Most times, starting a business is the easy part. To succeed in making it run smoothly without collapsing, however, is the where the work is. And the success of a business usually depends on who is running it- the entrepreneur! Some might call it a mystery but when you observe closely, most businesses fail for some common reasons and there are ways to avoid them. Have you ever wondered why some people start one successful business after another while others fail to succeed in maintaining one? Why do some businesses fail while others succeed? What makes a business fail or succeed? One terrible fact about a failing business is that the entrepreneur is unaware of it happening until it is too late. This is self-explanatory because if the entrepreneur really knew what he was doing wrong, he most likely would have been able to revive the business.
This is the exact reason I always recommend that entrepreneurs learn how to turn their mistakes into success. Before going into the business world, you need to be able to quickly analyze, identify your mistakes, learn from it and apply the lessons as stepping stones for success. You need to learn the right mindset you need for success. The life of an entrepreneur is filled with constant challenges and any one of them could put you out of business. Starting and running a business over the five years survival mark, involves a lot more than just a business plan, capital, product and marketing. Even when you create an amazing product, you still constantly need to improve it; adding more features and making it stay relevant!
There are over 100 reasons why businesses fail but to be candid, here are the top factors.
Having a great business plan is essential but making all necessary plans on the go as the business grows, is key. This is to say, you need to always plan ahead of every single stage/step/decision in the business. Businesses fail because of the lack of short-term and long-term planning. Having a plan that includes where your business will be in the next few months to the next few years is a very crucial requirement to run a business. Your plans should include measurable goals and results, dates and deadlines. Not having a good plan is the fastest way to ruin your business. Here are seven tips for writing a great business plan.
The biggest mistake you can make as an entrepreneur will be to start your business without sitting down to figure out how the business will be operated and putting it into writing. You will need to do a proper market survey/analysis and figure out your marketing strategy as well as revenue projections. And it is as brief and concise as possible. You don't need to treat it like you will be given an award for it.
An is only as strong as the team running it. As an entrepreneur, being so great with the best idea and qualities to start a business is never enough. You can't run a quality business alone. You will at some point, form a team and would probably keeping add more staffs as the business grows. Now, making sure you are bringing in the right person, is very crucial. Just as my friend always say; "Some people enter a moving train, just to slow it down." This statement is not far from the truth. You need to be able to pick the right set of people capable of moving your business forward.
Your team is one of your greatest assets. Every member of your team matters and has an impact on the success or failure of your business. Your team needs to have the level of motivation, dedication and passion for the business as you. When you bring in someone who doesn't have the passion for the business, to handle your products, there will be delays in delivery, inferior products among others. You should consciously develop and motivate your team via training, commendation, promotion, incentives, delegation and reward to ensure you all remain on the page. Also, make sure you have as many professionals as possible to handle each aspect of your business outside your capacity.
This has to do with those in charge of making quality decisions for running the business effectively. Most times this is the management team. A business with poor leadership will likely fail since that can trickle down to every other aspect of the business. The leaders in your business must be able to make the right decisions to keep the business functional. From financial management to employee management. Most successful entrepreneurs out there, are always learning, studying, and reaching out to mentors to in order to improve their leadership skills. You are not an exception to the rule.
Why should your potential customers buy from you instead of your competitor? Yes, new ideas in the world are almost going extinct and you are probably only left with improving the available ones. This means there is a high probability that your great product is likely being produced by some other person too (that is, if it's not out there already). Hence, it is not enough to have a great product. You also have to develop a unique value proposition because without this, you will get lost in the competition. What sets your business apart from the rest? What's unique about your business? It is important that you understand what your competitors do better than you. If you fail to differentiate your business from the competition, you will fail to build a brand. When building a product, the importance of adding a new feature (which is exclusive to you) or improving its quality can never be overemphasized. Overall, you will need to give your customers a reason to prefer your products.
5. FinancesIn as much as this shouldn't really be a major factor these days due to the endless availability of grants and business funding deals flying around, there are still a lot of businesses crumbling financially. Yes, it's not exactly easy to raise the capital to launch a business but gaining investors to fund your already established business is a lot easier, however, the business might be too capital intensive that you may run out of the acquired funds midway. Hence, the importance of business planning and financial management. If you can't raise the required capital to launch your business, your business could suffer from production instability due to your inadequate operational cost or you may be forced to cut-corners thereby creating an inferior/substandard product which could take you off the market in no time. The bad side? A crumbling business is usually not attractive to investors.
It becomes difficult to grow the business and it may jeopardize the day-to-day operations of the business. Just make sure you have multiple plans in place on how to raise funds for your business as well as how to break-even before the funds run out. Also, using your business funds for personal expenses could be very helpful in getting you closer to a failed business. Simply put; if you go spending massively from your business account especially in the growth stage, you are killing your business. Your business account is not your personal account. If possible, pay yourself a salary too. Don't spend without boundary and only take money out of your business when you've started making profits. For a startup or a business that is yet to gain a footing, your business funds ought to be used for strengthening the business. You should always reinvest your profits in the business till it gains some stability.
If your customers need to visit your business vicinity before you can make a sale, then you need to take the decision of a using a good location seriously. A poor location for your business will be a place that is difficult for your customers to locate or a place where the cost of daily operations of your business is overwhelming due to distance or lack of basic amenities. For instance, if you run a factory business, you should ensure your business is situated at a place with quality electricity supply as well as good road network for your delivery. Opening a five-star restaurant in a local community of peasant farmers will be a waste of money since they probably can't afford to eat there. Sometimes, setting up a boutique in a street already colonized with several other boutiques will help the customers get more choices but will, in turn, limit your customer base drastically since there will be too much competition on your hands. Just note that a provision store on a busy/major road will make more sales and probably survive terrible times compared to something similar on a quiet street. Overall, some businesses need strategic locations to survive while others can do just fine anywhere. However, even those business that can survive in bad locations, will still need to put up their offices in a location closer to their target employees and far from unsafe regions. The disadvantages of a poor business location could be too much to overcome.
One of the major hindrances to business success is the lack of focus from the entrepreneur. Without this, your business will likely lack proper direction in the competitive market. It is quite impossible to make your business be good at everything. Your strategy needs to be focused on a certain angle. What makes businesses succeed is their ability to quickly pivot, and the lack of focus leads to the inability to make the necessary adjustments. If as an entrepreneur, you are not focused and you forget your end-game, you may not succeed in business. You don't only need to keep your business focused on a goal but you also need to be able to focus on building that business for years. Most people are entrepreneurs based on trending businesses. This means they move from one business to another the moment they hear of a new business in town that they perceive to be more profitable, especially when things don't work the way they want in their current business. Many entrepreneurs start one business today and the next year they start producing a different product altogether. You won't make it in business this way. To be able to make anything meaningful out of any business, you need to grow and maintain that business over the 5 years survival mark.
Entrepreneurship is not for those in a haste to make money. As entrepreneurs, you are likely going to face a lot of challenges and if you are not patient enough or if you lack the proper dedication and determination to see it through, you are most likely going to abandon the business or run it into the ground faster than I can say 'Jack!'.Don't be in a haste take money from your business. Your business needs to break even and get enough ROI before doing otherwise. And when it doesn't? what if it takes too long to break even? This is why you need to have the passion for it and be persistent till you get your desired result. Don't rush into any business just for the profit. You need to learn the ropes and be dedicated to making it work. It takes a lot of courage, determination, persistence and dedication to start, runs and grow a profitable business. It's never an easy task otherwise, everyone would own a business today.
9. ProductsHow valuable is your product? Is your product needed in your target market? Does it solve an immediate problem? These are a few of the questions you should get a valid/positive answer to, even before creating the product, or starting your business. Then, after launching your great product and have probably gotten some positive feedback/reviews after several successful sales, you need to know that the work is not over. It just began. It's now time to tackle how relevant you will remain in the competitive market. If you don't seek and strive to continuously improve your products and services, you will be out of business sooner than you think. Being innovative is a vital trait of all successful entrepreneurs but of course, if you aren't innovative enough, you should bring in someone capable of improving your products.
The most important thing that you keep launching better versions of your products to keep customers coming back. You need to make your business stay relevant by adding more features to your products. The moment your products become obsolete, you are out of business. To capitalize and gain majority market share, your product development and improvement need to be ahead of your competitors. For instance, I took my time in making sure my 'Membership Setup Guide' (How to build a profitable membership website like Ghavoch) is valuable, unique, saves time and money, contains more information, plus many other added bonuses.
Using every available avenue within your reach and budget is a very important aspect that shouldn't be overlooked. In fact, before starting any business, your marketing strategy should have been included in the business plan. Inadequate marketing is one of the major causes of business failures. You could create as much quality products as possible but without a proper form of publicity, you would end up using your products alone. Seeking more creative ways to reach your customers/clients and getting your customers to prefer your products more than those of your competitors, is one way to remain in business. I'm placing more emphasis on this because marketing should actually be a top priority for every business. You don't always have to spend millions of dollars on it. Sometimes, keeping in touch with your customers through quality email campaigns could very effective. Periodically, informing your customers of your new products while listing the benefits/usefulness, is also a form of marketing that could be done easily by any member of your team. Start by getting a website for your business. Helping you showcase your products and services to the world is one of the several reasons why you should get a website for your business. Overall, you should strive to get your business out there through any form of awareness you can create.
When you run a business without making profits, you are certainly going to run out of funds sooner or later. And when that happens, you will lack the finances for the day to day operations of the business and in no time, your business is bound to crash. Non-profit organizations are certainly not businesses. Such organizations are usually being set up to give back to the society and it's usually owned by a profitable business. Also, they are known to always organizing fundraisers and accepting donations. I'm saying this because you need to understand that your business needs to generate enough profits for it to survive. And note that business revenue is not the same as profit. A revenue still includes your business expenditures. You make a profit when you break even. When your initial capital has been recovered, your expenditures removed and you still have something left, something tangible, then you've made a profit. As an entrepreneur, you must keep your eyes on profitability at all times. You need to find a way to generate some form of profit for your business. Without profit, growing the business could be a real difficulty. Sadly, a lot of businesses are failing due to this non-profitability issue. In fact, only 40% of small businesses make a profit. 30% are losing money and the other 30% just break even according to Small Business Trends. Here are 8 profound tips to help you generate more sales
One thing you should not underestimate is the power of your customers. One wrong move, you could be out of business in no time. All you need is a bad review from a customer and you will lose hundreds of potential customers! That common notion that your customer is always right, is as true as Ghavoch being designed by Lati. Don't be among those businesses that fail due to poor customer service. Don't lose touch with your customers, ever! Simple things such as keeping an eye on the trending values of your customers could be the thing to keep your business alive for years. You always need to find out if your customers still love your products. Do they want more features? What would they want you to improve on? How will you find out all these without listening to your customers?
Also, making sure your customer services team is friendly, polite and helpful in attending to your customers, is a great way to stay in business. Note that most people including me, do some basic form of research on a product or service before making purchases. This means, if people are complaining about your business and you aren't doing anything to improve, you won't be making any sale from us. Even the big guys like Google that are already successful, don't hesitate to request a feedback from you every once a while. Sometimes, you will even get invited to take a brief survey (to tell them what you like and dislike about their products) for a reward, just for them to know how best to serve you and remain in business. Learn from this!
This was the first point I mentioned at the beginning of this post and it remains the first thing you probably need to learn before going into the business world. Normally, every failure is a great opportunity to learn and improve. Honestly, failure only refers to those who don't learn from it and those who quit after a fail. Most times, failure is just a stepping stone to success. This means, you as an entrepreneur, must be willing to learn always. You must be very observant to figure out what works and what doesn't. It is so rare that businesses learn from failure otherwise most failed businesses would be fully operational and doing just fine today. Realistically, businesses that fail, fail for multiple reasons but this is most likely to be one of the reasons. If you make a poor business decision and drop down in sales, you need to learn from it by making a better decision next time. After your drop in sales, you must have noticed your mistakes and when you are adamant about doing that same thing, what result do you expect apart from a crashed business? Often times, business fail because the entrepreneurs were oblivious about their poor decisions responsible for the mistakes.
One known characteristic of every great business is their management culture. Which no management skill, you are required to get a professional with a good track record to get it done (while you develop the skills yourself) because anything otherwise, starting the business would be a waste of time, money and resources – It will collapse. The work of a manager is to keep everything together. Management, most times has to do with making sure things are working smoothly the way they should. Simple things such as organizing and prioritizing your projects are the core foundations in business management. When the entrepreneur lacks basic management skills like; ability to listen, communication, lack of trust or working with no actual system in place, there will be confusions, misunderstandings in the workplace which will lead to many things ranging from unhappy staffs to poor product quality and delivery. The whole business could crumble. It's also noteworthy to acknowledge that this includes inventory, finances, the staffs etc. You will need to manage your staffs effectively if you plan to keep your business running.
Scaling a business is good when it's done at the right time. Are you planning on hiring more staffs? Be sure to have enough funds to pay them and remain in business. How about marketing? Every day we (entrepreneurs) see large corporations pumping huge sums into promotions and the moment we lay our hands on some money, we follow suit as though it's the logical thing to do. Well, publicizing our products and getting them to our customers is the goal but when we go spending more than we can afford, we go broke and we are out of business. Just don't be too quick to launch a version 3 of your product when you are yet to fully build or sell version 2. Here are the 7 proven and effective methods on how to grow a business.
As entrepreneurs, our ambition and aim to own large corporations could be really dangerous if we fail to fully study and utilize our current market before venturing into new frontiers. Yes, we want a second, third and fourth branch or perhaps to take the business internationally but how ready are we? New branches will burn more operational funds. Is the business generating enough revenue to cover the cost? If you expand your business prematurely, you will crush it. Don't scale your business unless you are ready. Expanding your business into too many verticals could really be a very big mistake. Take it one step at a time. Grow and expand the business when it's due.
One of the reasons behind the success of most businesses is the presence of solid partnership deals. It's no news that forming a larger corporation will involve some form of partnerships. It's a lot easier to succeed in business with the right partners. However, the wrong business partner will, at the very least hurt, or, at worst, damage your business. For a business to grow beyond the sole proprietorship level, partnerships with other more experienced or more capable people will be essential. Sometimes, it is best to give up a percentage of the ownership of your business in exchange for its growth. As an entrepreneur, you ought to know that a 40% ownership of a big business is far better than 100% ownership of a small business.
For instance, having a 10% stack of Amazon holds more value compared to a 100% ownership of Konga. Partnership in business allows a chance of getting more finance, gives access to more knowledge, skills, more resources, shared efforts and manpower helps in the growth and expansion of the business. Many businesses have died off because the entrepreneur was reluctant to grow the business through partnership deals. Nevertheless, you should ensure all necessary legal frameworks are established, the profit-sharing formula is agreed and all responsibilities are defined before embarking on any form of partnership. Making sure your business partners are bringing something useful for your business, like more finance, knowledge, skill, experience and expertise, is one step closer to building a better business.
It's true that as entrepreneurs, there's only so much we can do and controlling macroeconomic factors such as recessions, natural disasters, business cycles, wars, inflation or government debt might not be on our agenda. Besides most of them can't be controlled. The best we can possibly do is to be prepared for it. This means, as we make our business plans, we should also make a backup plan for unforeseen circumstances like these. Just like MTV, Microsoft, Burger King, CNN, FedEx, which are examples of successful companies started during a bad economy, your business too, can survive terrible times when you are dedicated to making it work. In fact, with a good plan, financial projection, profit margin estimates as well as a good market analysis, setting up a strategic sequence to help you keep your business afloat amid the worst scenario will be a lot easier. At the end of the day, the survival of your business during a bad economy actually depend on serious you take the rest of the factors/tips written here.
No one lives forever and except we want our businesses to crumble upon our departure, we most certainly need a succession plan. Okay, even if you don't care about your business' survival once you are gone, you still need to make the necessary plans on the right and qualified persons to take over the leadership of the business after your retirement. Or do you plan to work forever? Sometimes, things happen and you may not be able to work anymore and choosing your business leaders then, maybe a bad idea or may not be possible. This is to say, the best time to choose a fresh set of leadership for your business may very well be now that you've known who is capable in your team and it's best to do it yourself. If your business is to survive, future leaders should be identified in advance. Without an effective succession plan, your business is unprepared to fill openings in created by unexpected departures, retirements or death. Most businesses die or begin to die once the proprietor of the business dies and it shouldn't happen this way. There should be a solid executable plan to train competent staffs capable of taking over the efficient management of the business in the event of the demise of the managers of the business. This is the only way you can be sure of the survival of your business.
Building a successful business requires a lot more than just creating and selling a product. While a business may fail due to a bad team, poor location, inadequate marketing or inferior products, the success or failure of a business usually depends on the decisions made by the entrepreneur. In the light of this, it is recommended that you always seek to improve yourself and equip yourself with more knowledge by learning from other people's experiences (history always repeats itself), carrying out a proper research, practicing customer validation, consulting other successful entrepreneurs (who would want you to succeed with the exception of your competitors) and doing some real analysis before making serious decision for your business. This is because a single bad decision can take you out of business. With the above tips, I do hope you will be able to build a successful brand for yourself too. Consider joining me in every step I'm taking in setting up a fresh new entertainment company……. Don't miss any update!