There are a lot of statistics about new business failure, a few say 95% of all startup businesses fail within 5 years another says about 65% fails within 5 years. Either 95% or 65%, the figures are real high for business failures and finding a way out of it is a good way to keep businesses flourishing but do this startup entrepreneurs know why they fail?
Failing in business can vary from one entrepreneur to another and even after reading a thousand books many still fail because business is practical, you are to sail your ship to harbor without wrecking the ship and without sinking.
Why do Businesses fail?
Paper Failure
You may ask what paper failure means but statistics show it that 75% of most businesses fail from their planning stage, meaning the business already failed before it began. Before starting a business, it is important to run a proper market survey about the product you are bringing to the market, checking and doing proper research on competitors and making sure the business has competitive advantage, proper business model and having adequate financial calculation, but not doing the proper research and having the right digits about the business means the business already failed before it began. Also a lot of entrepreneur do not know what it takes to do a quality research, business plans could take up to 6 months to complete in some cases and up to 2 years to have a solid customer base. In most cases of failed businesses, the entrepreneur wants to get everything as fast as possible.
Cash flow Problem
Cash flow is one major reason a lot of businesses fail. Do not get me wrong, I did not say profit flow because not all businesses make profit in the first five years of operation. When there is no money available to keep the business going until it starts making good profit then the business fails. A lot of startup business owners are in a hurry to improve certain things in their business, they want to spend money to renovate and do a lot of things or even live flamboyant in the first five years of business which often is wrong. No matter how successful your business appears in the first 5years, never go on a spending spree. The first five years of a business is to collect money from customers and be able to operate sufficiently.
Poor Management
Inability to delegate, inflexibility, micro-managing the work of others, or abdicating important work responsibilities are the major managerial problems in a business. This is why a lot of businesses die due to poor management. Being a good manager doesn’t require a degree at Harvard, It just requires having a good attitude, being flexible to ideas and good organizational skills are required to keep a company going.
Bad Customer Relation
When a customer sends a mail to a company several times and gets no response, the customer starts to lose interest in the company. When a happy customer comes into an organization, says hi to the receptionist with a smile and the receptionist replies shabbily and without humor, the customer starts to withdraw. Little things that happen to customers in a business can either chase them or make them stay. If I go to a store and I get a bad reception, it will be the last of me in the building. Keeping customers is keeping the business.
Bad Staffs/ Staffing Problem
Never employ a family/friend in a startup because the will feel too comfortable. Staffing problem is a major issue in startups and this problems varies from dishonest staffs, to employing bossy staffs who instead of counterbalancing the entrepreneur weaknesses, they act as bosses. One major reason why entrepreneurs employ bad staffs is lack of proper background checking and the hurry to employ the first person that comes in.
Poor Marketing
A quality product and or services will not sell itself to customers, it requires selling ability by the seller. So, the success of a company is dependent on the ability to sell their products and services. Selling a product to a customer involves understanding human psychology, marketing and promotion. Be able to sell your product and your business will thrive.
Other reasons are not limited to lack of competitive advantage, Bad pricing and Shortage of capital. Knowing everything about business is not necessary to start one, but it is necessary to start learning business tactics.