There are many factors that can make small businesses fail, and it’s hard to avoid every single one if you don’t know what to look for. In this article, we’ll discuss the most common causes and give you sound, proven ways to keep you from repeating the same mistakes other entrepreneurs committed before you.
Small business owners must juggle with too many new responsibilities, and it’s too easy to fall for the same mistakes countless other entrepreneurs do. Avoid them by following the advice featured in this must-read list!
14 reasons small businesses fail and how to avoid them
1. Refusing to learn from your own (and others’) mistakes:
Are you certain you’re taking the time to analyze the mistakes you make along the way? Or the errors others committed before you? Experience is the best way to comprehend what to avoid and what to head for, both in life and in your business venture.
If you turn a blind eye to everything but your successes, you won’t be staying afloat for too long.
2. Ignoring your lack of experience
Though planning and studying are important, there is nothing that will replace the down-to-earth experience. Sometimes you just have to admit it’s not the right time to be a shop owner yet. Sometimes you need to work as a first mate for a bit longer before becoming a captain.
3. Investing less than your venture requires you to
You might have all the best intentions in the world, but if you don’t put your money where your mouth is, and the business begins its days with a lack of cash flow, then you might just sink your ship before it even had the chance to sail.
4. Believing taking action is more important than planning
If you don’t sit down and establish your long-term and short-term plan, you’ll soon be experiencing a bad time. Planning is fundamental and should be the first step before you make any decisions.
You should include measurable and attainable results, being careful not to aim too high or too low. Don’t forget deadlines are fundamental to avoid allowing time to get the better of you.
5. Choosing a poor location
Unless you work exclusively online, your customers will need to visit your shop. If your business is on the wrong side of town or obviously hidden from view to allow your potential buyers to notice you, the chances for success are exponentially diminished.
Before either renting or buying, analyze if the location will help or harm your venture.
6. Taking your customers for granted
Are you sure you understand what your customers need and want? Are you listening to their preferences? Don’t disregard negative reviews and stick only with the positive ones, both are equally important and you should analyze critiques carefully to allow room for change.
7. Using your business’ funds for your personal expenses.
This is a big no-no: You can (and should!) take the portion of the earnings which belong to you as the venture’s owner, but the moment you start using the profits you should be investing into the business as your own personal bank account, you’re unwittingly paving the road to an inevitable disaster.
8. Choosing the wrong business partner
Friendship and business don’t always mix well, and so you must be very careful with who you choose as your partner. The wrong choice might harm, or even destroy, your venture. One common reason small businesses go burst can be attributed to toxic partnerships. Recent statistics reveal that “65 percent of high-potential startups fail as a result of conflict among co-founders.”
9. Failing to be a leader
If you want to own a small business, you better begin training your leadership skills. There is no following when you are the captain of your own ship. Leaders who fail to provide true and proper command, inspiration and strategic vision for their company leave a battered organization. They delude themselves and mislead others within a losing legacy.
Keep Reading: 12 Most Common mistakes every New entrepreneur should avoid
10. Believing all bad reviews are trolls or written by the competition
Sometimes the customer might not be right, but you should never completely ignore their opinions. Your competition might play dirty and post negative reviews, but this is a very rare scenario and even if this is the case, ignoring these remarks is not wise.
Analyze the reviews and input you receive and try to use it to improve your business’ weak points.
11. Disregarding the importance of tracking your finances
When dealing with small businesses, if you don’t have a clear picture of how much money you are earning and how much you are spending, soon you’ll be losing opportunities to fix problems before they grow too big to handle. Pay attention to your finances and keep a tight record of what comes in and what comes out.
12. Spending too much of your profits
For small businesses, it’s important to keep a rainy day fund in case of an emergency, so beware of wasting all your profits in one go. You might encounter unexpected costs along the way and it’s fundamental that you count with a reserve instead of scampering to find the extra cash.
Read Also: 12 Most Common mistakes every New entrepreneur should avoid
13. Forgetting failure is an inevitable part of the success
Though failing can be scary, you can’t always play it safe. You need to experiment, to change and adapt, and sometimes, the decision you take will be wrong. Be quick to learn from your mistakes and move on from them.
14. Ignoring the competition
The customer can always choose your competitor if they aren’t happy with your offer, so you should be aware of what other small businesses are offering. Is there a reason they are better liked or have cheaper options than you do? Research is key to find out and see if you are missing out on a good opportunity.
Try to always stay a few steps ahead, because customer’s loyalty is fickle, and if you don’t seize the opportunity, someone else will.
Final Thoughts
The truth is, there are many other factors that can negatively affect your business and make it fail. It’s impossible to encompass them all in a single article, but what’s important to remember is that you should always plan ahead and pay attention to factors you can’t control, like your competition and your customers. If you stay ahead of your game, there is a good chance your investment will pay off in the end!
Wrapping Up!
What part of this article resonated most with you and why? What have you learned from failure? How has failing shaped your journey? Share your ideas, tips, thoughts and experience below in the comments.
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