14 Causes of Failed Businesses and Solutions to Deal With it

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14 Causes of Failed Businesses and Solutions to Deal With it

14 Causes of Failed Businesses and Solutions to Deal With it

When starting a business, one thing you need to consider is; failure. But if you have already known the general cause of failure in the business, chances are it’s less risky to experience it.

According to statistics in 2016, around 78 percent of small-scale business startups survived in the first year, and about half of the number of businesses lasted at least for 5 years. Only one in charge for up to 10 years or more.

Experts suggest their opinions about what is necessary and do not need to do business owners to keep their business survive. Here are some of the causes of business failure and tips on avoiding it.

1. Uncertain business goals

Is the main reason you start your own business is to get money? In your opinion, if you have your own business, you have a lot of time for the family? Or you don’t want to answer all these questions? If so, you need to think again.

Conversely, if you start a business for the reasons above, you will have a better chance to succeed:

  • You have a passion and love for what you do and feel very confident, based on research and investigations, if your product and service will meet the needs in the market.
  • You are physically fit and have the stamina and mentally needed to face potential challenges. Although it is often a factor that is not considered, the health that is not prime can cause bankruptcy.
  • You have positive, patient, steadfast behavior.
  • Failure doesn’t defeat you. You learn from mistakes and make this lesson a provision of success at another time. Successful business owners initially failed first and used the failure as a learning process.
  • You are independent and can find creative and smart solutions when needed. This is especially important when you are under narrow time pressure.
  • You love fellow human beings and show it with honesty, integrity, and interaction with others. You can interact and deal with all different individuals.

2. Bad Business Management

Many business failures are rooted in poor management. New business owners often lack business skills and management in fields such as finance, sales, production, and recruitment, and employee arrangements. Unless they are aware of the wrong steps taken and seeking help, business owners can immediately deal with the threat of failure.

They must also have awareness of fraud and take action to avoid it.

Ignoring business can also lead to failure. There must be regular studies, organizing, planning, and control of all business operating activities. It also includes market research and customer data, which is a frequently neglected area when a business has begun to run.

Successful managers also become leaders who can create work climates that encourage productivity. Good managers have the skills to recruit people who are competent and train them. Reliable leaders also have skills in strategies, can make a vision of being a reality, able to deal with changes, make transitions, and create positive new possibilities in the future.

3. Lack of capital

The fatal error commonly experienced by most failed businesses is to have inadequate operational funds. The business owner underestimated the amount of money needed and finally, they were forced to close before having the chance to succeed. They also have unrealistic expectations about the income from sales.

It’s important to know how much money you need for your business, not just the cost of starting it, but the cost of staying in this business. One thing you need to consider, many businesses need one or two years to operate. This means you will need enough funds to cover all costs until sales can close all these expenses.

4. Location less strategic

The location is an important factor in the success of a business. Strategic locations allow businesses to survive, and inappropriate locations can bring disasters even though the company has been very well arranged.

Some factors that need to be considered:

  • Location of competitors
  • Where is the customer
  • Traffic, accessibility, parking
  • Building conditions and security
  • Local Incentive Program for Startup Business in Targeted Areas
  • Acceptance of a new business in a prospective location.

5. Lack of planning

Anyone who has held a successful event knows, if not careful, has strategic planning, and works hard, the success will not follow. The same can be applied for the sake of business success.

All types of business need to have planned. Many small businesses fail due to fundamental weakness in their business planning. Planning must be realistic and based on the accurate and latest information and projections about the future.

Business planning components can include:

  • Business description, vision, destination, and key success
  • Labor needs
  • Potential solutions and problems
  • Finance, capital equipment, financial balance sheets, profit-loss reports, fund analysis, sales, and expenditure estimates.
  • Competition analysis
  • Marketing, advertising, and promotional activities
  • Budgeting and growth of company management.
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In addition, most banks request your business plan when you are looking for additional capital for the company.

6. Excessive business expansion

This is arguably the main cause of business failure. Over expansion often occurs when business owners feel they have succeeded because they can quickly expand the business. You need to focus on slow and stable growth. Many bankruptcies were caused by developing companies.

But at the same time, you don’t press business growth. When you have a solid customer and a good flow of funds, let success help you determine the right size of the business. Some indications that expansion is not the right step, among others, the inability to meet the needs of customers and employees has difficulty following the demands of production.

Expansion can be done after a careful review, research and analysis, and identification of what and who you need to add so that your business is growing. So with the system and the right person in his position, you can focus on business growth, not by doing everything alone.

7. Don’t have a website

It’s quite simple if you have a business means you need a website. In the United States itself, the number of internet users is around 77 percent of its population, and e-commerce sales reached $ 165.4 billion in 2010, continue to increase, and is expected to increase each year.

Every business needs to have a professional look and a well-designed website so users can easily use them to find out their business and how to build their products and services. Later, the website is an additional way to generate income, such as space for sales advertising, drop ship products, or affiliate products.

Remember, if you don’t have a website, you are more at risk of losing business than competitors who have it. And make sure the website you manage makes your business look good because you want to increase income, not lower it.

8. The business model is not right

In simple terms, customers must pay for your product or service at a high price to support the business running. Your business model must solve customer problems.

Untested business concepts and models will fail.

You need to focus on potential customers who want to pay. When this is achieved, develop the product and ask the customer to pay for it. At this stage, business founders must be very committed to changing the concept into valuable products.

9. Target market error

No matter how many you make planning and test it, there is a time when the market has switched from what you have to offer. For example, a few years ago, an entrepreneur explores the possibility of establishing CLOUD accounting.

Unfortunately, the term “cloud” has not been known, and potential customers do not understand the importance of accounting systems on their internet. They are used to using the application on the server.

It takes more than 10 years before this concept begins to come true and now some accounting systems are available online. Fortunately, these businessmen do not spend a lot of money to remove products to markets that are not ready.

Even though you have the right marketing time, the competition will not stop and let you take over. They will fight with innovation and regain their customers. Never underestimate the competition.

10. Less business experience

If you don’t have enough business experience, it will open a gap of failure. Of course, if you get advice from professionals and build companies with internal control and process it correctly from the start, you have the opportunity to succeed.

Some of the effects of lack of business experience include not having a good management team and do not pay taxes on time. Every aspect of failure makes businesses less able to survive.

If you have a good business model and pay attention to customers, success will move in your hands. All you need is a piece of professional advice, including a good accountant. It would be better if you work in the industry you choose to get his experience.

11. Bad leadership

Your business can fail if you apply poor management, which can be proven in many forms. You will have trouble becoming a leader if you don’t have enough experience in making management decisions, supervision of staff, or vision to lead the organization.

Maybe your team doesn’t agree on how it should run a business. You and other leaders argue in public, or back-back to give instructions to the staff.

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When the problems faced need strong leadership, you hesitate to take over leadership and overcome the problems that arise so that your business is on the verge of failure.

Leadership dysfunction in your business will affect every aspect of business operations, ranging from financial management to the spirit of employees, and if productivity is blocked, failure is visible.

Learn, Look for Mentors, follow the training, do personal research, do anything you can to improve leadership skills and knowledge about the industry you live in. Find out other business practices and see which one can you apply in your own business.

12. Don’t have a unique selling value

You might have a good product or service with strong demand, but your business still fails. Maybe your approach is a problem or you are less strong in the value proposition. If there is a strong demand, you can have a lot of competitors and fail to be prominent between them.

What makes your business different from competitors? How do you do business in a truly unique way? What can be done better than competitors? Perform an approach or service that is not used by anyone in your industry so you can present it as a strong value and attract attention and interest in people.

This is where you build a brand. The brand is an image that customers receive and associate with your business.

Brand identity, including logos, taglines, colors, and all that are visible aesthetics and business philosophy representing your company must be supported by the value of your proposition. This will make your business stand out among competitors. Do anything to bring unique values ​​to your market and build your conversion rate.

To publish brands and make you different, not only needed marketing planning and use many ways to present a brand to the public. You can be better than competitors but this does not mean if your prospects are not aware of your existence.

Use social media, mouth news to mouth, and other marketing techniques. Make sure you have a well-optimized online presence, develop lead generations, and contact information techniques such as offering high-quality content on the site.

13. Do not meet customer needs

Your business will fail if you ignore interaction with customers and understand what they need and the feedback they provide. Customers may like your product service but they will prefer if you change features or procedures.

What did they say to you? Do you hear them? Are they still interested in what you sell? There are many important questions that you need to answer and submit.

Maybe you offer service products that are no longer a trend. A successful business always offers values ​​and interests that are in trends in existing plains and potential customers. Survey customers and find out what their interests are and follow with changes according to trends using customer relations management.

14. Growth is too fast

Increasingly the startup business day grows faster. You are very confident that your product will dominate the world, then you invest very much but then your business doesn’t move. This is one trigger for failure in business.

Business growth requires careful and strategic planning. Even the franchise that has been firmly standing up and succeeded as fast-food restaurants did research and careful planning before opening a new location.

They measure local and regional demographics, future development plans in the area, and other problems. You must do the same thing to avoid failure in business.

Perform research to ensure the right time and funds are available to expand. Make sure the business that you previously woke up was stable before establishing a branch in additional locations. Don’t use innovation that you are not sure you can sell, but make planning first. The key to the success of business growth and avoiding failure is strategic planning.

If 50 percent of new businesses have failed, there are around 50 percent of the other ones. Starting a business is a challenging thing for some people. Well when you want to start a business or you already run it, you need to understand if the success depends on strategic planning that continues throughout the business.

For your business to grow and increase the number of customers you don’t forget to advertise through the Froggy Ads service, you can start by advertising your product, so that later you can improve visitors in your online business portal. FROGGY ADS is an online advertising service that can help you control all your product campaigns. Helps you target the targeting target you want and give you many choices to market your product.