4 Causes of Bankrupt Business That Must Be Avoided

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4 Causes of Bankrupt Business That Must Be Avoided

4 Causes of Bankrupt Business That Must Be Avoided 1

Why do many businesses and small businesses go bankrupt? Starting a business is not easy, and there are many statistics out there that show the survival rate of a bankrupt business.

There are only about 20% of businesses that have survived in the first year since it was launched, and nearly half failed in the first five years.

Whether you are an experienced business owner or a businessman who has just started, the above statistics are quite scary. However, do not let these numbers reduce your entrepreneurial spirit.

Instead, try to study the reasons why many small businesses fail. Learn the mistakes so you won’t fall into the same hole.

The following are 4 causes of small business failure that you should avoid.

There Is No Mature Business Planning

This factor is most often found among small entrepreneurs who have just started their businesses. What do you think looks like a good business idea on paper might not work well in the field.

This does not mean you have to ignore your passion. Instead, you need to do a little research and business planning with more food.

A business plan requires you to define what your unique value is – what distinguishes your product or service from competitors. How do you make it stand out more? Is the product or service offered? Is it from promotions on social media that are typical? Whatever it is, you must be able to separate yourself from competitors so that you can maintain a sustainable business model.

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Too Fast Expansion

In the business world, slow and stable can often lead you to win battles. Too fast expansion, which usually requires additional capital loans, can backfire if the market has changed or you are experiencing certain difficulties.

Expansion that is too fast – which is beyond the capacity of your capital – will drain and burden your finances, and ultimately will reduce quality. You may be overwhelmed and your product/service has difficulty in the market.

Be smart in choosing your target customers, and consider how you will repay each capital loan. Saying “no” to borrow capital is also part of running a business.

Sales Target Not Achieved

Nothing is more painful for a new business except sales targets that are not reached. This might happen when you rely too much on a large enough customer segment. For example, if your cafe relies heavily on student traffic during school years, you need to diversify during the holiday season so your business can survive.

The only way to ensure you can achieve sales targets is to get insights from existing data, and use these insights as a basis for carrying out your marketing strategy.

A sophisticated and quality Point of Sale (POS) system is one of the best first steps to get started.

Sales Target Not Achieved

Nothing is more painful for a new business except sales targets that are not reached. This might happen when you rely too much on a large enough customer segment. For example, if your cafe relies heavily on student traffic during school years, you need to diversify during the holiday season so your business can survive.

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The only way to ensure you can achieve sales targets is to get insights from existing data, and use these insights as a basis for carrying out your marketing strategy.

A sophisticated and quality Point of Sale (POS) system is one of the best first steps to get started.

Thus the discussion about the 4 causes of a bankrupt business that you should avoid. Want your business to grow? Advertise your website, online store, and service with Froggy Ads, you can target your specific target marketing location and attract many visitors to your website.