Reasons Why Businesses Fail And How To Avoid Them

Business failure is a possibility

Nobody starts a business expecting to fail. In fact, most if not all entrepreneurs will tell you that before they launched their business, they had already figured out ways in which they would recover resources invested and make significant profits.

A small number of entrepreneurs probably admit to themselves and to others that they hear a small nagging voice telling them that failure is a possibility. Passion may not be the only reason that drives entrepreneurs to work crazy hours after all; the fear of failure plays a part too.

Nobody tells you that it is possible that your business might fail when you are starting out. Often people are too scared to hurt your feelings. The hard truth is that, failure is a possibility in business. Before you quit your job to start your own business, before you invest your life savings into your dream venture, before you put your tuition into that start-up, know there are a number of things that may increase your risk of failure in business.

The good news is that with the right knowledge and skills you can be able to swim against the tide of business failure.

Reasons why businesses fail

Failure to manage finances: Financial management means that you monitor and track how much you spend, what you spend it on, how much you make and how much you borrow. This information guides decision making and budgeting. Without this information, a business owner is not able to tell whether he is making profits or incurring losses and as such is unable to take the appropriate course of action.
Sometimes entrepreneurs borrow more than they need or more than they could ever pay back because they do not have accurate information to help them forecast company profitability.

Poor customer relations: How you treat a customer today determines if he will become a customer for life. Poor customer relations will drive your customers into the hands of your competition. Communicating in a professional and friendly manner and reaching out to customers to find out whether their needs have been met are some of the steps you can take to attract and keep customers.

Failure to effectively market your products/services: If nobody knows what services or products you are offering, nobody will buy from you. Employing marketing strategies that are not cognizant of the dynamics of your target customers is not only wastage of money but time. You have to invest in effective marketing strategies including social media to make your business visible to potential customers.

Poor leadership: every business needs a strong leader who is able to effectively manage the company’s resources. Failure to manage finances, human resources and partners can be detrimental to the company. The leader has to ensure that the financial books are in order, that human resources are motivated to deliver and innovate and that partners receive timely updates on how the company is fairing.

Failure to investigate the market: not understanding the market dynamics, what products and services are needed and what is trending could lead to failure of your business before it even launches. It is important that you understand the market dynamics, what is trending and what is not. It is also critical to investigate whether the product/service you want to invest in is needed, what your competition is and what solutions they are proposing.
It is important for entrepreneurs that one failure should not mark the death of your dream. Whenever you fail, learn from it and move on. Remember that persistence always pays off