6 Reasons why new Businesses Fail
If you have just started a new business, then here is a bit of depressing statistics; 8 out of 10 of the new businesses that are out there fail within the first year. It’s important, therefore, for you to understand the major reasons why so many businesses fail so early. The truth of the matter is that in spite of your best efforts, there are a wide range of pitfalls into which you and your business are likely to fall. Here are some of the reasons why new businesses fail;
- Not having a passion about what you are doing
Running a business is not an easy proposition. Most of the time, not only will you be under pressure to keep everything going, but you will also feel the weight from being responsible for so many other people.
This can translate for many sleepless nights for you right from the beginning. That’s why it’s so important for you to have a passion for what you are doing before even beginning. What you need to do is start a business in an area that you clearly understand and for which you have a passion.
Otherwise you will soon wish that you never started your venture in the first place. The good thing is that all that hard work will begin to yield results after a while.
- Having the wrong reasons for starting a business
Consider the following scenario; you are a Plumber who used to work for a big building contractor. At some point, you got into an argument with your employer and decided to start your own venture. This, clearly, is not a good reason for starting a business.
In fact, most businesses that are started in this knee-jerk way tend to fail. Running your own business is complex, and you need to understand exactly what you are getting into before setting out on your own. Though you may be an exceptionally good Plumber, you may not actually have what it takes to run your own business.
What this means is that a business is much more than the basic skills. That is not to say, however, that you will not be able to do it on your own. In fact, with the right kind of planning, you can get everything set up and be on your way should you start your business for the right reasons. So, what are the right reasons? Well, they include having a passion for what you do and having identified a niche in the market that you can service with your unique skills.
- Not understanding the dynamics of the modern marketing world
Technology now plays an inordinately role in marketing, even for small business, such as our Plumber example. Most businesses that fail do so because they fail to account for this fact. The internet, in particular, now plays a huge role in your ability to keep going. There are a number of things that you can do online;
- Start your own website that acts as a portal for your business
- Reach out to new customers through social media
- Use review websites to promote your business. This is particularly useful for local businesses. Online reviews are used by Google and other search engines to assign ranks for local searches. If, as an example, your run a Plumbing business as we have already noted1, local reviews will help you find customers within your locality.
- You should also embrace the power of social media to help grow your business. Platforms such as Facebook are how businesses are finding new markets in today’s operating environment. This is something that you need to embrace.
- Not having enough capital
Not many businesses out there can be started without some kind of capital. One of the reasons why so many businesses fail is because their owners start them without taking into considering their capital requirements.
You know you are in trouble once you start using a credit card to finance your business. You also know you are in trouble should you be forced to keep borrowing in order to stay afloat.
Not only is the unavailability of funds detrimental to the health of a business, but failing to manage available funds can also spell doom to your ability to keep going. The thing to note here is that most of your customers are not going to pay you on the spot when you make deliveries. In fact, some of them will only pay you after several weeks.
It’s important, therefore, for you to have enough capital to cover you during this period. Otherwise you will be forced to take expensive loans.
- Poor Management
We have already noted that some businesses fail because their owners take on more than they can handle. You may a good Plumber, as an example, but you will probably suck at marketing. That is the reason why so many new businesses fail.
By trying to take on too much, their owners become marketers, accountants, web designers and so on. Clearly, you are not going to be able to carry out all these tasks. Though you may actually be good at all these things, you are not going to have enough time to be able to do everything on your own.
What you need to do, in any case, is hire other people to help you run those areas of your venture that you cannot do on your own.
- Expanding too quickly
The importance of taking on only what you can handle can never be overemphasized when it comes to business. Doing this is why so many businesses end up getting into debt. What you need to do is allow for the organic expansion of your business. Take is slow and easy, and you will be able to take your business far.