Why Businesses Fail – The 7 Main Reasons

Do you know why businesses fail? Are you new to business? Struggling to stay afloat? Need a sales boost? Run out of fresh new marketing ideas? Is your business working for YOU? Or are you working for IT?Fundamental shortcomings in business planning are a cause of many businesses failures. Knowing the 7 main reasons for business failure is critical. Your business plan must be realistic and based on accurate, educated data. Future projections must rely on knowledge of your chosen industry, the economy, the market, your potential customers and realistic sales targets.Commencing a business is not a casual undertaking. It is not a hobby and it is not some game where you start today and quit tomorrow. Budding entrepreneurs often commence their business with a few hundred dollars. However, by doing this you may run the risk of having to raise more capital.If you don’t have a strong success mindset, you should not waste your time and money by going into business. The market place can be very unforgiving. Starting from scratch is not easy. In fact, a large percentage of small businesses fail in the first year and most are gone within the first five years.Research shows that Business Owners fail for 7 common reasons.1. Poor Management Skills. Business owners often try to do everything themselves and refuse to delegate. This problem is one of the most common because business owners know their industry but fail to realise that they need to learn how to manage the business.2. Failure to Plan. You should always start by checking out the competition. Planning is good business management practice. Inadequate planning often translates into poor management functions. Good business practice includes planning your research, planning for expansion, sales and marketing planning, and recruitment planning.3. Inadequate Cash Flow. This is the primary reason for a large percentage of business failures. Many otherwise asset rich companies find that they are, for all practical purposes, insolvent simply due to lack of cash flow. Cash flow is the balance between your income and your expenditure. When these get out of balance, or your timing is wrong, your business is drained of its lifeblood.4. Keeping Sloppy Business Records. This can lead to flawed business forecasting and potential taxation problems. Poor business systems can result in higher costs, lost time and inefficiency.5. A Lack of Sales and Marketing Skills. Inadequate Marketing Systems produce poor customer service and an inability to attract and retain satisfied customers.6. No Market Potential. Many businesses fail because the market for their products or services is too small or specialised to support them. Thorough and accurate market research and analysis is vital when starting a new business.7. Failure to Seek Help. Having a network of professionals in place is critical for business longevity. A good Accountant, a trustworthy Legal Advisor and an experienced Business Mentor are critical if you want your business to grow and succeed. Learn to network with other business people. Find out what advertising and promotional techniques are working now. Educate yourself. Go to seminars. Learn from the experts. Be open to new ideas and strategies.For more business tips and assistance, check out the Resource Box below and join me on Facebook or visit my site.