Starting up a business and becoming self-employed can be very exciting. What many people don’t know is that more than 50% of businesses fail within the first five years and it is regrettable they do not understand why they probably failed. In this piece, I am going to share with you the significant factors that contribute to small businesses failing and how you can overcome them.
Reasons that contribute to small business failure and how to overcome them:
1. Lack of management and leadership skills
In any institution, management is the key, poor management, and poor leadership skills can cause business failure. When we talk about management, we mean all sorts of management; handling staff, time management, cash flow management and so on. Before starting up a business you must make sure that you are well acquainted with the management and leadership skills. You can do this by working for someone else to gain those skills. You can as well take a personal initiative and attend management lessons or find a mentor to guide you through management lessons, but the bottom line is, never start up a business when you don’t have proper management skills.
2. Wrong decisions
They say “error is to human” sometimes in our daily lives we make wrong turns; it also happens in business. It is always advisable that before you take any drastic move or change always consult. You can ask other business partners, friends, and even financial experts if necessary.
3. Poor planning
Without proper planning, your venture is bound to fail. Before you start running a business, you need to sit down and set out your goals; you need to know where you want your business to be in 2years, 5years, and much more.
4. Losing touch with your customer needs
Always remember in business” the customer is always right” you need to know what your customer wants and needs are. We are living in a dynamic world, and customers needs keep on changing. As an entrepreneur, you need to be very swift in embracing change. Always be on toes trying to understand new trends in the market and how technology is changing.
We are all living in a competitive world” man eat man society” Even if you are the inventor of an idea, nothing can stop your competitors from inventing a similar concept. It’s upon you as a business person to keep your head high and try to understand what your competitor is doing. Be innovative and always diversify your customer base
6. Bad debts
Cash flow is the main thing in running a small business, if there is no cash flow in the industry, the company will collapse. Bad debts can lead to lack of cash flow in business, as a business owner, you need to establish a credit limit for your customers that may not compromise the cash flow in your business.
7. Theft and fraud
Fraudulent activities or robbery can be a significant cause of business closer; this can be either internal or external. The owner of the business should ensure that enough security measures are taken to prevent this from happening. It can be done by close monitoring of staff activities, maybe through CCTV camera installation. Also, ensure that there is proper bookkeeping to reduce theft and fraud.
8. Excessive spending of business income for personal use.
The entrepreneurs should stop excessive spending on personal materials. The business should be able to pay bills and pay workers as well.
The reasons illustrated above are the primary reason why a lot of small businesses fails and explanations on how to overcome those challenges.