In recent years the tough and turbulent global economic climate has caused businesses to greatly reduce over heads, decrease budgets and in some cases close down good honest businesses. Starting a new business that is both successful and profitable can be difficult and financially stressful. Every business is unique but the following three reasons for failure are wide spread and cause 1000’s of businesses to draw their curtains for the last time.
With experience managing a business’s finances is not easy, entrepreneurs/small businesses often lack the experience or skills to manage themselves and their budget successfully. Many new business owners also struggle in key areas of purchasing, selling, production, and hiring and managing employees. These are all key elements of any business that if unmanaged incorrectly can contribute to the failure of any new or existing business.
Failing to plan and organize your daily activities and work force can lead to procrastination and the businesses down fall. Setting goals and targets will ensure benchmarks are met and the business has a clear vision for the future. People in business need to continually evolve and adapt to the tasks they are undertaking, without grow a business is doom to fail. Taking charge of your business will help control unnecessary spending and motivate employees, people are not always born leaders but with the right process in place you should start to build your skills at strategic thinking, able to make a vision a reality, and able to confront change, make transitions, and envision new possibilities for the future.
Insufficient Capital
The need for capital within a business can be underestimated greatly by business owners. When starting a new business it’s not always easy to maintain good capital as success and profit can be sometimes unrealistically predicted. One of the main reasons businesses fail in the first year of trading is the lack of sales, unrealistic sales figures are usually to blame for poor capital and growth leading to closure of many new businesses around the world.
Not having capital readily available is one of the biggest mistakes a struggling business can make. Anticipating costs are crucial and by having good capital any business can have a fair chance to succeed without having to give up the dream.
Business can make the bad choice of seeking capital from Pay Day loan companies, as recent headlines suggests most Pay Day loan companies have unrealistic terms and conditions and interest rates. Turning to other less risky and costly sources of capital is usually advisable, business owners may consider taking out a secured homeowner loan. A loan like this is usually secured against the business owner’s home and is often referred to as homeowner loan. When looking at this loan type the decision to go forward should not be taken lightly. If handled properly any business owner can get a quick cash injection, but if not managed correctly and you default on you loan your home could be taken from you and you could be declared legally bankrupt.
Growth and Over Expansion
One of leading causes of business failures is the over expansion of small businesses, this often happens when business owner confuse success with how fast they can expand their business. If you start to get more and more work try to evaluate the need for expansion in the long term instead of the short term. If you need more employees or assets consider the consequences on capital and your future vision. Expanding to quickly can kill your cash flow and cause employee’s moral to be lowered, leading to low productivity in fear of redundancy.
Once you have established a strong customer base with a good cash flow set the right measurements in place to ensure that when times are heard your business can still strive and grow. Some indications that an expansion may be warranted include the inability to fill customer needs in a timely basis, and employees having difficulty keeping up with production demands.
Getting the right systems and people in the right places in a business can take a lot of hard work and time. Businesses often struggle to set a system that works and once one is set it’s often hard to rework a strategy and a system when employees are familiar with the process or routine.
It’s Not Always Easy
Another key mistake is being greedy, don’t spend thousands of pounds of trying to get 1000’s of customers unless you can handle it. Many businesses waste money on targeting the wrong audience with the wrong message. The best advice to any business is to manage the budget you have and really understand your target audience, look for small effective ways to target them. Usually the best marketing and advertising ideas are often the best and most effective.
Remember business is not always easy, so it’s important to ride the roller-coaster and enjoy the good times. Be realistic and educate yourself on the most important factors surrounding your business.
Bio: This post was created by Karl David on behalf of Norton Finance, the topics covered within the article include debt consolidation loans, homeowner loans, capital and family business. The information given is general advice, always speak to a specialist before making any decisions on securing capital.
Featured image on home page, courtesy of Ryan Vaarsi.
