Why Small Businesses Fail and How to Avoid Failure.
Research and statistics from all over the world shows that 70% small business startups barely survive a year after commencement. This is being caused by so many factors however, we shall be looking at some of the top troubling factors influencing the failure of new startups from all around the globe.
This information is important for existing small business owners and individuals who wish to begin or invest into a new business model. Most of this factors are generic in nature thereby, making it very common in most countries in the world. This means your current country of resident doesn’t matter, however, we shall be making use of Canada as a case study showing you why small businesses fail and how to avoid failure as a startup owner.
Why Small Businesses Fail and How to Avoid Failure
According to a research publication as conducted by an Industry Canada Study, “the main reason for (business) failure is inexperienced management. Managers of bankrupt firms do not have the experience, knowledge, or vision to run their businesses”.
As mentioned earlier, there are so many factors resulting to the diminishing of a business startup. The above study lay emphasis on “inexperienced management” as a cause of business failure. In as much as this is true, an experienced management can as well fail when there is poor planning and lack of implementation of policies to support the growth process of the firm. Therefore, we pointed “Poor Planning” as major reason why small business barely survives for a year or two. As a means of tackling some of the causes of failure as a business owner, you can refer to some of this tips on how to avoid failure as a business owner.
Tips on How to Avoid Failure as a Small Business Owner
Do Market Research
Research is basically a limitless process as it has no end. This is the reason why what works perfectly few years back may not give a good result in the present year. A lot of managers believe they know the market while they don’t as they are relying on their past ideas for execution which later result to failure at the end.
Some managers also consider themselves first when starting a business. In as much as it’s not a bad decision; it’s considered as a terrible decision as your business growth relies on your customers. This is why it is very important to draw out a business plan even before starting out as it will further help you in market research so as to know what your customers want.
Get the Money Sorted
Creating a business plan will not only help you in market research, it will also enlighten you on how much worth of fund you will need in starting out and how much will be needed in running your business.
Starting a business from any country requires that you know the cost of starting and running your business. Without this, you may end up being bankrupt at a certain stage which may later result to closing your business entirely. Getting your money sorted include having a solid knowhow on your bills, expenses and taxes based on your kind of business.
Choose a Feasible Business Model
Choosing a feasible business model is very crucial for existing startup or individuals planning to start a new line of business. It is a part that can guarantee your growth or rather, result to the doom of your business which is why it is required to get it right at the first quarter.
Have a Growth Plan
Some businesses shuts’ down not because the managers lack good managerial skills but because they fail to have a growth plan for the success and expansion of their startup.
Planning for growth has to do with strategizing and bringing in reliable directors or investors into your business. Take for instance a new startup was launched and it recorded huge success however, the managers can’t keep up the demand as they are of retirement age. What do you think will happen to a business of such nature that lacks growth plan?
Plan and Have an Exit Strategy
So many small business people work hard creating small businesses and building them into successful enterprises. And so many of these same people have no plan for what will happen to their successful small business when they’re done working so hard. If you ask them, many say they’ll sell their business.
But this is a hope, not an exit plan. If you want to sell a business, it has to be salable. Many small businesses aren’t because they’re dependent on one person’s talents and personality. Others might be if a person gets their business into selling shape.
But is selling in the open market the best possible exit strategy for you? Exit Strategies for your Small Business presents other possibilities. If your small business is a family business, Family Business Succession Planning provides tips for planning a smooth transition to the next generation. The best time to choose an exit strategy is when you’re starting a business, not when you want to get rid of it.
Key Takeaways
- Do Market Research
- Get the Money Sorted
- Choose a Feasible Business Model
- Have a Growth Plan
- Plan and Have an Exit Strategy