Running a business provides endless challenge and opportunities for learning. One of the least understood aspects of entrepreneurship is why small businesses fail? While it may seem to be a matter of luck, in reality there are common mistakes that kill many small businesses before they ever get off the ground. In any case, if the business owners knew what they were doing wrong, they probably would have been able to correct it.
If you address the common reasons for failure up front, you’ll be much less likely to fall victim to them yourself. Let’s find out what are these reasons that lead to failure of a business.
Many reports on business failures cite poor management as the number one reason for failure. This is a business that lacks focus, vision, planning, standards and everything else that lacks good management. When you are a small business owner, you should be more focused on properly managing your business – administration, human resource and most importantly the finance.
Growing Too Fast
This one might be the saddest of all reasons for failure — a successful business that is ruined by over-expansion. Many a bankruptcy has been caused by rapidly expanding companies. That is why it is sometimes said that “small is beautiful.” Set realistic goals and expand only as needs dictate.
Lack of Proper Financial Planning
You can’t be in control of a business if you don’t know what is going on with the finances. It is imperative to ascertain how much money your business will require; not only the costs of starting, but the costs of staying in business.
Starting Business without Any Goal
Many small business owners set up a business for wrong reasons without any focus on what they want to do and achieve. You must have a passion and love for what you’ll be doing, and strongly believe — based on educated study and investigation — that anything you’re going to offer would fulfill a real need in the marketplace.
As a small business or a start-up, competing against well-established products or services can land you in trouble. Not having the tenacity or stomach to negotiate terms that are reflective of today’s economy may leave a company uncompetitive. Watch your competition and stay one step ahead of them.