Failure or bankruptcy is never the expectation of any business person but unfortunately, many businesses end up there. It is statistically proven that eighty percent of businesses fail in the first five years. Hence seeing a business survive and thrive for ten years and more; that business has loads of stories to tell and lessons to glean from. Hence, bear in mind that the business you want to start will be threatened by very many things around you today. Our ability to keep our businesses afloat and thriving is something we must desire to know. You need not fail when you start your own business. Here are some reasons why businesses fail:
Lack of understanding of customers’ needs and unique value proposition; as entrepreneurs, many run on assumptions by just buying a product and taking it to the market; not being aware that what is of interest to us many times may not be of interest to the customer. If you’ll survive and thrive in business, you must pay close attention to the customer’s need and not what you want to sell. We need to understand what is of interest to the customer. Businesses need to understand what the unique value they’re offering the customer is; what the customer will not get anywhere else. Many businesses fail because of this and can’t stand afloat because they lack this understanding of the customer and even the businesses themselves.
Another reason for failure in business is the inability to manage the expansion phase of the business; unexpected growth when the business grows faster than you anticipated and you can’t contain it. Imagine a business that handled about five hundred customers a week suddenly grows to handle five hundred a day. Without adequate systems and structure to manage the bloat, such will start failing and disappointing customers’ expectations and disappointed customers can do great harm to the business by dissuading other potential customers that you need to have. If you don’t anticipate that your business will grow, then why start a business.
Businesses also fail because of lack of a strategic plan; your goals, mission and objectives aren’t clearly defined. They lack feasibility studies; market survey and research. It is said that if you fail to plan, then you’ve already planned to fail. Proper preparation prevents poor performance.
Next is poor financial management. They lack financial projection, no proper controls to check financial leakages and wastage.
Another is poor leadership and bad culture. Culture, as it is said, eats up strategy and policy for lunch. Lack of strong work ethics and more with time will make the business to face challenges that will sink it.
Next, changes in government policy or the environment. Every business operates within a government controlled environment. Policies can limit or influence business; just one policy from government can wipe out a business or even an industry. In business, you must pay close attention to these things.
How do we mitigate against these? Constantly seek feedback from customers. In all you do always have the customers in mind and let them see you have their satisfaction in mind knowing that all customers think about is benefits. Find the meeting point between your passion, strength and the customer’s need. You’ll need to keep increasing your capacity to meet your customer’s need; never allowing them to get dissatisfied. Keep building your momentum in the business and don’t lose it. Go back to your business plan when things aren’t working as expected to review and see what can be done to ensure you still stand strong in business. Acquire financial education; be able to read and measure the health of your business from your financial report. Your people skills must be top notch to succeed in business. Have a strategic plan developed from scenario planning. Also, have a succession plan for your business. Businesses don’t fail overnight without giving us adequate signals. Proverbs 22:3 says a prudent man foresees evil and hides himself, but the simple pass on and are punished.