If statistics is anything to go by, you will find that businesses fail every day. In fact, a majority of companies will always be out on the scene within a couple of years. But why does this happens? What are some of the key reasons? Typically, scholars have come up with a number of reasons that can make a business to fail or succeed. One of the most startling studies shows that almost 90% of businesses fail within a year of start up. This means if you start a business today you only have a 10% chance of succeeding. Here are some of the reasons why businesses fail.
- Lack of market need– Before starting a business it’s very important to ask yourself whether there is any market need for that particular product of service. In fact, this is the number one reason why many businesses fail. It’s important to study the market and look for any potential gap concerning what you are planning to peddle. While doing this do not fool yourself. Ask yourself clearly if there is any market need for that product. Steer clear from creating something just for your own selfish reasons. Knowing when to start and when to bow out is also a very important skill when starting out
- Poor management– A majority of people normally go into business because they have a passion for doing something. Some of these people might be lacking in management skills. Apparently, this is often one of the most important factors to consider before venturing into business. It’s so unfortunate that most business owners lack even the most basic financial knowledge. Some even start without knowing what to do. Although very sad, this comes back to hit their delicate undertaking. The major reasons why CEOs fail is because they fail to settle business bills. They eventually end up closing shops.
- They listen to bad advice– With all the information about entrepreneurship the amount of information out there has really gone up but the quality has gone down. This means, most people are getting a lot of advice from unqualified sources. The worst scenario is when the good advice collides with the bad one. The most important thing is that if your business fails you need to take your time to know what went wrong before starting up again. That’s the only way you are going to overcome failure. Remember, there will always be a next time.
- Operational gaps- Sometimes your business idea itself is good and you have the right kind of people and the best financial acumen but operational inefficiencies are the things that are failing you. For instance, paying too much for labor, rent, materials, machinery and many others can really strain your cash eventually killing your profit machine. For any business to succeed, it’s very important to demonstrate the willingness to reevaluate the terms and renegotiate rates with the concerned parties at every step. This will ensure that you are keen on the overhead costs.
Well, as an entrepreneur, you should not sit back and wait for things to happen on their own. Instead, take a proactive approach so that you can avoid most problems that often bedevil most start-ups.