First things first, let’s get the grim statistics stacked up to break the entrepreneurial spirit that has built all small businesses around the world out of the way. Starting and running a business can be risky and scary but it is attainable feasibly.
Often, some of the challenges that businesses face are a natural part of starting a business thus before you panic, take a deep breath and focus. Don’t lose the passion and drive that has motivated you to get into business.
Have a look at some of the causes of business failure below.
1. Insufficient cash flow is the leading cause of business failure standing at 82%. While there are multiple factors to consider with cash flow depending on industry and the lifecycle stage of your company, one key is relevant to all small businesses regardless of size or industry: If your expenses exceed your cash, then you have a cash flow problem. In addition miscalculating or underestimating how much you’ll need to run the business or securing the wrong type of financing can lead to business failure.
2. Lack of a clearly defined pricing strategy is another cause of failure. Setting prices too high or too low will affect sales. Without the right combination of product quality, market trends, customer demand, product differentiation and product pricing, the business will not run far.
3. Failure to anticipate or react to competition, technology or other market changes also puts the business at high risk of failure. Too often, businesses neglect information vital in helping them understand the complexities of their business environment and either focus on a long view that may be undermined by events, or end up firefighting, reacting to circumstances with little prospect of achieving sustainable growth.
4. Controlling every aspect of the business is another growth limiting factor. One of the biggest challenges for entrepreneurs is to let go of control and rely on others to finish the job. Delegating is a productive way of ensuring work is done efficiently and enhancing accountability at the same time.
5. Failure to keep up with a fast growing business is another factor. While business growth is great, slow and steady wins every time. As tempting as it is to go for it all, steady, predictable growth is healthier than uncontrolled spurts in volume. The 80-20 rule should be a reminder: 80% of your business will come from 20% of your clients and as the business grows your capacity to handle this should grow with it.
You may experience one or a number of these challenges as you venture into business and while it may cause discomfort or uncertainty, there are things you can do and strategies you can put in place to turn things around and journey on to success.
For business strategy consultation or for questions don’t hesitate to get in touch with us. We are happy to see your business grow.
