Home > Business > 10 Reasons why businesses fail

10 Reasons why businesses fail

95% of start Up businesses fail. There are numerous reasons why businesses fail. Some are just doomed from the beginning, not thought out and carefully executed. You can’t really just do whatever you want and hope that it works.  Knowledge helps business people go further, that is why I write. Maybe one person can learn one thing. Knowledge helps to change mindsets. We really need to change mindsets. You do not need to buy the latest Mercedes when you make your first profit!

1. Lack of experience

Small business managers have to learn how to do a multiple number of tasks and duties. Often they start of as a one man band and have to do all the marketing, accounting, providing the product or service, administrative work and all other functions required to make the business function.

There are a lot of resources and help available and there is no need to grope around in the dark. Get some help.

2. Insufficient capital

Lack of finance can pose a big problem as it takes money to get a business going. Launching into business without counting the cost and planning ahead can be a threat to your business. Market size and projected sales are often over estimated while running costs are under estimated. Try to be as accurate as possible, and build in contingencies.

3. Poor management

Poor management and paying too little attention to routine but necessary tasks can cause the downfall of many new businesses. Self discipline and effective use of time will hopefully avoid this.

4. Bad debt

Always keep your bank manager up to date with your financial situation and avoid getting into bad debt.

5. Wrong location

 Your business must be situated in a place where it is easy for your customers to get to. You may need to be near a major road or inside a big shopping mall. Thorough research and planning is needed to get this right.

6. Paying yourself too much

You may need to go without a salary for a few months. Many entrepreneurs go without large salaries initially as they plough in most of their profits back into the business.

7. Staffing problems

Hiring the right staff is important because inefficient staff can be costly to the company. It is good to have a sound knowledge of recruitment techniques, so that you do not hire the wrong people.

8. Red tape

The legal side of things can present problems for businesses especially those that require licences from authorities. From an administrative point of view, keep things simple. No need to start or use up productive time writing long procedures. 

9. Unplanned expansion

The business can grow too fast making it difficult to keep up with orders. This may also require more capital to produce more as demand has overtaken supply. Be thorough in your estimation and don’t take on more than you can handle.

10. Too much expenditure on capital assets

Always think lean. Do not spend too much money on new furniture and equipment. To start off, think about buying second-hand furniture then upgrade from there. If there is anything you can do without, leave it out.

Prepare yourself for success. Get help when you need it. Dont become a statistic.

Categories: Business
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