Why businesses fails

Every time a small business fails I felt sad. The owners of a new business have often staked their entire capital on a new venture and they stand to lose a lot more than if a big company fails in their new venture. Before you start a new business familiarise yourself with the top 10 reasons why many new businesses fail.



1. The manager is incompetent

Most small businesses fail because the owner does not have the knowledge to run a business properly. It is advisable to do a basic business course before starting a new venture.

2. Finances are not in place

Many people start out in business without any idea of how much money is really required. If you do not know how to write a business plan get your accountant to help you. In any new start-up cash flow is king and without proper funding even the best idea will fail.

3. The Owner gives up too quickly

Any new business will be lucky to break even in their first year. Many people new to business often assume that they are going to make a fortune within 12 months. In reality less than 80% of new start-ups make a profit in their first year.

4. Advertising

There is zero point in doing a single leaflet drop to all your potential customers. There is no point in doing a single advertisement in your local newspaper. Advertising is all about repetition. Many of your potential customers will not buy your products until they have seen your marketing material at least half a dozen times.

5. Branding

Every single piece of your company has to scream out your brand including your brochures, websites, delivery vans and the uniforms that you and your staff wear.

6. Ability to close the sale

This is really an art form in itself. Some people are naturally good closers but others have to learn by reading and studying the art of closing a sell. The more you practice the better you will become.

7. Location

Location is very important to the chances of your businesses survival. Often you will have to pay more for a decent location but it can make the difference between just getting by and turning a decent profit.

8. Ability to get on with other people

We all know that we have to treat our customers with respect but what about our suppliers. If you do not pay your suppliers on time they will start quoting you higher prices. If you are rude to them they might stop doing business with you altogether.

9. Lady Luck

Some people are really unlucky; there is no getting away from this. Just hope and pray that Lady Luck smiles at you, especially in the first year.

10. Demand and USPs

Small businesses often overestimate the demand and usually have no unique selling proposition built in to their products. If people only ever need to buy one of your widgets and you make millions, chances are that you are heading for a point of no return.


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