Although many people would love to start their own business, it is not easy.
According to studies conducted by the United States Small Business Administration, the survival rate of businesses is not very favorable. Only about two-thirds of businesses survive for two years or more and the number keeps on dwindling further as more years pass by. Less than half of businesses established survive for six years or more.
With these statistics in mind, it is no wonder that running and strengthening a business enterprise is difficult. Here are the top ten reasons why businesses tend to fail:
Required Resources are Underestimated
Opening up a business requires more than financial resources and bravery. Aside from capital, one must have a clear and concise plan on how to start the business. This isn’t just a simple checklist that you can complete overnight. You should know where to put your business, your target customers and market, how many workers you will need, your workers’ salary, business hours, how you will pay for the business’ bills and tax, what permits are needed, and many other elements that will take time and effort.
Many businessmen fail because they think that money or brilliant ideas can make a business. This isn’t the case. If you are not prepared, you will easily be swept away by competitors.
Low Customer Satisfaction
Product quality and cost-effectiveness are two of the most important elements consumers look for in products or services. However, many wonder why their businesses fail even though they offer a quality product.
The truth is, many businesses offer what they perceive to be important, not what the customer actually wants. Customer satisfaction is an integral part of keeping a business from failing. Not knowing how to communicate with customers to learn their preference is one way to guarantee failure.
Commonality and Lack of Uniqueness
In the business world, there is a lot of competition. The more common your business is in an area, the smaller your chances are of succeeding. Coming up with unique ideas is essential to stand out from the crowd. If a business fails to do this, they will easily have their customers taken away by larger, well-known companies.
Proper management and leadership is the fuel that runs a business. It is crucial to have managers that effectively communicate with employees. No matter how many employees a business has, it cannot execute its functions without proper guidance from managers.
One of the reasons that businesses fail is because the team lacks marketing skills. It is very important to advertise what your business is all about and what you can offer to your consumers. One has to clearly state the advantages of the products and services that the enterprise offers and whether they are high quality or cost-effective. Most customers won’t know how great a product is unless it is explicitly presented to them.
Many who venture out into business without properly planning their goals can easily lose business to competitors. It is important to research an industry before opening a business in order to know what to expect in the future and how to plan for it.
Lack of Experience
Lack of experience is also one of the main causes for businesses failing. Novice entrepreneurs fail to adapt to situations that arise. This can be avoided by doing research, talking to people in the industry, and attending events.
Not Being Flexible
Some businesses fail to adapt quickly to changes in the market, like costumer needs and new competition. Being sluggish in adapting changes can cause businesses to fall behind and fail.
Lack of Revenue
Businesses that open without proper research of the target market can have a low income in the beginning stages of the business, especially in an area with a lot of competition. This causes many businesses to go bankrupt and eventually close down before they have time to grow. Understand the value the business offers and what makes it unique before opening to avoid this.
Giving Up Too Early
The final reason for failure is not trying. Failing is part of the process of being successful, especially if you are a novice in the business world. Failure is guaranteed if you give up. If one idea does not work, try out another idea.
Photo Credit: Jason
No changes were made to this image.