Business failure and overcome it if it does eventually happen

Are you afraid of failing and losing your business?  here are the top 7 reasons for business failure and 15 effective countermeasures to prevent and overcome it.

For many entrepreneurs, it’s natural to be optimistic about the business they want to get into. Whether the entrepreneur has a new innovative idea, wants to improve on an existing idea or just wants to manage a cliché, for example in a grocery store, in them. There is always a belief that their business will survive, because honestly, who wants to start a business that they know will fail?

However, when entrepreneurs start their businesses, they are faced with the harsh, cold reality of the business world. In fact, statistically, 21.2% of all businesses in the United States fail the first year, 32.2% the second, 51.2% the fifth, and 66.6% the tenth. This suggests that there is more than a 50% chance that a new business will fail within the first five years of starting a business.

Why do businesses fail?

When a business fails It is usually very difficult to say specifically which one factor is responsible for the failure. Business failure is often the result of many interconnected factors, not just one singularity. For example, the American bank shows that 82% of small businesses fail because of cash flow management. Even if it is a face value, this statistic will seem plausible because cash flow is the lifeblood of a business, and without it every business will surely die.

However, a close analysis of these statistics may reveal that the problem with cash flow management is a consequence of many other factors that led to the demise of the business. Indeed, lack of money to run a business can be associated with many other symptoms of business failure, such as a business following the bad market, unmotivated, unqualified or inept team, etc. All of these factors can lead to poor sales, resulting in poor cash flow and ultimately business failure.

Success stories of companies and entrepreneurs can be found almost everywhere, while failure stories are usually hidden, this is mainly because people are uncomfortable with failure. But the truth remains that there are more failures than successes in business.

It is usually persistence that makes the difference. If your business is failing, that doesn’t mean the business owner is failing. Learn from the mistakes that made your business fail, fix them, and try again. Here are some of the main reasons for business failure:

The 7 main reasons for business failure

and. Poor management and lack of adequate planning

Just as an architect must first create a project, a contractor must have a plan. The key to business success at this stage of development is having a thoughtful and well-designed business plan. Traffic around your community can show you revolving door syndrome of closing outlets and starting a new business a few months later.

The service sector suffered the same fate. A common suspicion of these failures is usually a lack of planning. No matter what type of business you want to start, you need to have a good manager in charge. Good management includes everything from customer service to an efficient office.

b. Lack of cash and capital

Cash flow describes the movement of money in a business. Businesses often start out with people who have very little money to invest in a startup and don’t have enough money to see a business in the fragile and critical first couple of years. Without sufficient capital investment, business survival and growth is very difficult.

Without the money to purchase the necessary equipment, support, monthly overhead, or marketing to start a business, a business cannot start on a positive note. Mid-sized businesses start with minimal capital, often borrowed from family and friends, bank credit cards, or high interest loans.

It is advisable to know where your financing will come from, the repayment terms and whether the company can afford to meet the debt. If you can’t afford to borrow, don’t. Review your business plan. The business should have a cash flow forecast so that it can know the amount of money entering and leaving the business.

Even though the forecast is just a forecast, it will help you understand what is in store for your financial future. By using forecasting, you can predict likely sales and expenses, and you can also use other effective cash flow management techniques such as timely invoicing, down payment, invoice payments on time. timely and immediate follow-up of late customers.

vs. Bad location

Since competition from large companies is already a threat to small businesses, location is the key to a successful business. For example, a hairdressing business in an industrial area is unlikely to be successful. Despite the simple logic, some people still try to find their business in inconvenient areas.

Some owners simply choose the location because of the cheap rentals. This is a very big mistake. Research shows that the average consumer will not travel more than three-quarters, especially if there is a closer alternative. No advertising will entice customers to go this far from their location if they can easily purchase the same product elsewhere. Traffic jams, visibility, and parking are all essential for retailing.

re. Inadequate marketing plan

A marketing plan is an integral part of a business plan, but many people don’t plan how they will promote their new business. Some people just print flyers and advertise in the local newspaper, then wait for the phone to ring.

Every business needs a structured marketing plan in which you find the right marketing techniques for your business. In small businesses and home businesses, marketing is generally seen as the biggest hurdle for business owners.

e. Competition not studied

Many budding entrepreneurs delve deeper into a specific business niche without first analyzing the competition that already exists in that area. Take the time to thoroughly study this aspect of your business. With the growing number of home businesses, knowing who is competing and where can be time consuming.

Too many stores offering the same service in the same geographic area will certainly struggle to break even and therefore offer special profit opportunities to attract customers. Also think about the future. What happens to your business if a department store that sells your product or service for less opens a few blocks away?

There is no rule preventing companies offering the same services from opening up next to each other; you just need to determine when not to join.

F. The wrong business choice

Be an expert in your field and love what you do. Starting a business because it seems like an easy way to make money isn’t smart. See long-term consumer economic trends and assess your business community. Whether you are purchasing an investment opportunity or purchasing an existing one, you will need an accountant to study the offer.

Many unprofitable companies were well represented through professional presentation, skillful wording, and good sales. A business portfolio is often hidden for a real reason that necessitated the sale of the business, which is usually a lack of profit. Some people think they can take a business and do better than the last person. If this is your first commercial purchase, don’t rely on yourself to work wonders.

g. Business grows too fast

It may sound strange, but the rapid and unexpected growth of a business can be ruinous. If a business started with minimal cash flow, especially with a large margin, rapid growth can create all kinds of problems. Sudden growth can mean your location is no longer suitable and it is costly to move your business.

In addition, the needs for inventory, personnel, equipment upgrades, etc. must first be paid with profit. There is always a time lag between the need for additional funds and the eventual return of funds to the business from sales. Sudden growth creates additional demand for your managerial skills.

All of the above factors can lead to business failure, but a combination of several factors can lead to the death of any business. Here are some tips to help you avoid bankruptcy and how to overcome it when it does:

15 countermeasures to avoid a business failure and overcome it if it does eventually happen

1. Identify the Potential Reasons for Business Failure:

  No one likes to think about failure, but nonetheless, the statistics for business failure are pretty high. One of the main tips to help you prevent your business from going bankrupt is to identify the various potential factors that could lead to your business failing. Once you’ve identified them, you can put the right measures in place to help prevent them, even in the first place.

2. Failure is a matter of mind:  Failure in a business will happen to many people on the path to success. Entrepreneurs need to understand that failure is in the mind. Just as a predator that loses its prey keeps hunting other animals, an entrepreneur whose business fails shouldn’t simply abandon the business altogether. Entrepreneurs need to be emotionally disconnected from results from their bottom line. Just like a predator, keep hunting!

3. Recognize the Warning Signs of Business Failure:

  Recognizing the warning signs of failure before they become real can help a business prevent it before it happens. It is recommended to reward customers, suppliers and employees who identify situations. worth fixing.

When you recognize these early warning signals, it’s best to react immediately so that things don’t get out of hand. It is important to plan how your business will respond to these signals.

4. Accept this:  While failure can be a matter of reason, it is still a very powerful thing. Being emotionally detached from failure is usually easier said than done. For most people, it’s easier to ignore failure than to face it.

However, one of the most important steps in overcoming failure is to accept the emotional effects that come with it. Removing the pain you are feeling will only exacerbate the problems you already have. So, give yourself time to feel frustrated, but don’t let the feeling last for weeks or months.

5. Find out why something went wrong:

  There is a lesson and therefore an opportunity in every business failure. By applying the lesson you learned from your business failure, you are more likely to be successful in your next endeavors.

Try to critically assess and analyze your business to find out what you did wrong and the factors that led to it. to its failure. You can try to write down your big failures. Discuss the reasons the business went bankrupt and what you would do differently if given the chance.

6. Have a clear roadmap for the future:  Before starting a business, you must first write down your vision for the business. Use this vision to create a business plan later, as it will give you a clear idea of ​​the goal.

Be forward thinking and try to determine where you would like your business to be in the years to come. However, the goals set for your business don’t have to be unrealistic. Additionally, goals should be specific, measurable, achievable, and consistent with your goals.

7. Examine the stories of failure:

  As an entrepreneur, you must have successful people whom you admire. Based on how you perceive them, it’s easy to conclude that they’ve always found it easy, but sometimes they haven’t.

There are many inspiring stories behind their successes. chess stories. Pick a few of your business models and spend some time researching and familiarizing yourself with their past. One example is the story of Colonel Sanders, founder of KFC (Kentucky Fried Chicken).

He retired at 65 and only had $ 105 to start a business. He traveled to many states in America seeking sponsorship and funding, but was repeatedly turned down. Due to his positive thinking and the fact that he didn’t quit, he finally met an investor who saw the value of his business, and that’s how KFC was born.

He finally started selling KFC for $ 2 million at the age of 74. Studying their stories will show you that they are only human and that they have overcome even greater struggles than the ones you are currently facing.

8. Perform a SWOT Analysis Frequently:  a (Strengths, Weaknesses, Opportunities and Threats) A SWOT analysis is a study conducted by a company to determine its internal weaknesses and weaknesses, as well as external opportunities and threats.

The purpose of a SWOT analysis is to identify which areas of your business are working and which are not. Strengths are good internal factors within the company, weaknesses are internal destructive factors, opportunities come from external factors and present good prospects for the future, and threats are unfavorable external factors such as your competition .

To prepare for a SWOT analysis, you must first list all the known strengths and weaknesses of your business. Then make a mental prediction of how you would like your business to look in the future. Using a SWOT analysis, you can then develop the goals you want to achieve and also develop an action plan.

Companies must regularly access their weaknesses before they are identified and exploited by their competitors, always ready to win their customers and their market share.

9. Perseverance, Purpose and a Positive Spirit:

  Starting a business that will eventually succeed is no easy task. However, it is highly possible to be successful in business. Be brave, strong and determined to succeed and fiercely refuse to be another statistic of business failure. If your business fails, consider it a short-term failure and seek help finding a solution to the problem.

Apple was once on the verge of bankruptcy, but thanks to the perseverance of its founder, Steve Jobs, the company was able not only to get through this difficult stage, but also to become one of the most successful companies in the United States.

10. Recognize the key role of customers:  According to Gartner statistics, eighty percent of a company’s revenue comes from twenty percent of its customers. Without loyal customers, a business will inevitably collapse, so it is necessary to involve these loyal customers in your business strategies or when developing a new product or service. Think about their views and comments and make them feel important (because they are).

11. Think about the financial impact of divorce on your business:

  Planning for eventualities like divorce is certainly one of those things that people choose not to think about, but the truth remains that not only can divorce have an impact. emotional impact on you, but it can also ruin your business.

Funding for a divorce can rob you of a part of your business. One way to lessen the effects of divorce on your business is to get a prenuptial agreement before you get married.

Additionally, you should know how the law applies to your divorce case before you take any action. Divorce should not take away all of the effort you put into your business, so it is recommended that you seek the advice of an experienced divorce lawyer to help you through the process.

12. Having a Mentor: A

  mentor is a person or friend who leads a less experienced person by building trust and setting an example of positive behavior. You can use the wealth of their experience and knowledge to help your business grow and avoid bankruptcy. This is because they have faced several sticky situations and somehow managed to be successful.

Starting a business can be quite scary, but the support, guidance, and trust of a mentor can be very helpful. According to a Sage survey, 93% of midsize businesses believe their mentors have helped them succeed.

13. Take risks, but be careful: the  importance of risk in business can not be overstated, for stagnation is the enemy of progress. Although the outcome of the risk is unknown, it should not be confused with blind gambling, regardless of the consequences associated with the risk. Avoid taking risks when your emotions are high. Be objective and discuss your plans with your colleagues, friends or family.

14. Valuate Your Assets:

  Don’t overlook the power of the assets you may have amassed, even if it is office space you have rented or a good relationship you have established. Think about what your business has done well. It could be your employees, your customer relationships, or your intellectual property. Evaluate these assets, adjust them, and then be ready to use them again.

In conclusion, a bankrupt business does not mean that your business career is firmly established. Be persistent in your approach to business and you will one day be successful. You should also understand that failure is not the opposite of success, but part of it.

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