitors have not given much thought to or are not paying much attention to can make you different from others. If you do not have a proper business plan, your business might come crashing down sooner or later.
Financial Hurdles
“Chase the vision, not the money; the money will end up following you.” –Tony Hsieh, Zappos CEO
One of the biggest problems you might face while starting a business is the financial problem. People mostly do not consider financial planning and run out of money before time. If money initially meant to be spent in the next six months is spent in six weeks, it would obviously lead to bankruptcy. For example, Airlift, one of the famous startups in Pakistan, recently shut down due to a financial crisis.
Your financial planning should create enough revenue to pay your employees, your rent, utility bills and should generate you profit. This is only possible through proper planning and strong management. When the cost of production and marketing is higher than the revenue generated, you would have no choice but to shut down your business.
Lack of Flexibility
People often refuse to make any changes in their business plans. Remember, being rigid will get you nowhere. If your customers demand something different than you offer, consider changing your business plans if possible. There is always room for changes and improvements.
You should stick to the plan but if something better comes up, give it a chance. Changing according to what time and your customers demand is essential, otherwise failure would not take long to come your way.
Take Apple, for example, they began by selling computers but came to know that they could never get ahead of Microsoft in the computing business. So they decided to introduce other cool technology like iMac. That is what got them ahead and led them to stay and be successful.
Lack of Expertise
Setting your foot in a business in which you have less or no experience or expertise is a risky thing. Other than planning and investment, business requires skills. If you do not have the skillset of the business you are planning on running, there is a minimum possibility for you to rise above the stakes.
Weak Partnership
It would be unwise to start a business all alone. It would take heavy investments and plentiful effort to do everything on your own. Therefore, it is recommended that a business be started with partnership. Before signing someone as your business partner, make sure that you run a thorough background check. See if your and your partner’s skills would prove beneficial to the business. Proper terms and conditions should be made and a written contract should be signed. Weak partnership causes businesses to collapse so it is important to remain mindful while choosing a business partner.
Bad Marketing
Marketing is a job to be taken seriously in the business world. People often open businesses but do not pay much attention to its marketing and advertising. In these modern times, social media presence is extremely important to be taken care of.
If you are looking for digital marketing professionals, click here.
To learn how digital marketing can help you grow your business, read: Benefits of Using Digital Marketing Services
Inadequate or Weak Management
Once you start taking more responsibilities than you can handle, it all goes down the drain. Do only as much as you can easily manage. If you think of expanding your business as soon as you open it, you might not be able to handle all the pressure.
Secondly, it is important to hire skillful employees who can establish effective communication with the customers. You might know the drill but if the employees you hire do not fulfill their responsibilities, you are in for a big loss. You should have command over your team and work towards making it better. Poor management and leadership could lead to failure in business.
Ignoring The User Feedback
As the old saying goes: The customer is always right.
Your customers make you. Their feedback towards your product or service is highly significant. When you tend to ignore the user’s feedback, you are neglecting the user’s needs. If the needs of the consumer are not met, the chances of your business failing becomes higher.
Ways to Avoid Business Failure
There are some important things you should be well acquainted with if you want your business to succeed. Here are some of the things you should focus on to give your business a kickstart.
- Set your goals
- Learn about your industry
- Beware of your competitors
- Maintain an active social media presence
- Know your skills and how they can help in business
- Value your customer’s feedback
Success does not come overnight. It is important to remain patient and keep in mind that establishing a business takes time. If you want to become a successful businessman, keep in mind these tips and don’t give up.
That is all folks! We hope this guide was helpful for you! If you have anything to say on this topic, comment below and share your thoughts with us.
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