4 Top Reasons Why Many Businesses Fail

Sarah Olray

4 Top Reasons Why Businesses Fail

Starting a business isn’t easy. It takes a lot of hard work and knowledge, and success isn’t always sure. When looking at the numbers, it can be a bit scary.

For example, in the U.S., about 21% of new businesses don’t make it past the first year. After five years, almost half of them have closed down. These are tough numbers to see.

But these facts aren’t meant to scare you. They’re there to show you what’s really going on so you can be ready. Being your own boss is awesome.

You get to make your own schedule, be in charge, and help the economy grow. But, there are big challenges too.

Every year, lots of businesses close. If you’re running a business, you might want to know why so many fail to avoid the same fate.

Here, we’re going to talk about some of the main reasons businesses don’t make it.

  • Financial Hurdles

Finance is the lifeblood of any business, and one of the things an entrepreneur should strive to achieve is financial intelligence.

Even if a reasonable amount of capital is available to you, it’ll make no difference in the long run if you don’t fully understand your finances.

Every business owner should have an intimate knowledge and understanding of how much money is required for the day-to-day running of the business and have a plan to fund payroll and pay other expenses.

An understanding of the income generated is also important. If you don’t have a firm grip on all discussed above, you are putting plans in motion for failure.

Sometimes, a business owner may have financial intelligence but have problems obtaining finances.

This is one of the major problems startups face, and since a business cannot survive without funding, it’s only a matter before startups that lack funding close their doors. 

This is why it’s important that entrepreneurs analyze the financing options available to them, be realistic about how much they can raise, and plan operations around a realistic budget.

Doing this will give them a good idea of the feasibility of the business idea or the business itself.

Pricing of goods and services can also create problems for a business. It’s not unusual for new businesses to set lower prices in a bid to entice new customers, especially in an oversaturated market.

And while this can pay off in the short term, it may cause problems if it goes on for too long. 

  • Poor Management

An entrepreneur is also a manager. He/she needs to oversee the day-to-day running of the business, make critical business decisions, and oversees the employees.

Doing all this and more is crucial to success, and this is why businesses with poor management suffer.

Small business owners usually don’t have the luxury of hiring a management team and have to take full responsibility for the full running of the business.

However, such individuals should be honest with themselves about their abilities and outsource activities they aren’t good at or don’t have enough time to focus on.

They can also attempt to take a ‘shortcut’ by seeking advice from experienced entrepreneurs. Sometimes, nuggets of wisdom from veterans can save you a lot of trouble as you don’t have to figure things out yourself. 

  • Ineffective Business Planning

It’s an open secret that one of the first things an entrepreneur should do is draft a detailed business plan that clearly outlines the goals of the business and how it intends to achieve those goals.

Typically, a business plan contains a description of the business, market analysis, competitor analysis, product and services, financial planning, marketing strategy, and so on.

The main idea behind a business plan is for entrepreneurs to have an in-depth understanding of their industry, business, and products since drafting a business plan requires a lot of research.

So, businesses that skip creating a business plan or don’t take it seriously enough are setting themselves up for challenges.

It’s also worth mentioning that business plans are reviewed periodically. New trends may arise, and the organization may need to adapt to the times to survive. In such cases, the business plan will be revisited and properly revised.

  • Lack Of Online Presence

It’s hard to believe, but some businesses still don’t have an online presence in this digital world we live in. Such businesses are automatically missing out on reaching a large number of people and expanding their business.

Bill Gates couldn’t have said it better when he said, “If your business is not on the Internet, then your business will be out of business.”

You might be really good at your job. Your products or services may be exceptional, but only your small and loyal customer base will know how awesome you are if you don’t have an online presence. 

Having an online presence is simple. All you need is to get a website designer to make you a professional website that aligns with your business.

And while the approach for bankruptcy lawyer website design may be different for someone into clothing, the goal is still the same, which is to ensure customers can find you online.

Having social media accounts and a Google business profile is also good for your online presence.

Three best practices to implement in your business

Below are three practices that can help make a positive impact on your clients and boost your business:

Encourage Face-to-Face Meetings Whenever Possible: As we mentioned earlier, we live in a digital world, and there are several means of communication. As a result, in-person meetings are rarely conducted, and this has made businesses somewhat impersonal.

• You can try to add a more human touch to your business by encouraging in-person meetings whenever possible. If that isn’t possible, try organizing video or voice meetings. It’s one of the best ways to make your business more personal and ensure a deal is right.

Focus On Adding Value: One of the best ways to grow your business is to provide value to customers. And the best way to offer value is to focus more on giving to the world than taking from it. 

Do Right By People Always: This is more of a life lesson than a business one. Always do right by people even when no one is looking or if no one will ever know.

Let everyone around you know you as the person that always does the right thing. It’s an attitude that can open several doors of opportunities in both your personal and professional life.

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