5 REASONS WHY BUSINESSES FAIL



Have you ever wondered why businesses fail? Why don’t many businesses last up to 5 years? Statistically speaking, if 100 businesses started today, 20℅ of that businesses fail in their first years, 50℅ fail within five years, and only 33℅ makes it to 10 years and further. This report is shocking because there are thousands of businesses springing up daily. If you are reading this, you might want to start your own business. When you see this type of scary statistics it will make you anxious. This article will answer all the questions you have in mind as to why businesses fail, why is it that some businesses have been told for over a century and they are still doing well? What leads to business failures? This is what we will be discussing in this article, but before that, I want you to take a look at this How to start a business.

Many articles have been written on the cause of business failure, it is important to note that every business failure started with the owner of the business. Every business’s success too started with the owner, the owner of a business is the pioneer when it comes to that business. 

The first place success is achieved is in the mind, as a business owner, the mind is the seat of success and failure. Every business you see today that has been around for the last 50 years, started in the mind of someone a long time ago. For you to grow and scale a business, you have to visualize it in your mind. Maybe as you’re reading this now, you intend to start a business, have it at the back of your mind that if you don’t first see the success of that business in your mind it cannot become a reality. Having a clear picture of where you want your business to be in the next 5 to 10 years will guide you on the plan to put in place for your business. Every business that ever became a success started with a plan, a well-structured detailed plan backed up by a strong reason to start a business. If you’re a newbie looking to start a business I advise you to check this out Don’t start a business without reading this. A strong reason for starting a business will give you focus and vision during the business planning. If you just started a business because you want to be a boss of your own, or because you just want to, you may not do well in that business. A strong reason for doing something will determine the amount of time you spend preparing for that thing. The longer the time of preparation the better prepared you become. It is vital to note that there are so many reasons that cause business failures, I have taken the time to list the most important ones after a series of research. Take each word in this article seriously, sit tight and read on, we have just entered the most important part. Below are the most important reasons why businesses fail

Lack of business planning

This is one of the reasons why businesses fail. The failure of every business starts with planning, and how a business is planned depends on how the owner sees the business. There are so many business owners who started businesses without an effective plan. A business plan involves strong market research that crosses many areas such as; Where to get prospects, stages of buyers’ decisions, and the deepest desires of your customers. A sound business plan should include

A clear description of the business: This is very important when making your business plan, if you must avoid business failures, you should have a clear description of your business. What type of product are you selling? Is it digital or goods? Does your business need a website? What does your product stand for? These are some of the questions you have to ask yourself during your business planning 

Competitor analysis: As a business owner or one looking to start a business, you have to consider this. One of the reasons why businesses fail is because many business owners do not consider competitors’ analyses. What is your competitor doing? What are they doing differently? What is that thing you can copy from them and add to your product? What prices are they selling their products? Asking yourself these questions will give you direction on how you should plan your business. Business planning is the most difficult part of a business, for your business to survive you have to take out time to plan business well. What it will cost you to hire and keep employees, all this is done in the planning stage of the business. If you ever see a business that has been in existence for over 50 years, the planning process was what made it stand the test of time.

Failure to understand your customers 

Lack of understanding of your customers is one of the reasons why businesses fail. Understanding your prospect will give you the edge over your competitors, understanding has to do with psychological knowledge of customer and consumer behavior and the psychology of selling to know How to sell like crazy. When you understand your customers deeply you will know how to relate with them. The goal of every business is to drive sales, sales are the lifeblood of every business, and every business that must survive must make sales and lots of it to stay in business. And you do that by understanding your customers, asking yourself important questions like; Who are my customers? Don’t make the mistakes many business owners make that lead to their failures, don’t think everyone is your customer, be detailed in choosing who your target audience is, and for you to do this very well, you have to understand your customer, know where they congregate, know their deepest pain, know their desires, go out and know what they are thinking, they have deeper thoughts in their minds than you can think of. You need to understand them to create offers and set up ad campaigns that will speak directly to them. Understanding your customers is the first step to a successful business. 

Inadequate management of business

This is a very important aspect of a business, it is among the reasons why businesses fail. Every business owner or a newbie trying to start a business or already in business must learn risk management, this is very vital for any business to grow. Business management cuts across many things, financial management is among them, and the ability to manage your finances for the specific needs of the business is as important as the growth of the business itself. Business management may sound new to a newbie, but if you neglect it, it will lead to the failure of your business in the long run. To manage your business effectively you need a bookkeeping record, a record that contains how much entered into your business a year, how much was lost, and how much was paid to workers. Having this type of record at your disposal will allow you to know where you are spending most of the money and where you are spending less, it gives you the insight to know where you should spend more. Business management is a must-learn for everyone who wishes to own, build and scale a business.

Lack of capital to start a business

This is one of the reasons why businesses fail, lack of capital is one of the factors that has led to the closure of many businesses. Most times business owners think that capital is all about the money used to start a business, in the right analysis, capital crosses above that. Capital refers to the total amount of money that is needed to start and scale a business until profit starts coming into the business. It is not enough to have only the money needed to start a business, you must have the money to pump into the business in different areas, from marketing to hiring employees, to sustaining yourself as the business grows. Many businesses don’t bring in profit in the first year of starting up, you need money to pay your workers during that time, and you need money to sustain yourself, therefore when making your business plan, write down the total cost of everything before you start. Get your facts right, and get your analysis right before venturing into the world of business, if not you will fail miserably.  

No proper knowledge to execute the business plan

Many business owners and newbies to business have a business plan and template but they don’t know how to execute the plan to run the business. If you must prevent failures in business, you have to seek knowledge, in starting and scaling a business, knowledge is indispensable, you need the knowledge to execute, the how to do a thing is sometimes very difficult to come by, this is why you have to pay the price learning how to execute a business plan, it will help you greatly in the success of your business. Quality knowledge must be bought and you have to sacrifice to get that knowledge, you may not be able to know everything it takes for one to start and execute a business plan, all you have to do is to hire someone who can. Hiring someone to do the job for you will free up the activities you have at hand and make you focus on other things that are important to the success of your business. Having the proper knowledge or people to help you execute your business plan is a great step to preventing business failure, not having this on the other hand is one of the reasons why businesses fail in infancy.

Failure to adapt to the market changes is one of the reasons why businesses fail 

There are times in the business cycle when changes that the owner didn’t expect at the point of creating or starting the business occur. These are unforeseen circumstances that happen to everyone and every business out there. Every business you see that has lasted over 20 years has a system put in place to tackle any of these changes. It is during this time that the wit of the business owner is tested, how capable you are as a business owner determines how you handle such situations. Every business owner is a leader whether you know it or not, and the true test of leadership is in front of unforeseen circumstances. If you don’t plan toward this during your business planning stage, you will find it difficult to handle such situations and this will inevitably lead to business failure. One of the best ways to prepare for any eventuality is to cover your business with insurance, insurance keeps you prepared should anything occur. But many other things occur in business that are beyond your power, the law of supply and demand is not totally within your power to control, where there’s a shift in this area, be it in supply or demand, you have to be flexible enough to make changes in your business and still keep it running. There are times it will require you to make strong sacrifices of laying off employees for the success of your business. In running a business you must be logical and not emotional, failure to adapt to the changes in your market will inevitably lead to business failure, take this seriously

Conclusion

We have come to the end of this article, I have written in-depth on the reasons why businesses fail, I started by telling you the rate at which businesses fail globally, and I went ahead to let you know that the first place business fails is in the mind, if you cannot conceive the success of your business in your mind, you cannot be able to make it come to pass. How you view your business determines how much you can sacrifice for its success and growth. I went ahead to list the reasons why businesses fail. The area I wrote about in business planning is a place you want to take seriously. The success of your business lies in it, you have to take out enough time to do the research needed to plan out your business, for your business to succeed you have to take that part seriously. Then you need the right knowledge to execute your business plan. For you to benefit from this article, you need to read it again to grasp every word I’ve penned down. They were written after a series of research and when followed accordingly will lead to the success of your business. If this article has been of value to you, comment your thoughts in the comment section and share it with friends.

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